1. Managing Human Resources Personal Finance Unit 5 Life Insurance

2. Why Have It? A.Provides financial security for someone who depends on your income --helps provide a way for your family to maintain a decent living in case of your death B.Helps pay for funeral expenses that will be incurred when you die C.Can be used as a very limited investment and savings program

3. Term Insurance Provides coverage for a limited amount of time 1.Who should get it?—People who want inexpensive and temporary insurance for a limited number of years 2.Disadvantages a.The older you get the more expensive the annual cost of the policy b.There is no cash value, you cannot borrow against the policy

4. Whole Life Insurance Often called “straight life” or “ordinary life” 1.Offers a combination of protection and savings 2.Advantages a.The premiums and the face value of the policy stay the same throughout the life of the policy. b.As the policy remains in force, it acquires a “cash value” which you can borrow against (at a low interest rate) c.You can change the policy at any time

5. Universal Life Insurance Combination of term and whole life policies 1.How does it work? a.Premiums are paid and put into a cash value fund b.Every month the insurance company’s fees and the cost of a term insurance policy are deducted c.The remainder of the money earns interest (usually at a higher rate than whole life) d.As the policy increases in value, the policyholder can borrow the money or simply take it out and reduce the face value 2.Advantages a.Provides flexibility with your money b.Helps keep your savings ahead of the inflation rate 3.Disadvantages a.Some people object to paying interest on loans from money they have invested themselves b.This is initially often the most expensive of all the policies