The Need for Life Insurance

Social Security Income "Blackout" Period

Time during which the surviving spouse and/or children do not receive any social security benefits. Blackout begins when the youngest child turns 16 and ends when the surviving spouse enters retirement.

Liquidation vs. Retention of Capital

Under the retention of capital approach, enough insurance is purchased so that when added to other liquid assets, there is enough to pay income benefits without jeopardizing the insured's principal asset.

Costs associated with death

Taking into account the final medical expenses of th insured, funeral expenses, and day-to-day expenses family maintenance

Preretirement Period

The period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for Social Security survivor benefits . Benefits lesson.

Liquidity

The policy's cash values can be borrowed against at any time and used for immediate needs.

Estate Creation

The purchase of life insurance creates an immediate estate. Important for young families that are getting started and have not yet had time to accumulate assets.

Replacing insured's salary or lost services

The surviving spouse who was the caregiver of the children may have to train to enter the job market

Retirement Period

The surviving spouse working income ceases and his/her social security benefits begin.

Family Dependency Period

Period when, if the insured dies prematurely, the surviving spouse will have dependent children to support . Income is the greatest.

Needs Approach

Predicted needs of a family after the premature death of the insured. Factors: income, he amount of debt, investments, and other ongoing expenses.

Advantages as property

1. Can be a valuable part of an individuals estate, providing immediate cash to pay debts and financial security 2. For land and building, it can turn into a cash value for a loan 3. Life insurance canbe paid in manageable installments called premiums

Three income periods

1. Family Dependency Period 2. Preretirement Period 3.Retirement Period

Education funds

Paying for children's education expenses so they can remain in school, or for the surviving spouse who may need additional education or training in order to re-enter the on market

Retirement fund

As a source of retirement income

Human Life Value Approach

Gives an estimate of what would be lost to the family in the event of the premature death of the insured. Calculates the life value by looking at : insureds wags, inflation, # of years to retirement, and the time value of money.

Emergency Reserve Funds

Paying for unexpected expenses following the death of the insured, such as travel expenses and lodging for family members

Debt cancellation

Paying off debts of the insured such as home mortgage or auto loans

Bequests

Leaving funds to the insured's church, school, charity

Survivor Protection

Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death

Cash Accumulation

Life insurance may be used to accumulate specific amounts of money for specific Ed's with guarantees that the money will be available when needed.

Estate convervation

Life insurance proceeds may be used to pay inheritance taxes and federal estate taxes so that it is necessary for the beneficiaries to sell off the assets.