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Chapter 9

Chapter 9. Managing Life, Health, and Disability Risks. Risks Associated with Premature Death. Inadequate financial resources Income for readjustment period Financial support for dependents Earmarking funds for specific goals Estate preservation Expenses Taxes Debt retirement.

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Chapter 9

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  1. Chapter 9 • Managing Life, Health, and Disability Risks

  2. Risks Associated with Premature Death • Inadequate financial resources • Income for readjustment period • Financial support for dependents • Earmarking funds for specific goals • Estate preservation • Expenses • Taxes • Debt retirement

  3. Measuring Needs • Needs related to premature death • Human life value approach • Financial needs approach • Capital retention approach • Disability income needs • Long-term care needs

  4. Term Life Insurance • Features • Types of polices • Term life policy riders • Advantages • Limitations

  5. Whole Life Insurance • Characteristics • Types of whole life policies • Dividend options • Nonforfeiture options • Whole life insurance policy riders • Advantages and limitations

  6. Universal Life Insurance • Overview • Death benefit options • Option A • Option B • Premium payments

  7. Structure of a Universal Life Policy

  8. Variable Universal Life • Flexible premiums and death benefits • Self-directed investment accounts • Policy structure • Registered security • Agents/brokers who sell VUL must have license for insurance and securities

  9. Modified Endowment Contracts (MECs) • 7-pay test • Material change • LIFO treatment • 10% penalty (< age 59½)

  10. Universal Life and VUL: Other Features • Riders and optional benefits • Advantages • Limitations • Equity indexed universal life (EIUL)

  11. Group Life Insurance • Group term • Group whole life insurance • Group universal life • Group variable life insurance

  12. Life Insurance Policy Selection and Replacement • Policy selection • Policy illustrations • Policy replacement • Belth price of protection model

  13. Policy Replacement • Belth price of protection model:

  14. Life Insurance Policy Provisions • Grace period • Incontestability • Entire contract clause • Misstatement of age or gender • Assignment • Absolute • Collateral • Suicide

  15. Life Insurance Policy Provisions (cont.) • Reinstatement • Policy loans and automatic premium loan • Beneficiary designations • Aviation and war exclusions • Survivorship clause • Simultaneous death

  16. Life Insurance Settlement Options • Interest only • Fixed amount • Fixed period • Life income • Life income with period certain • Life income with refund • Joint and last survivor income

  17. Annuity Contracts • Types of annuities • Immediate/deferred • Flexible premium/single premium • Fixed/variable/equity-indexed • Timing of annuity payments • Straight life • Life with period certain • Installment refund/cash refund • Joint and survivor

  18. Taxation of Life Insurance and Annuities • Life insurance • Lifetime benefits • Death benefits • Viatical agreements • Terminal illness • Chronic illness • Annuities

  19. Individual Health Insurance • Major medical insurance • Characteristics • Limitations • Medical expense insurance • Basic medical insurance coverage • Limitations

  20. Health Savings Accounts and Long-Term Care Insurance • Health savings accounts (HSAs) • Eligibility • Contributions and distributions • Long-term care insurance • Levels of care • Benefits • Tax-qualified long-term care insurance

  21. Disability Income Insurance • Characteristics • Taxation of benefits • Integration of benefits • Termination of benefits • Residual benefits

  22. Health and Disability Insurance Policy Provisions • Preexisting conditions • Grace period • Reinstatement • Incontestability clause • Rights of renewability

  23. Group Health and Disability Insurance • Eligibility • Characteristics • Health insurance and managed care • COBRA • Taxation of group health benefits • Portability (HIPAA)

  24. Business Uses of Life Insurance and Other Employee Benefits • Buy-sell agreements • Nonqualified plans • Key person life insurance • Disability overhead expense insurance • Other employee benefits

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