Lý thuyết tài chính - Insuring your life

PFIN4Insuring Your Life8Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. GITMAN/ JOEHNK/ BILLINGSLEY2Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Explain the concept of risk and the basics of insurance underwritingDiscuss the primary reasons for life insurance and identify those who need coverageCalculate how much life insurance you needDistinguish among the various types of life insurance policies and describe their advantages and disadvantagesChoose the best life insurance policy for your needs at the lowest costBecome familiar with the key features of life insurance policiesLEARNING OBJECTIVESPFIN4| CH8Basic Insurance Concepts3Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Purpose of insuranceProtect people from the financial consequences of losing assets or income when an accident, illness, or death occursStrategies to prevent financial lossRisk avoidance: Avoiding an act that would create a riskLoss prevention: Any activity that reduces the probability that a loss will occurPFIN4| CH8Basic Insurance Concepts4Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Loss control: Any activity that lessens the severity of loss once it occursRisk assumption: Choice to accept and bear the risk of lossInsurance policy: Insurer agrees to reimburse the insured for any losses suffered according to specified termsPFIN4| CH8Underwriting5Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Used by insurers to decide who can be insured and applicable rates for premiumsHelps insurance companies to protect against adverse selectionPractices and standards vary among insurance companiesPFIN4| CH8Benefits of Life Insurance6Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8Financial protection for dependentsProtection from creditorsTax benefitsSavings vehicleMethods to Estimate the Required Amount of Insurance7Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8Multiple-of-earningsInvolves multiplying gross annual earnings by some selected numberNeeds analysisInvolves considering a person’s financial obligations, available financial resources, and life insuranceExhibit 8.18Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8How Much Life Insurance Do You Need?Term Life Insurance9Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Provides death benefits for a specified periodDoes not provide for the accumulation of cash valueTypesStraight term policy: Coverage remains unchanged throughout the effective periodDecreasing term policy: Premium remains unchanged while coverage decreasesPFIN4| CH8Whole Life Insurance10Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Provides permanent insurance coverage during an individual’s entire lifeCash value: Accumulated refundable value of an insurance policyResults from the investment earnings on paid-in insurance premiumsNonforfeiture right: Provides policyholder the assets allotted for future death claim, upon policy cancellationPFIN4| CH8Types of Whole Life Policies11Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Continuous premiumPremiums should be paid until death or policy cancellationLimited paymentPremiums should be paid for specified number of yearsInsurance is effective until deathSingle premiumLifetime coverage purchased with a single premiumPFIN4| CH8Universal Life Insurance12Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Permanent cash-value insuranceCombines term insurance with a tax-sheltered savings accountDeath protection and savings portion premiums are unbundledPFIN4| CH8Other Types of Life Insurance13Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Variable life insurance: Coverage amount varies with the profits generated in the investment accountGroup life insurance: Provides a master policy for a groupEach eligible group member receives a certificate of insurancePFIN4| CH8Other Types of Life Insurance14Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8Credit life insuranceSold in conjunction with installment loansMortgage life insurancePays off mortgage balance in the event of the borrower’s deathIndustrial life insuranceWhole life insurance with small face amountsExhibit 8.815Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8Advantages and Disadvantages of the Most Popular Types of Life InsuranceStrategies Involved in Buying Life Insurance16Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4| CH8Compare costs and features of competitive policiesSelect a financially healthy insurance companyChoose a reputable agentLife Insurance Contract Features17Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Beneficiary clause - All life insurance policies should have one or more beneficiariesSettlement optionsLump sumInterest onlyFixed periodFixed amountLife incomePolicy loan: Advance secured by the cash value of a whole life insurance policyPFIN4| CH8Life Insurance Contract Features18Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Premium paymentsGrace periodNonforfeiture optionsPaid-up insuranceExtended term insurancePolicy reinstatementChange of policyPFIN4| CH8Other Policy Features19Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multiple indemnity clause: Doubles or triples the policy’s face amount if the insured dies in an accidentDisability clause: Includes a waiver-of-premium benefit alone or coupled with disability incomeGuaranteed purchase option: Right to purchase additional coverage without providing evidence of insurabilityPFIN4| CH8Other Policy Features20Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Suicide clauseExclusionsParticipationLiving benefitsViatical settlementPFIN4| CH8Life Insurance Policy Illustration21Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Includes the important assumptions that the insurance company relies on when presenting the policy to a prospective clientConsists of two partsGuaranteed illustrationCurrent illustrationPFIN4| CH8Life Insurance Policy Illustration22Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ensure the following sections are present in the narrative summaryPolicy description, terms, and featuresUnderwriting discussionColumn definitions and key termsDisclaimerSignature pagePFIN4| CH8Risk avoidanceLoss preventionLoss controlRisk assumptionInsurance policyUnderwritingMultiple-of-earnings methodNeeds analysis methodSocial Security survivor’s benefitsTerm life insuranceStraight term policyDecreasing term policyRenewabilityConvertibilityWhole life insuranceCash value23KEY TERMSPFIN4| CH8Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Nonforfeiture rightUniversal life insuranceVariable life insuranceGroup life insuranceCredit life insuranceMortgage life insuranceIndustrial life insuranceBeneficiaryPolicy loanMultiple indemnity clauseDisability clauseGuaranteed purchase optionParticipating policyLife insurance policy illustration24KEY TERMSPFIN4| CH8Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SUMMARYInsurance policies protect people from the financial consequences of losing assetsIndividuals must choose policies based on their economic needs and available financial resourcesSeveral insurance policies are available with specific set of featuresEach has its own advantages and disadvantagesPFIN4| CH8