Bennie Waller wallerbd@longwood 434-395-2046

1. Bennie Waller wallerbd@longwood.edu 434-395-2046 Longwood University201 High StreetFarmville, VA 23901

3. Health insurance is a necessity • Provides protection against catastrophic medical bills which could significantly impact your financial security. • Life insurance protects your family if you die • Risk pooling – the concept that you are placed in a pool with other to share risks • Premiums – payments to insurance company to provide coverage • Actuaries – • Beneficiary – the designated party to received proceeds

4. Life insurance may not be needed by everyone • Single without dependents • Married, no children working spouse – you would want life insurance if spouse would suffer • Life insurance is likely needed if • You have children • Married and with non-working spouse

5. Earning multiple approach • Determines lump sum amount needed to replace stream of annual income • Multiply annual gross income by earning multiple (some planners recommend 5-15 times earnings) • Earning multiple is dependent on years and rate of return • Needs Approach • More of a customized method of determining the financial needs of ones family to maintain their lifestyle • Immediate needs, debt elimination, children, spouse, and dependency needs

6. Term insurance – pays specific amount at death • Best alternative for many individuals • Lower costs • Cash value insurance – life insurance and savings plan • Tax advantages as cash-value is tax deferred • Life insurance is not considered part of estate

7. Term insurance – where “term” refers to the number of years of coverage and pays a stated benefit if insured dies during the coverage period. It has no “face” value, is more affordable but costs do increase each time policy is renewed. • Renewable term insurance – Most term insurance is renewable up to some specified age (e.g., 70 years old) • Decreasing term insurance – annual premiums remain constant but coverage benefits decrease each year reflecting the increasing probability of death as you get older. • Based on the concept that you will require less insurance as your wealth increases and children become self sufficient.

8. Group term insurance – provided usually to a group of individuals such as a company. Typically without a medical exam. For example, employees of Longwood University. • Credit/mortgage insurance – a variation of group insurance provided by lenders to cover outstanding debts such as a mortgage. • Convertible term life insurance – the ability to convert a term policy into cash-value life insurance without medical exam. Premiums may increase.

9. Insurance that provide a death benefit and savings. As long as premiums are paid a benefit will eventually get paid. • 3 basics types of cash value insurance • Whole life • Universal life • Variable life

10. Whole life – insurance that provides coverage when the insured dies, turns 100 or some stated age. • Premiums tend to be higher than term insurance due to the fact that the company will eventually make a payout. • Premiums are known in advance and many times are fixed. • In earlier years, after fees and cost of death benefits are deducted from premiums, goes into savings account and represents the “cash value” which increases over time. • As time passes, the policy premiums are not enough to cover death benefit. The cash value is used to supplement the premiums • Non-forfeiture right – policyholder has right to choose the cash value in exchange for giving up the right of death benefits.

11. Universal life insurance – a cash value insurance that allows policyholder to vary the premiums and level of protection. • Policyholder can increase or decrease premium payments which will increase/decrease cash value. Premiums are broken down into death benefit, administrative costs and cash value. • If premium paid isn’t large enough to cover death benefit and administrative expenses, the rest is subtract from cash value. If the cash value is not sufficient to cover these costs, the policy will lapse.

12. Variable insurance – policy that provides death benefits and cash value which are tied to the performance of some investment chosen by policyholder. • Policyholder assumes the risk as the value of the policy will vary

13. Beneficiary – individual named to receive benefits • Grace period – late payment period which the policy will remain in effect, typically 30 days. After which policy can be cancelled. • Loan clause – right to borrow against cash value at specified rate • Non-forfeiture – provides choices available if premiums are missed and protects cash value of policy. Typical choices are receiving the cash value or converting to term policy • Reinstatement – requirements to reinstate lapsed policy such as paying all past due premiums, interest and loan amounts. • Suicide – most policies will not pay for suicide within certain period of contract, typically 2 years. • Incontestability – will not allow company to dispute validity of contract after some period (2 years). It protects against policy cancellation due to error or innocent mistatements.

14. Accidental death – double or triple indemnity • Guaranteed Insurability – right to increase insurance protection without medical exam at specified times such as birth of child or purchase of a home. • Cost of living (COLA) – increases coverage at same rate as inflation

15. As with any purchase, do your homework • Check the financial stability of the company you are considering (S&P rating AAA is best) • Remember insurance agents are salespeople and make their living off of commissions. • Interview several agents and ask many questions.

17. Most health insurance policies includes some combination of • Doctor • Hospital • Surgery • Major medical insurance – coverage for catastrophic illness • Stop-loss provision – limits payment amount by policy holder • Dental and Eye care insurance – routine examinations, glasses • Dread Disease and Accidental insurance –

18. Private Health Care Plans • Traditional Plans • Provides reimbursement for some portion of medical expenditures and provides flexibility. • Coinsurance – percentage of each claim that company will pay. For example, 80% participation premium on hospital claims up to $3,000 and 100% thereafter. Policyholder would pay 20% of first $3,000. • Co-payment – policyholder must pay some amount of each claim. • Expensive and requires significant paperwork.

