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Personal Finance: Another Perspective

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Personal Finance: Another Perspective Insurance 2: Life Insurance Tyler J Vongsawad, CLU, ChFC, CFP 02/10/2011 – PowerPoint PPT presentation

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Title: Personal Finance: Another Perspective


1
Personal FinanceAnother Perspective
  • Insurance 2
  • Life Insurance
  • Tyler J Vongsawad, CLU, ChFC, CFP
  • 02/10/2011

2
Objectives
  1. Understand Benefits of Life Insurance
  2. Understand 5 Key Questions about Life Insurance
  3. Understand different types of Term Insurance
  4. Understand different types of Permanent Insurance
  5. Understand which type of insurance is best for
    you and the steps to buying Life Insurance

3
Understand Benefits of Life Insurance
  • What are some benefits of Life Insurance?

4
Understand Benefits of Life Insurance
  • Death Benefit
  • Secure Insurability
  • Cash Value
  • Tax-deferred Growth
  • Estate Planning

5
B. Understand 5 Key Questions about Life Insurance
  1. Why Have Life Insurance?
  2. How Does Life Insurance work?
  3. Who Needs Life Insurance?
  4. How Much Life Insurance is Needed?
  5. Which Type of Life Insurance is Suitable?

6
1. Why Have Life Insurance
7
B. Understand 5 Key Questions about Life Insurance
  1. Why Have Life Insurance?
  2. How Does Life Insurance work?
  3. Who Needs Life Insurance?
  4. How Much Life Insurance is Needed?
  5. Which Type of Life Insurance is Suitable?

8
4. How Much Life Insurance is Needed?
  • From the old LDS Handbook for Families it states
  • Insure the familys breadwinner first, then
    others, if desired, as income permits. At a
    minimum, get enough life insurance to pay for
    such things as a funeral, taxes, mortgage on the
    home, car payments, and other debts. The next
    priority should be to get enough insurance that,
    supplemented by any government retirement
    benefits the surviving spouse may be entitled to,
    there will be sufficient to provide for the
    family and to make provisions for the childrens
    education and missions. Handbook for Families
    Preparing for Emergencies, Ensign, Dec. 1990,
    59.

9
Customized Needs Approach
  • Immediate Expenses
  • Mortgage
  • Debt
  • Funeral Costs
  • Other Final Expenses
  • Future Expenses
  • Education
  • Missions
  • Weddings
  • Ongoing Expenses
  • How much is needed to be comfortable and for how
    long?

10
B. Understand 5 Key Questions about Life Insurance
  1. Why Have Life Insurance?
  2. How Does Life Insurance work?
  3. Who Needs Life Insurance?
  4. How Much Life Insurance is Needed?
  5. Which Type of Life Insurance is Suitable?

11
5. Which Type of Life Insurance is Suitable?
  • Permanent
  • Own
  • Term
  • Lease

12
5. Which Type of Life Insurance is Suitable?
  • Own
  • Permanent
  • More Expensive per Month
  • Equity
  • More Control
  • Payments Will Stop
  • Tax Benefits
  • Lease
  • Temporary
  • Less Expensive per Month
  • No Equity
  • Less Control
  • Payment Will Continue
  • No Tax Benefits

13
5. Which Type of Life Insurance is Suitable?
  • Which Type is Better?
  • It Depends on Goals and Situations
  • Goal Financial Security is the goal, not just
    having Life Insurance
  • Goal Death benefit 1st, other benefits 2nd
  • Situation Duration
  • Situation Ability to pay premiums

14
Types of Life Insurance Products (continued)
  • The differences in life insurance products
    relate to
  • Mortality Risk (for insurer) The risk that the
    insured dies during the contract period.
  • Investment Risk The risk of who takes
    responsibility for the outcome of the investments
  • Policy Cost What are the costs of the policy
    compared to other policies
  • Investment Choice The types of investment
    vehicles the non-mortality portion of the
    premiums are invested in, i.e., bonds, stock,
    etc.
  • Policy Flexibility The ability to change the
    types of investments, monthly premium amounts, or
    the face value amount during the life of the
    contract.

