HDF 322 1st Edition Lecture 19 Outline of Last Lecture I Health Insurance Disability Outline of Current Lecture II DI Provisions Clauses III Life Insurance IV Movie Clip Life Insurance V Life Insurance Mortality Tables VI The Purpose of Life Insurance VII Estimating Your Life Insurance Needs VIII Term Life Insurance IX Whole Life Insurance X Types of Life Insurance Current Lecture I DI Provisions Clauses a Waiting period Waiting period is day not dollar deductible it has the same inverse relationship that deductible has with premium period 30 days is more 60 days is more social security waiting period is 5 months 150 days and then you have to live through 6 month to get first paycheck b Duration of benefits under 60 you always get at least 5 years but age 60 64 you only get 5 years at one time you stopped working at age 65 so they cant have mandatory retirement at age 65 so UT policy says if 65 69 then gives you to age 70 but no less than one year and if you are 70 you get 1 year and that s all These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute c Amount of benefit 60 of the monthly gross not monthly take home but gross and counts as 12 025 but you only get 60 no more d Partial disability one is loss of income and one is loss of work residual or partial in readings loss of income is partial check you go back to work but you cant do all the work sot they give you set benefit for 6 month period of time you go back and you re not at 100 not able to fully work you work what you can and they will give you half of the benefit e Presumptive disability If something happens and you lose loss usually loss of hearing loss of eyesight loss of limb you don t just want the loss you want the loss of USE you want loss of USE on a policy if you cant hear that s loss of hearing so you are presumed disabled and you would start getting paid after you wait elimination period Cost of living adjustment this and ABI is similar cost of living is more expensive premium once you become disabled you have COLA you have increase could be tied to govt social security benefit or flat percentage 4 or 5 it s a cost of living adjustment and you cont to get it f Waiver of premium If you become disabled the premium will be waived if you become disabled if you become disabled wont have to pay disability insurance premium until no longer disabled g Social Security Rider its another disability income policy it says benefits under disability income policies will be reduced by deductible sources of income or other disability benefits if you become disabled and you receive another source of disability income social security workmans comp then this policy will reduce their benefit pay by the amt the other insurance is giving you you will only get 60 whether its all from UT or various sources this is rider II Life Insurance we are SOLD life insurance that s why so many people end up dropping it after 3 years more than 20 are dropped 5 years 60 and 7 over 75 of policies are dropped they were sold and after paying 3 5 thousand dollar premiums a year stop it but you wont get a return until 10 15 years later III Movie Clip Life Insurance Life insurance a company that pays money to someone else when you die 2 types TERM and PERMNANT permanent are whole and universalboth pay benefit but with term you would need to die within specific life period but permanent provides protection for entire life and provides cash savings which is why sometimes more expensive than term policy RENEWABLE TERM allows you to renew without need for medical exam CONVERTIBLE allows you to turn it into permanent policy so you have lifelong insurance protection LIFE INSURANCE is considered cornerstone of sound financial planningget right coverage for you and family IV Life Insurance Mortality Tables the principle of insurance is you look at probability of your life expectancy when are you expected to die most people die older but there are people who die by accidents and people who don t live that long MORTALITY TABLES so mortality tables are designed by mathematicians and say when at age 2 get away from parents 1112 then 16 19 bc of auto accidents most people die older and of old age if young and dying than its accidents or ill V The Purpose of Life Insurance a if you have a child dependent on you then you NEED LIFE INSURANCE VI Estimating Your Life Insurance Needs The Easy Method a often called the multiple earnings method where you say I earn so much every year and if I were to die how long would I want to provide income for my family how many years will I provide for my survivors The Nonworking Spouse Method b you multiply number of years until youngest child reaches 18 by 10 000 dollars The Family Need Method Needs Approach c the needs approach this is what you do on project what Kitt wants us to consider doing look at possible sources of income security assets and what is in readings you don t have period 1 2 and 3 do you have debt what do you want final expenses tell you its 8 000 and then you see what the children need and divide that annual amount by 12 bc its monthly amount then look at social security and then take those amounts and times 12 months to get a year multiply by 13 to get amount you need to fund for that carrier VII Term Life Insurance buy this its least expensive for dollar amount you get young people have low incomes children so you need low price policy and that s what term does so term is for specified period for Thomas you get 15 year term policy when they give you terms all they do is take premium price for every year and divide it by 10 15 20 years all they do is avg premiums that you are some people detest term bc you start low but every time you renew it the price goes up but its called life expectancy you are older so possibility gets higher so does price RENEWABILITY automatic as long as you stay in group the conversion option what is convertible says that if you have a term policy and you decide that Dr Kitt was so wrong you need whole life policy then you can convert your term policy into more expensive cash value ordinary life policy cant go backwards only for term to lifeget a convertible rider and you will buy term and invest difference so you can have own savings plans you wont bc you will buy all the …