Introduction to Personal Finance

INSURANCE

LEARNING OUTCOMES

Section 1: Protecting Your Wealth

Section 2: Basic Types of Coverage

Section 3: The Importance of Life Insurance

Section 4: Insurance to Avoid

SECTION 3

IMPORTANCE OF LIFE INSURANCE

Life insurance provides a monetary payout tobeneficiaries (the person/people you elect toreceive your money or other assets) in the eventof your death.

The financial risk associated with death is the lossof income necessary to support your family.

Life insurance is to replace lost incomes due todeath.

TYPES OF LIFE INSURANCE

1.Term

Insurance for a specified time period.

Substantially cheaper

Easy to understand

Has NO Savings plan built into it.

Only job is to replace income when you die.

2.Cash Value

Insurance is normally left for life and is more expensivebecause it funds a savings plan.

The most common insurance myth is that you need lifeinsurance for a permanent situation.

If you save, invest, stay out of debt, and have a solid financialplan, you will eventually become self-insured.

When purchasing life insurance – you should buy only low-cost level term.

Level Term means you pay the same amount for the entireterm of the policy.

SECTION 4

INSURANCE TO AVOID

Credit Life/Disability:

Pays off a borrower’s debt if that borrower dies or becomes disabled (Term Lifeinsurance overs this)

Credit Card Protection:

Insures your credit card debt (avoid credit card debt)

Cancer & Hospital Indemnity Insurance:

Insures you against cancer or other medical issues.

Your health insurance already covers this

Accidental Death:

Insures you against unexpected accidents that causes death.

Term Life Insurance does this

Any insurance with cash value, investments, refunds:

Anything that combines insurance with investments is a bad idea.

Prepaid Burial Policies:

If Invested instead, this money would pay for your burial policy many times over.

Mortgage Life insurance:

Pays off your home mortgage if you die unexpectedly or become disables.

Your life insurance, which is 10-15 times cheaper, already does this.

Any kind of duplicate coverage:

Any extra insurance on top of your existing insurance.

Remember, you only need one policy for each type of insurance – The two insurancecompanies will fight over who pays the bill and nothing will get accomplished.

DISCUSSION QUESTIONS:

1.What is the purpose of life insurance?

2.What type of life insurance is recommended?

3.What are some types of unnecessary types ofinsurance?

4.How does someone become self-insured?

BE SURE TO ANSWER THESE QUESTIONS –IN DETAIL – AND UPLOAD YOURRESPONSES TO THE NOTES/PODCASTASSIGNMENT ON CANVAS.