Study Guide 3 - Personal Finance Study Guide 12,13,19,20...

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Personal Finance Study Guide 12,13,19,20 Important insurance, retirement, and estate information is provided below. Using your text and class notes, prepare for the exam which will focus on the topics and facts covered for this section of the course. A person’s need for life insurance varies over their lifetime, depending on the assets one wants to protect. If no one else relies on your income, life insurance may not be necessary. Know types of insurance = Whole life; universal life; variable life; decreasing term insurance; mortgage insurance. Term life policies are the most popular form of life insurance. A disadvantage of variable life policies is that the cash value may actually decrease in value of stocks or other instrument values decline. The person who can collect on an insurance policy is the beneficiary. They can be anyone named by the policyholder and can include friends, animals, estates, and foundations, in addition to family members. Know factors that impact insurance premiums = age; gender; health; policy cash value. The underwriting process allows the company to determine how much the premium of the policy should be. The major underwriting factors of life insurance are age, gender, health and lifestyle choices. The policy holder can borrow money from the cash value of a whole life policy with low interest rates compared to getting a loan from a credit union or bank. The policy holder can use the borrowed funds for any purpose they choose. Know the difference between a defined-benefit and a defined contribution plan. Know that premiums can be paid= annual, semi-annual; quarterly; monthly. Monthly premiums result in more expensive premiums for the policyholder. A disadvantage of term insurance is that it increases in cost when you renew it, it has not value at the end of the term and it has not value when you discontinue the policy. Term insurance becomes more expensive when you renew it (older and less healthy); it has no investment or saving products associated with it. Term insurance is less expensive than whole life insurance (great for young people who what to get insurance at affordable rates). If you purchase a term insurance policy with a conversion option, you can convert the term policy to a whole life policy during the conversion period. This assumes you will be able to better afford the increased premiums at a later time because people used to get raises, promotions, and new jobs to increase their methods
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This note was uploaded on 02/18/2012 for the course FINA 1100 taught by Professor Dr.anthony during the Fall '11 term at Tallahassee Community College.

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Study Guide 3 - Personal Finance Study Guide 12,13,19,20...

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