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17 Cards in this Set
- Front
- Back
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Life Insurance |
Consists of insurance on human lives, including benefits of endowments and annuities, and may include benefits in the event of death or dismemberment by accident and benefits of disability income. |
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Overall Financial Objectives |
1) Standard of Living: To provide for basic needs 2) Savings: To set aside emergency funds for sudden and unexpected events 3) Investment: To accumulate wealth through the return on assets leading to financial independence 4) Estate Planning: TO distribute the invested assets held for the accumulation of wealth in a tax efficient and effective matter |
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Financial Planner |
Analyzes personal financial circumstances and prepares a program to meet financial needs and objectives |
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Financial Risk Management |
Management of investment risks associated with business risk, purchasing power risk and pure risk. Pure Risk can be reduced or transferred through the use of insurance |
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Two Approaches for Determining Life Insurance Amounts |
1) Human Value Approach: Focuses on an individuals future income streams (Considers annual salary and expenses, years until retirement and future value of dollars) 2) Needs Approach: Focuses on the needs of survivors |
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Methods of Managing Risk: Avoidance |
Avoidance: conscious decision not to participate in situations, events or circumstances which create the possibility of loss. (Not always practical and very limited) |
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Methods of Managing Risk: Retention |
Aka Self Insuring May be done intentionally in the form of inadequate limits, a deductible, a co payment or unintentionally by either a lack of awareness the risk exists, underestimating the chance for loss, or by simply not electing to purchase insurance |
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Methods of Managing Risk: Sharing |
The risk accepted by an insurer is being paid for by the unequal amount of premiums paid in by a pool of insureds |
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Methods of Managing Risk: Reduction |
Occurs when a risk cannot be avoided completely. Ie: eventual death But can be avoided prematurely by exercise, proper diet and healthy habits |
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Methods of Managing Risk: Transferring |
Most effective way. Transfer risk to an insurance company in consideration of the payment of a premium. Insurance is a transfer of risk |
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Key Person Insurance |
Placed on important employees whose absence would cause the employer a financial loss. Premiums paid by the employer are not tax deductible. |
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Buy-Sell Agreements |
Help with the orderly continuation of a business in the event an owner dies prematurely. Set value on each personas portion of ownership in the business. Allows another individual to purchase the deceased owners interest so that the survivors can receive a fair cash settlement and the business can continue without interruption. |
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Split Dollar Plan |
Employer pays part of the premium that is allocated to the cash value and the employee pays the difference. Cash value belongs to the employer |
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Term Limit of Liability |
In a life only policy, the limit of liability ( or face amount) is the amount of proceeds payable to the beneficiary upon death of the insured. |
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When is insurable interest required to exist? |
During the time of application, but need not continue to exist at the time of death. |
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Mortality |
The frequency of death |
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Mortality Table |
Tracks the life spans of 10,000,000 people from newborns through the age of 100 and calculates the number of people that will die. |
