Aflac- Life Insurance Questions & Answers Already Passed!!

Uses of Life Insurance - -Insured pays premium to company and in return, company assumes risk of that person dying prematurely -premium (small certain loss) is exchanged for a large uncertain loss -spreading risk of premature death among a large group Life insurance has value like property: -valuable part of individuals estate, providing immediate cash to pay debts and financial security to insured's survivors -cash value of life insurance policy can be used as collateral to secure a loan -may be paid for in manageable installments called premiums -used to pay inheritance taxes and federal estate taxes 3 Income Periods - Family Dependency Period: if insured dies prematurely, surviving spouse will have dependent children to support -income need will be greatest during this period Preretirement Period: after children are no longer dependent upon surviving spouse for support, but before surviving spouse qualifies for SS survivor benefits (Blackout Period) -income needs of surviving spouse lessen, but SS benefits not available until they turn 60 Retirement Period: surviving spouses working income ceases and SS benefits begin -standard of living does not lessen, so they require income comparable to preretirement period Personal Financial Planning - Information needed to be gathered:1. Debt 2. Income 3. Mortgage 4. Expenses -these costs take into account final medical expenses of insured, funeral expenses, day to day expenses of maintaining a family (rent, car, utilities, groceries, etc) -other needs include estate taxes, day care, insurance premiums, etc Debt Cancellation - Insurance may be used to create a fund to pay off debts such as home mortgage or auto loans Emergency Reserve Funds - Insurance proceeds may be used to assist in paying for sudden expenses following death of insured -travel expenses and lodging for family coming from a distance Education Funds - Insurance may be used to pay for childrens education so they can remain in school -surviving spouse who works at home to take care of child will need to receive education or training to re-enter job market -if they work outside of home, expense for day care to be considered Retirement Fund - Insurance proceeds may be used as source or retirement income Bequests - Insured may wish to leave funds for their church, school or other organization at their deathLiquidation/Retention - Liquidation: selling assets is method of raising capital Retention: retaining of assets