1. Chapter 10 In-Class Notes

2. Background on Life Insurance Parties to a life insurance contract Beneficiary, life insured, policy owner Life and health insurance company Types of temporary life insurance Term insurance Consider the implications of owning Term10 versus Term20 Renewability Creditor insurance Who is the beneficiary? Should I buy creditor insurance or personally owned term insurance? Group life insurance 10-2Copyright © 2009 Pearson Education Canada

3. Permanent Insurance Types of permanent life insurance Whole life Fixed premiums Source of liquidity (you can borrow from the cash value) Limited payment policies available Investments made at the discretion of the life insurance company 10-3Copyright © 2009 Pearson Education Canada

4. Permanent Insurance (Continued) Universal life Flexible premiums Cost of insurance options Level term Yearly renewable term (YRT) Company expenses will vary Investment returns are based on the performance of the investments selected by the policy owner Term to 100 No cash value 10-4Copyright © 2009 Pearson Education Canada

5. Determining the Amount of Life Insurance Needed Income method Multiple of your annual income Does not consider age or household circumstances (children vs. no children) Budget method Allows you to consider your household’s future expected expenses Does not account for unexpected expenses 10-5Copyright © 2009 Pearson Education Canada

6. Contents of a Life Insurance Policy Features Beneficiary Grace period Reinstatement Living benefits Premium schedule Loans Suicide clause Incontestability date Misstatement of age or sex Renewability and conversion options 10-6Copyright © 2009 Pearson Education Canada

7. Contents of a Life Insurance Policy (Continued) Riders Waiver of premium Guaranteed insurability Accidental death Child term coverage Term insurance coverage 10-7Copyright © 2009 Pearson Education Canada

8. Selecting a Life Insurance Company Other types of insurance offered? Group insurance Living benefits Provides the specific policy desired? Settlement options available? Services available? Online services Convenient office location Relatively low premiums? Financial condition? What rating is assigned by services such as A.M. Best, Moody’s, and Standard & Poor’s? 10-8Copyright © 2009 Pearson Education Canada