Transcript Facts About Life Insurance  Purpose  What You Are Paying For  Who Needs It?

Facts About Life Insurance
 Purpose
 What You Are Paying For
 Who Needs It?
How
Life
Works
Using Life Insurance in Protecting
the Farm Family
 How much insurance is needed?
 What kind of insurance do I buy?
Areas of Protection (DDIME)
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Death Expenses
Debt cancellation (vs. transfer to heirs)
Income or lost services of the deceased
Mortgage
Education funds
What Kind of Life Insurance to
Buy?
The protection feature of life
insurance if more important than
the investment feature.
Permanent Life Insurance
 Permanent life insurance is a general term
used to refer to various forms of whole life
insurance policies that remain in effect to
age 100 so long as the
premium is paid (include
a savings or investment
element called cash value).
Cash Value Negatives
Typically 20% of the premium paid goes towards the cost of
insurance and 80% goes to build a cash value that operates under
the following rules:
No Cash Value for the first 2-3 years
Negative return for 5-15 years. Average return is 1.3%
Charged 6-8% interest to borrow your own money*
Lose cash values when you die
Can You Afford Bundling
Term Life Insurance
 Term life insurance is temporary life
insurance provided for a specific period of
time (also known at pure life insurance
protection).
Insurance to Cover Farm Debt Only
 Decreasing Term Insurance
 Mortgage Insurance
 Credit Insurance
Business Transfer Planning
 Buy/Sell Agreements
 Key-Person Insurance
Liquidation Versus
Retention of Capital
 Selling assets is a method of
raising capital.
 Retention is the retaining of
assets.
Looking at My Current Policy
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Type of insurance
Amount of Insurance
Premium – Is the premium level?
Length of Policy
Beneficiaries
Convertibility
Renewable
How to Pick a Life Insurance Agent
 Does the agent take the time to get to know you
and your needs?
 Does the agent help you understand your options?
 Does the agent present a clear analysis.
 Do you feel pressured?
 Do they have a license to sell insurance in your
state?
 A DON’T – “How Much Do You Have to Spend”
What to Consider When
Replacing a Policy
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Family needs change
Policy outdated
Your investment needs better met elsewhere
Several separate policies
Be Cautious About Replacement
When…
 You are in bad health, uninsurable, or
considerably older.
 You have a good, competitive policy and
can’t get a better value for your money.
 Never cancel your existing policy until the
new one has been issued and delivered to
you.
 Your relationship with your agent is more
important than having your family covered.
The bottom line….
When considering policy replacement,
examine your options carefully! Most
companies offer proposals that show the
costs and provisions of the policy. As for
these illustrations as you shop for the best
value. Your goal is financial security – avoid
spending more than necessary. Always
consider what works best for you and your
family – it’s your decision!
Summary – Tips for Making a Wise
Insurance Purchase
 Buy Adequate Coverage
 Buy Only One Policy Per Family
Example:
6 policies x $75 administrative fee = $450
1 policy with riders
- $75
$375
With the $375 difference ($450 - $75 = $375), you could buy
as much as $325,000 term life insurance at age 30 and pay
a full year’s premium.
Summary – Tips for Making a Wise
Insurance Purchase
 Understand the purpose of life insurance on
children
 Avoid expensive “gimmicks”
 Avoid insurance policies disguised as
something else