Life Insurance Workbook
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Author Tony Steuer provides a clear path to understanding life insurance with his new workbook and Slideshare series. Tony is a Life Insurance Analyst who writes about the insurance industry as an advocate for financial literacy.
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Life Insurance Workbook
- 1. H O W W I L L T H I S W O R K B O O K A N S W E R Y O U R Q U E S T I O N S ? THE QUESTIONS AND ANSWERS ON LIFE INSURANCE WORKBOOK Created by the author of Questions & Answers on Life Insurance Tony Steuer, CLU, LA, CPFFE
- 2. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com AUTHOR OF: TONY STEUER, CLU, LA, CPFFE
- 3. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com TONY STEUER, CLU, LA, CPFFE • Author, Advocate and educator for insurance literacy • Director of Financial Preparedness - United Policyholders • Member: California Department of Insurance Curriculum Board • Member: National Financial Educators Council Curriculum Advisory Board
- 4. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com THIS PRESENTATION WILL GIVE YOU AN OVERVIEW OF THE QUESTIONS AND ANSWERS ON LIFE INSURANCE WORKBOOK This presentation: • Highlights important topics in the workbook; • Gives you simple answers to the top questions on life insurance; and • Helps you to know the right questions in order to plan well and spend wisely.
- 5. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 1: EVALUATE YOUR NEEDS & SITUATION Take charge! It’s your money, so plan your way to smart spending. • Life insurance is for the benefit of someone who is dependent upon your income, like a child, spouse/partner, or business partner. • To purchase the right policy, it’s important to take the time and evaluate your situation.
- 6. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP I: CALCULATE YOUR NEED FOR LIFE INSURANCE Protecting family from… Income loss, debt, or estate tax liability WHAT ARE YOUR NEEDS? To determine how much life insurance you need, use the worksheet or calculators on www.lifeinsurancesage.com or by clicking on the image:
- 7. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com What if I have group life? (For example, through an employer.) If not, skip to the next slide. • Premiums typically increase annually or every fifth year for group insurance plans; • Coverage is usually not portable (you can’t take it with you); • Generally, group plans are more expensive for those in good health (due to simplified or modified underwriting); and • Coverage amounts are limited.
- 8. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 2: FINDING THE LIFE INSURANCE THAT’S BEST FOR YOU TERM LIFE INSURANCE OVERVIEW Term Insurance provides coverage only for a specified amount of time and expires without value. Types (most common): •Guaranteed Level Premium Term •Annual Renewable Term •Decreasing Term (a.ka. Mortgage Insurance) •Return of Premium Term View my presentation: Understanding Term Life Insurance at: http://www.lifeinsurancesage.com/slideshare/
- 9. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 2: FINDING THE LIFE INSURANCE THAT’S BEST FOR YOU PERMANENT LIFE INSURANCE OVERVIEW Types (most common): •Whole Life •Universal Life •Variable Life •Equity Indexed Universal Life •Joint & Survivor (2nd to die) Permanent Insurance is designed to provide coverage until you die and often accumulates a cash value over time. View my presentation: Understanding Permanent Life Insurance at: http://www.lifeinsurancesage.com/slideshare/ Insurance policies may look alike, but each one is different.
- 10. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com • Evaluate your health (examples: physical build, cholesterol, medical conditions, family history, etc.) w Medical Records - review your medical records to understand your history and health. w Think of your health rating like a credit rating. In finance the better your credit score, the more favorable your interest rate. Good health and physical fitness earn you a good credit score and thus a better rate. • Financial Underwriting Different life insurance companies have different underwriting standards. Because these standards determine the rates you pay, you want to be well aware of the differences among them before you sign on the dotted line......................... STEP 3: ASSESSING HEALTH AND OTHER FACTORS THAT IMPACT PREMIUM RATES Which one is you?
- 11. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com PART II: EVALUATE COMPANIES & AGENTS STEP 4: EVALUATING LIFE INSURANCE COMPANIES The workbook gives you details on how insurance companies are rated so that you can evaluate your company, and explains: • Financial Strength Ratings • What these ratings are & where to find them • Financial Analysis • Ethical Standards • NAIC/State Insurance Department - Complaints (for Variable Products - FINRA) Visit www.lifeinsurancesage.com for links to rating services, NAIC & FINRA
- 12. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 5: CHOOSING AN ADVISOR • Check on whether the professional working with you is properly licensed with the Department of Insurance in your State (and for Variable Products with FINRA) at: www.lifeinsurancesage.com • What are there qualification & designations? Chartered Life Underwriter’s (CLU’s) have comprehensive Life Insurance training (use www.designationcheck.com to confirm) • Be aware of rogue designations - See the California Department of Insurance Bulletin on Senior Designations. • Find an advisor at the Society of Financial Services Professional (SFSP) website (www.financialpro.org) or at the LIFE website (www.lifehappens.org)
- 13. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 6: SELECTING POLICY COMPONENTS & RIDERS w Beneficiaries - always make sure to name a contingent beneficiary. w Policy Owner - know how this financial tool works and how changes or events can seriously affect it (i.e. policy loans). Ask questions if you don’t understand something. w Policy Riders - are they worthwhile? Popular riders include: w Waiver of Premium w Accelerated Death Benefit Rider • The workbook helps you to prioritize what is important and empowers you to ask questions. Keep in mind the following as you choose or evaluate a policy: Complete the application accurately, completely and truthfully along with all forms.