15
C. Understand the Different Types of Term
Insurance
Premium Payments
Your Term Life Insurance Policy
- (Low) Expense Costs
- Mortality Costs
16
C. Understand the Different Types of Term
Insurance
17
Term Insurance Comparisons
18
Term Insurance Comparisons
19
Term Insurance Comparisons
20
Term Insurance Comparisons
21
C. Understand the Different Types of Term
Insurance
  • Level
  • /- Fixed Cost
  • Potential Long-term Savings
  • - Coverage May End Sooner than Needed
  • Annually Renewable
  • /- Increasing Cost (starts smaller finishes
    larger)
  • Potential Short Term Savings
  • Coverage May Continue Without Evidence of
    Insurability

Can it be Converted to Permanent?
22
D. Understand the Different Types of Permanent
Insurance
Premium Payments
Investment Income
Dividends (if participating)
Policy Cash Value
Your Permanent Insurance Policy
A major benefit is to be able to borrow against
your cash value portion of your policy tax-free
- Mortality Costs
- (high) Expense Costs
23
D. Understand the Different Types of Permanent
Insurance
  • Whole
  • Universal
  • Variable
  • Equity Indexed

24
E. Understand which type of insurance is best and
the steps to buying Life Insurance
25
E. Understand which type of insurance is best and
the steps to buying Life Insurance
  • Things to watch out for
  • Why do I need to know this, isnt it the life
    insurance agents job to know this stuff?
  • Ill have life insurance coverage through work
  • I can get 500,000 of life insurance for
    13.56/month. Why would I pay more?
  • Why do I have to get a medical to open an
    investment account?
  • Only buy permanent insurance, if you dont
    youll be throwing away your money!
  • Only buy term and invest the difference, if you
    dont youll get ripped off!
  • Ill self insure when Im 48, so I wont need
    more than a 20 year policy

26
E. Understand which type of insurance is best and
the steps to buying Life Insurance
  • Steps to Buying
  • Know what you want to achieve and maintain
    financial security and find a life insurance
    policy that fits it
  • Understand the financial institution Fortune
    does a survey every year on Americas Most
    Admired companies in each industry Insurance
    Life and Health
  • Understand the companies Financial strength
    ratings

27
E. Understand which type of insurance is best for
you and the steps to buying Life Insurance
  • Ratings Companies
  • A.M. Best http//www.ambest.com/
  • Fitch Ratings 800-893-4824
  • Moodys 212-553-0377
  • Standard Poors 212-438-2400
  • Weiss Research 800-289-9222
  • Aggregate Consumer Complaint Reports
  • National Association of Insurance Commissioners -
    Consumer Information Source http//www.naic.org/ci
    s/index.do

28
E. Understand which type of insurance is best for
you and the steps to buying Life Insurance
  • Steps to Buying
  • Know what you want to achieve and maintain
    financial security and find a life insurance
    policy that fits it
  • Understand the financial institution Fortune
    does a survey every year on Americas Most
    Admired companies in each industry Insurance
    Life and Health
  • Understand the companies Financial strength
    ratings
  • Find a licensed professional you are comfortable
    with

29
E. Understand which type of insurance is best for
you and the steps to buying Life Insurance
  • First Presidency Message March 2008
  • Consideration should also be given to investing
    wisely with responsible and established financial
    institutions. We are also concerned that there
    are those who use relationships of trust to
    promote risky or even fraudulent investment and
    business schemes. While all investments carry an
    element of risk, that risk can be managed by
    following sound and proven financial principles
    first, avoid unnecessary debt, especially
    consumer debt second, before investing, seek
    advice from a qualified and licensed financial
    advisor and third, be wise.

30
E. Understand which type of insurance is best for
you and the steps to buying Life Insurance
  • Steps to Buying
  • Know what you want to achieve for financial
    security and find a life insurance policy that
    fits
  • Understand financial institutions Fortune does
    a survey every year on Americas Most Admired
    companies in each industry Life and Health
  • Understand the companies Financial strength
    ratings
  • Find a licensed professional you are comfortable
    with
  • Compare policies Not just on price but on
    benefits

31
E. Understand which type of insurance is best for
you and the steps to buying Life Insurance
32
Questions?
  • Tyler Vongsawad, CLU, ChFC, CFP
  • tyler.vongsawad_at_nmfn.com
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