Everything you ever wanted to know about LIFE INSURANCE….. but were afraid to ask

1. Everything you ever wanted to know about LIFE INSURANCE…..but were afraid to ask Jeanette Tucker, Ph.D. RFG Associate Professor, Family Economics jtucker@agcenter.lsu.edu

2. Who has the greatest need for life insurance?

3. 2005 Life and Health Insurance Foundation for Education Survey • 1000+ American respondents said: • Spiderman—28% • Batman—18% • Fred Flintstone—16% • Harry Potter—15% • Marge Simpson—11%

4. Life insurance isn’t for the people who die…. It’s for those who live….

5. How much do you need? • Average coverage--$176,000 or about 3 times annual gross income • Old rule of thumb—4 to 5 times annual income • Professional Financial Needs Analysis • Considers: current and future financial obligations, spouse’s earnings, savings, investments current life insurance • Online calculator: http://www.life-line.org/build/how_much_do_i_need/index.php?pt=lfhmdin&m=1

6. No matter what the name……. • All policies are a variation of two types: • Term insurance • Permanent insurance (whole life, cash value)

7. Types of Life Insurance • Term Life • Annual renewable term • Level term • Decreasing term • Convertible term

8. Permanent Life (cash value, whole life) • Whole life • Universal life • Variable life

9. Which type is best? It depends….. • < 8 years—term has lowest overall cost • 8-12 years—determine on case by case basis • 12+ years—permanent less expensive in long run • Online decision guide http://www.life-line.org/build/decision_guide/index.php?pt=lfdg&m=1

10. Insuring the times of your life • Marriage • Parenthood • Home ownership • Changing jobs • Retired or planning for retirement • Single

12. Generally Unnecessary Insurance • Credit insurance (life, disability, unemployment) • Life insurance for children • Cancer insurance • “Double Indemnity” insurance riders • Hospital indemnity policies • Flight insurance • Car rental collision-damage waivers

13. Common Insurance Errors • Not following the “large loss principle” • Not buying insurance as a “total package” • Unfamiliarity with employer-provided (and public) insurance benefits • Lack of disability insurance • Lack of adequate liability insurance • Not checking credit rating of insurance company

14. General Insurance Tips • Insure for major losses • Choose a highly rated insurance company • Select the highest deductible you can afford • Pay premiums annually or semi-annually • Avoid duplicating coverage • Ask about available discounts • Follow “The Rule of Three”

15. Policy Features That Limit Coverage • Benefit coordination clauses • Deductible • Elimination period • Co-payment • Co-insurance • Policy limit

16. Questions? Comments? Experiences?

17. References: • Edelman, R. The Truth About Money. • Garman T. & Forgue, R. Personal Finance. • Life and Health Insurance Foundation for Education. • Miller, T. Kiplingers Practical Guide to Your Money • Rutgers CES. Money Talk

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19. Survey Findings • Tony Soprano—25% • Homer Simpson—17% • Cliff Huxtable—12% • Ray Barone—12% • Mike Brady—10% • Not sure—23%