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Flashcards in Insurance Deck (11):

Insurance; why have it?

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


Personal Risk Exposures:

- 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


Business Risk Exposures

- 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)


Life Insurance Selection Considerations

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


Term life Insurance

only pays off if you actually die


Whole Life Insurance

will be worth something even if you don't die


Variable Life Insurance

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


Universal Life Insurance

more of an investment element to it.


How much Insurance do I Need

- 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



Needs for insurance change as time passes

financial obligations decrease and saving and investments goes up

Cost and Coverage