Insurance

Question 1

Insurance; why have it?

Answer 1

• Personal and Business Risk
• A complement to investments and portfolio

Question 2

Personal Risk Exposures:

Answer 2

• Death before loan repayment; insurance would protect those who are stuck with your debt
• spouse outliving a pure life annuity, annuity insures you never run out of money
• guarantee a financial legacy
• Death before achieving investment goals
  - funding your spouses retirement
  - providing family needs
  - funding a gift

Question 3

Business Risk Exposures

Answer 3

• death of a partner- funding a buy sell agreement- all of possessions transfer to spouse, only way to get out of this deal is buy out, insurance policy would cover this buyout
• death of a key employee
• business owner estate liquidity
• Employee stock buy back plans- insurance pays for this (employee death benefits)

Question 4

Life Insurance Selection Considerations

Answer 4

• Personal Profile- age, income, health, savings and investment
• Survivor needs- consequences of someone being gone
• Estate Liquidity
• Risk Tolerance

Question 5

Term life Insurance

Answer 5

only pays off if you actually die

Question 6

Whole Life Insurance

Answer 6

will be worth something even if you don’t die

Question 7

Variable Life Insurance

Answer 7

like whole life but it has an investment element, generally invested in some type of mutual fund

Question 8

Universal Life Insurance

Answer 8

more of an investment element to it.

Question 9

How much Insurance do I Need

Answer 9

• Rule of Thumb- 6 to 10 times of your income
• Based on Expense projections
  - funeral costs
  - debts
  - college costs
  - on going family expenses
• less savings and social security coverage

Question 10

Needs for insurance change as time passes

Answer 10

financial obligations decrease and saving and investments goes up

Cost and Coverage