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Facts About Life InsuranceFacts About Life Insurance
PurposePurpose What You Are Paying ForWhat You Are Paying For Who Needs It?Who Needs It?
How Life
Works
Using Life Insurance in Protecting Using Life Insurance in Protecting the Farm Familythe Farm Family
How much insurance is needed?How much insurance is needed? What kind of insurance do I buy?What kind of insurance do I buy?
Areas of Protection (DDIME)Areas of Protection (DDIME)
Death ExpensesDeath Expenses Debt cancellation (vs. transfer to heirs)Debt cancellation (vs. transfer to heirs) Income or lost services of the deceasedIncome or lost services of the deceased MortgageMortgage Education fundsEducation funds
What Kind of Life Insurance to What Kind of Life Insurance to Buy?Buy?
The protection feature of life The protection feature of life insurance if more important than insurance if more important than
the investment feature.the investment feature.
Permanent Life InsurancePermanent Life Insurance
Permanent life insurancePermanent life insurance is a general term is a general term used to refer to various forms of whole life used to refer to various forms of whole life insurance policies that remain in effect to insurance policies that remain in effect to age 100 so long as theage 100 so long as the
premium is paid (includepremium is paid (include
a savings or investmenta savings or investment
element called cash value).element called cash value).
Cash Value NegativesCash Value Negatives
No Cash Value for the first 2-3 years
Negative return for 5-15 years. Average return is 1.3%
Charged 6-8% interest to borrow your own money*
Lose cash values when you die
Typically 20% of the premium paid goes towards the cost of insurance and 80% goes to build a cash value that operates under the following rules:
Can You Afford BundlingCan You Afford Bundling
Term Life InsuranceTerm Life Insurance
Term life insuranceTerm life insurance is temporary life is temporary life insurance provided for a specific period of insurance provided for a specific period of time (also known at pure life insurance time (also known at pure life insurance protection). protection).
Insurance to Cover Farm Debt OnlyInsurance to Cover Farm Debt Only
Decreasing Term InsuranceDecreasing Term Insurance Mortgage InsuranceMortgage Insurance Credit InsuranceCredit Insurance
Business Transfer PlanningBusiness Transfer Planning
Buy/Sell AgreementsBuy/Sell AgreementsKey-Person InsuranceKey-Person Insurance
Liquidation Versus Liquidation Versus Retention of CapitalRetention of Capital
Selling assets is a method of Selling assets is a method of raising capital.raising capital.
Retention is the retaining of Retention is the retaining of assets.assets.
Looking at My Current PolicyLooking at My Current Policy
Type of insuranceType of insurance Amount of InsuranceAmount of Insurance Premium – Is the premium level?Premium – Is the premium level? Length of PolicyLength of Policy BeneficiariesBeneficiaries ConvertibilityConvertibility RenewableRenewable
How to Pick a Life Insurance AgentHow to Pick a Life Insurance Agent
Does the agent take the time to get to know you Does the agent take the time to get to know you and your needs?and your needs?
Does the agent help you understand your options?Does the agent help you understand your options? Does the agent present a clear analysis.Does the agent present a clear analysis. Do you feel pressured?Do you feel pressured? Do they have a license to sell insurance in your Do they have a license to sell insurance in your
state?state? A DON’TA DON’T – “How Much Do You Have to Spend” – “How Much Do You Have to Spend”
What to Consider When What to Consider When Replacing a PolicyReplacing a Policy
Family needs changeFamily needs change Policy outdatedPolicy outdated Your investment needs better met Your investment needs better met
elsewhereelsewhere Several separate policiesSeveral separate policies
Be Cautious About Replacement Be Cautious About Replacement When…When…
You are in bad health, uninsurable, or You are in bad health, uninsurable, or considerably older.considerably older.
You have a good, competitive policy and You have a good, competitive policy and can’t get a better value for your money.can’t get a better value for your money.
Never cancel your existing policy until the Never cancel your existing policy until the new one has been issued and delivered to new one has been issued and delivered to you.you.
Your relationship with your agent is more Your relationship with your agent is more important than having your family covered.important than having your family covered.
The bottom line….The bottom line….
When considering policy replacement, When considering policy replacement, examine your options carefully! Most examine your options carefully! Most
companies offer proposals that show the companies offer proposals that show the costs and provisions of the policy. As for costs and provisions of the policy. As for
these illustrations as you shop for the best these illustrations as you shop for the best value. Your goal is financial security – avoid value. Your goal is financial security – avoid
spending more than necessary. Always spending more than necessary. Always consider what works best for you and your consider what works best for you and your
family – it’s your decision!family – it’s your decision!
Summary – Tips for Making a Wise Summary – Tips for Making a Wise Insurance PurchaseInsurance Purchase
Buy Adequate CoverageBuy Adequate Coverage Buy Only One Policy Per FamilyBuy Only One Policy Per Family
Example:6 policies x $75 administrative fee = $4501 policy with riders - $75
$375With the $375 difference ($450 - $75 = $375), you could buy as much as $325,000 term life insurance at age 30 and pay a full year’s premium.
Summary – Tips for Making a Wise Summary – Tips for Making a Wise Insurance PurchaseInsurance Purchase
Understand the purpose of life insurance on Understand the purpose of life insurance on childrenchildren
Avoid expensive “gimmicks”Avoid expensive “gimmicks” Avoid insurance policies disguised as Avoid insurance policies disguised as
something elsesomething else