19. Managed Health Care – • Health maintenance organizations (HMO) - prepaid insurance that permits services from participating doctors and hospitals • Individual practice plan – patients go to participating offices and get treatment • Group practice plan – patients must go to central facility for treatment. • Point of service plan – Plan that allows members to get treatment from HMO and non-HMO doctors.

20. Preferred Provider Organization (PPO) – Insurance plan under which employer (insurer) negotiates rates for its members. • Government sponsored Health Insurance • Worker’s compensation - states laws that provides payments for work-related accidents or illnesses.

21. Government sponsored Health Insurance • Medicare – Government provided insurance for the disabled and those over 65. • Part A – provides hospital insurance. You are responsible for a portion of the costs. • Part B - Supplemental insurance • Part C – Advantage • Part D – Prescription Drug coverage – • Medigap – sold by private insuarance companies to cover “gaps” in Medicare coverage • Medicaid – insurance for the needy

22. Disability insurance – provides payments to the insured if their livelihood is interrupted by illness or accident. • Long-term care insurance – coverage for nursing home care. • Benefit Period—can range from 1 year to lifetime • Waiting Period—0 days – 1 year • Inflation Adjustment—protected from inflation • Waiver of Premium—insurance stays in force while receiving benefits

24. Requires individuals to obtain health insurance or be fined $695 (effective 2014) • Prohibits denial of coverage due to pre-existing conditions (effective 2014) • Allows children to remain on parents policy to age 26 • Provides tax credits for those falling within 400% of poverty line (effective 2014) • Provides access to Medicaid for those with income less than 133% of poverty.

25. Homeowner Insurance – Six basic types of policies; • HO 1–Basic Form: provides the narrowest coverage of all HO policies limited to only 11 specifically named perils. Because of its limitations, the policy is not widely available. • HO 2–Broad Form: a “named perils” form of insurance that limits coverage to a set of specific perils (e.g., fire, windstorms). • HO 3–Special Form: an “open perils” form of insurance that covers all perils except those that are specifically excluded (e.g., earthquakes, nuclear accidents).

26. HO 4–Tenant Insurance: policy that provides funds to replace furnishings and personal property in a rented dwelling. These policies also provide liability insurance for renters up to a specified limit. • HO 6–Condo Insurance: policy that covers the personal property of condo or co-op owners, plus any structural improvements or alterations made to their unit. • HO 8–Modified Coverage: policy designed for an older home that limits coverage to repair costs or actual cash value, rather than replacement cost due to the expense of replacing materials and construction details used in older homes.

27. Section 1: Property Coverage • Coverage A: Dwelling and attachments such as garage • Coverage B: Other structures – Storage shed • Coverage C: Personal property – e.g., stolen laptop • Coverage D: Loss of use - covers living expenses while home is being repaired

28. Section 2: Personal Liability Coverage • Protects policyholder and family from financial loss if someone is injured on their property or as a result of their actions. • Protects against liability suits • Also covers medical expenses of anyone hurt by policyholder, their family, or pet

32. Supplemental Coverage • Endorsement – an addendum to an insurance policy to add or delete coverage. • Personal articles floaters – additional coverage for personal property items (expensive jewelry, silver, computer) • Earthquake coverage • Flood protection • Replacement cost coverage – • Personal Umbrella policy – protection against lawsuits

33. How much insurance do you need? • Enough for full replacement in event of total loss • Coinsurance – requires portion of loss to be paid by homeowner if underinsured. • 80% rule – most companies require homeowners carry a minimum of 80% of replacement cost.

34. Cost of Insurance • Credit score • High deductible • Security systems • Smoke alarms • Multiple policy discounts • Pay premiums annually • Shop around

36. Personal Auto Policy (PAP) • Part A: Liability – to protect against legal liability for injury and property damage. • Part B: Medical Expense – for medical and funeral expenses • Part C: Uninsured Motorist – required in many states to provide coverage caused by an uninsured driver • Part D: Collision/Comprehensive – for repairing your automobile in case

38. What drives auto insurance premiums? • Type and use of automobile • Driving record • Geographical location • Personal characteristics • Age • Sex • Discounts – check with insurance company • Credit score

39. Shop around. Ask questions. • Deal with reputable companies • Take advantage of discounts • Consider a car that is relatively inexpensive to insure • Improve driving record • Raise deductibles • Keep adequate liability insurance

40. Move automobile to a safe place • Get information from witnesses and keep detailed records. • Cooperate with authorities and ask for alcohol test if you suspect the other driver to be under the influence. • Write down the facts as soon as possible • Don’t admit guilt or sign anything. Get copy of police report, review for accuracy. • Call agent