- 14. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com PART III: UNDERSTAND, MAINTAIN & MONITOR YOUR POLICY The workbook reviews what you need to know after you’ve obtained a policy (or found an old policy in a drawer.) Policies are living things. Keep track of them! Key information is explained so that you can decide to keep, replace or terminate a policy.
- 15. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com FREQUENCY OF PAYMENT It matters how frequently you choose to pay your insurance. Changing how often you pay can save you a lot of money (especially on term insurance). FREQUENCY OF PAYMENT MONTHLY ANNUAL COST(%extrayoupay) SEMI-ANNUAL Click here to open an online calculator QUARTERLY 3.92 - 8% 4-20% 2-6% 0%
- 16. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 7: ASSESS YOUR POLICY IS IT LIVING UP TO YOUR EXPECATIONS? Gather and check for this information: • Death Benefit • What is the current benefit? • Type of Coverage • Term, Whole Life, Universal Life, Variable Life, Equity Indexed or something else... • Cash Value (if any) • Loan Values (if any) • Conversion Eligibility • If it’s term insurance, some policies allow conversion to permanent. • Any and all information is helpful in your assessment!
- 17. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com FURTHER STEPS: ASSESSING A PERMANENT (CASH VALUE POLICY) Here is what you need to monitor an existing life insurance policy: • Current (most recent) annual statement • In-force illustration based on current assumptions • In-force illustration(s) with any desired modifications Sign up for an annual review package at: www.lifeinsurancesage.com Read about why (and how) a policy can under- perform in the Resources section at: www.lifeinsurancesage.com Is your policy running out of time?
- 18. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 8: REPLACING A POLICY: TERM INSURANCE When replacing a term policy, consider these facts: • Premium • What is the actual net premium & is it guaranteed? • Length of guaranteed premium period • New Incontestability Clause & Suicide Provision • Most policies are issued with an incontestability clause, which means that unless you don’t pay your premium, the insurance company cannot contest the insurance contract during your lifetime as long as the original policy is in-force, no matter how your health may change. Check for the period of time that the company is allowed to contest.
- 19. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com STEP 8: REPLACING A POLICY: PERMANENT (CASH VALUE) INSURANCE • What are the different assumptions & guarantees in your policy? • Interest Rate, Dividend Scale, etc. • Cost of Insurance/Mortality Cost • Expense Charges • Qualification as an IRS Section 1035 Tax-Free Exchange • Is there a surrender charge? • What are other pros & cons? The above are the main areas, however, every permanent life insurance policy is a complex financial product with unique features. Comparing permanent policies can be a complex & tricky area. Proceed with caution
- 20. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com TERMINATING A POLICY TERM VS. PERMANENT • Term Policy: To cancel, notify the company and request immediate termination (possible partial refund). • Permanent Policy: To cancel, you can: • Surrender the policy • Exchange the policy to an annuity • Gift the policy to an entity • Sell the policy in a secondary marketplace.
- 21. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com MORE RESOURCES W W W. T O N Y S T E U E R . C O M Feel free to forward this free pdf download link to friends! Additional thanks to MyStoryCatcher.com and ThreeLineMedia.com
- 22. By Tony Steuer, CLU, LA, CPFFE Visit: www.tonysteuer.com DOWNLOAD THE FREE REPORT AT TONYSTEUER.COM: W W W. T O N Y S T E U E R . C O M
- 23. W W W. T O N Y S T E U E R . C O M THANK YOU! Thank you for taking the time to watch this Presentation!
Notas del editor
- There are a number of scenarios or life situations that support a need for life insurance. There’s a quiz in the workbook to help you determine your needs, but some of the most common situations are: You’re a primary breadwinner for your family. You have young children who are dependent on your income. You have debt - mortgages, car loans, credit cards, student loans, or some other form of large, significant debt that you don’t want to burden your family or cosigners with if you passed away tomorrow. I don’t want to burden my family with the costs of my funeral. You want to have an emergency fund. You’re worried about estate taxes. You want your family to have liquidity upon your death to fund the estate tax liability. You’d like to donate a sizable amount to charity once you pass. You want to make sure your heirs each get an equal share of your assets when you pass away. You’ve got assets that haven’t been taxed yet (a tax-deferred retirement account, for instance), and you don’t want your family to be burdened with those taxes upon your death.
- Knowing the difference between term and permanent insurance is critical. Term Insurance provides coverage only for a specified amount of time. Permanent Insurance is designed to provide coverage until you die and often accumulates a cash value over time.
- Knowing the difference between term and permanent insurance is critical. Term Insurance provides coverage only for a specified amount of time. Permanent Insurance is designed to provide coverage until you die and often accumulates a cash value over time.
- Knowing the difference between term and permanent insurance is critical. Term Insurance provides coverage only for a specified amount of time. Permanent Insurance is designed to provide coverage until you die and often accumulates a cash value over time.
- Policies are living things, and there are many components that can affect their performance. This is particularly true with permanent policies that build cash value over time. For example,i f you’ve taken out policy loans or have a Universal/Variable/Equity Indexed, etc. - you’ll need to pay extra attention to premium payments and the investment portfolio—you’ll want to be very aware of how much money it’ll take to keep those policies in-force, and whether you can afford to keep them in-force.
- The reason the monthly option is frequently more economical than the quarterly is because monthly bank-draft persistency is better than quarterly mode persistency.