Everything you ever wanted to know about LIFE INSURANCE…..but were afraid to ask

Jeanette Tucker, Ph.D. RFG

Associate Professor, Family Economics

jtucker@agcenter.lsu.edu

Who has the greatest need for life insurance?

2005 Life and Health Insurance Foundation for Education Survey 1000+ American respondents said:

Spiderman—28% Batman—18% Fred Flintstone—16% Harry Potter—15% Marge Simpson—11%

Life insurance isn’t for the people who die….

It’s for those who live….

How much do you need?

Average coverage--$176,000 or about 3 times annual gross income

Old rule of thumb—4 to 5 times annual income Professional Financial Needs Analysis Considers: current and future financial obligations,

spouse’s earnings, savings, investments current life insurance

Online calculator: http://www.life-line.org/build/how_much_do_i_need/index.php?pt=lfhmdin&m=1

No matter what the name…….

All policies are a variation of two types: Term insurance Permanent insurance (whole life, cash value)

Types of Life Insurance

Term Life Annual renewable term

Level term

Decreasing term

Convertible term

Permanent Life (cash value, whole life) Whole life Universal life Variable life

Which type is best? It depends….. < 8 years—term has lowest overall cost 8-12 years—determine on case by case

basis 12+ years—permanent less expensive in

long run Online decision guide http://www.life-

line.org/build/decision_guide/index.php?pt=lfdg&m=1

Insuring the times of your life Marriage Parenthood Home ownership Changing jobs Retired or planning for retirement Single

Generally Unnecessary Insurance Credit insurance (life, disability, unemployment)

Life insurance for children

Cancer insurance

“Double Indemnity” insurance riders

Hospital indemnity policies

Flight insurance

Car rental collision-damage waivers

Common Insurance Errors

Not following the “large loss principle”

Not buying insurance as a “total package”

Unfamiliarity with employer-provided (and public) insurance benefits

Lack of disability insurance

Lack of adequate liability insurance

Not checking credit rating of insurance company

General Insurance Tips

Insure for major losses

Choose a highly rated insurance company

Select the highest deductible you can afford

Pay premiums annually or semi-annually

Avoid duplicating coverage

Ask about available discounts

Follow “The Rule of Three”

Policy Features That Limit Coverage Benefit coordination clauses

Deductible

Elimination period

Co-payment

Co-insurance

Policy limit

Questions?

Comments?

Experiences?

References:

Edelman, R. The Truth About Money. Garman T. & Forgue, R. Personal Finance. Life and Health Insurance Foundation for

Education. Miller, T. Kiplingers Practical Guide to Your

Money Rutgers CES. Money Talk

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Survey Findings

Tony Soprano—25% Homer Simpson—17% Cliff Huxtable—12% Ray Barone—12% Mike Brady—10% Not sure—23%