©2012, College for Financial Planning, all rights reserved. Module 9 Life and Health Insurance Foundations In Financial Planning SM Professional Education Program
Dec 28, 2015
©2012, College for Financial Planning, all rights reserved.
Module 9Life and Health Insurance
Foundations In Financial PlanningSM Professional Education Program
Learning Objectives
9–1: Identify a type or use of group or individual life insurance.
9–2: Identify a feature or provision of a life insurance policy.
9–3: Calculate the amount of life insurance needed for a client’s financial situation.
9–4: Describe features of group, major medical, or comprehensive major medical insurance, including managed care plans.
9–5: Calculate expenses that may be incurred under group, major medical, or comprehensive major medical insurance coverage.
9–6: Explain features and terms of disability income insurance.
9–7: Explain features and terms of long-term care insurance.
9–8: Identify definitions or characteristics of an annuity.5-2
Coverage in the Event of Death• Social Security• Group Life Insurance
o four types of coverageo no evidence of insurability (usually)
9-4
Basic Types of Individual Life Insurance
• Term• Whole Life• Universal• Variable• Variable Universal
9-5
Term Life Insurance
• Temporary coverage• Annual renewable term• Level premium term• Decreasing term
9-6
Whole Life Insurance
• Permanent coverage• Higher premiums than term at a given
age• Cash value buildup (guaranteed or
variable)• Tax deferral• Dividends (with participating policies)• Payment plans
9-7
Universal Life Insurance
Flexibility• Premium• Face amount of coverage• Cash value
Fluctuating interest rate• Danger of lapsing• Potential benefit of higher cash value
9-8
Life Insurance Features & Provisions
• Ten standard provisions• Other common provisions• Dividends
o taken in casho accumulate at interesto reduce premiumso paid-up additionso purchase one-year term
(5th dividend option)
9-10
Amounts of Life Insurance Coverage
Income-based method (human value)
• Estimate future average annual earnings
• Subtract expenses
• Determine number of productive years left
• Set discount rate
• Compute the present value
Needs-based method
• Determine needs (five categories)
• Determine available assets
• Needs – assets = insurance amount
9-11
Health Care Plans
Group coverage• Lower costs• Continued coverage after termination of
employment (COBRA)
Individual coverage• Higher costs
Social Security• Medicare (Parts A, B, C & D)
9-12
Medical Expense Policies
• Major medicalo deductibleo coinsuranceo stop-loss limit
provision• Comprehensive major medical (combined
base plan and major medical): what most people think of when discussing major medical coverage
9-13
HMO, PPO & POS Plans
Health maintenance organizations • Preventive care emphasized• Gatekeeper concept
Preferred provider organizations• May or may not use a gatekeeper
Point of service plans• Greater flexibility• Benefits vary by the type
of service chosen
9-14
Coverage Decisions
• Costso deductibleo coinsurance
• Coordination of benefits• Level of benefits
o flexibility of doctor selectiono types of services neededo access to specialists
9-15
Disability CoverageSocial Security• Four requirements
o under age 65o disabled (or
expected to be) for 12 months
o filed an application for benefits
o has necessary quarters of coverage
• Definition (strict)• Waiting period
Workers’ Compensationo Coverage without
determination of fault
9-16
Other Types of Disability Coverage
• Group coverageo short termo long termo maximum monthly benefitso waiting periods
• Individual policieso COLA riders
9-17
Disability Income Terms
• Benefit amount
• Benefit period
• Elimination period
• Definitiono at any occupationo modified any occupation for which the
person might be qualified based on education, experience, or training
o own occupation
9-18
Disability Coverage Amounts• Insurance limitations• Monthly expenses• Cost of coverage• Business continuation• Business overhead expense
9-19
Long-Term Care
• Medicare (very limited benefit)o requires stay in
approved facilityo provides some home
care• Medicaid
• Individual policieso daily benefito elimination periodo benefit periodo activities of daily
living (ADLs)
9-20
Question 1
Which one of the following types of insurance should be used to provide insurance protection for a mortgage?a. term life insuranceb. paid up life insurancec. variable life insuranced. universal life insurance
9-22
Question 2
In seeking needed life insurance coverage in which participants can invest in broader investment markets such as equity or fixed income, you would suggest that a client consider which type of insurance?a. term life insuranceb. whole life insurancec. variable life insuranced. universal life insurance
9-23
Question 3
Which one of the following disability income categories would one be likely to find an insurance agent?a. blue collarb. white collarc. professionald. certified
9-24
Question 4
Which disability income insurance policy guarantees policy renewability, but has rates that can be changed; however, only for an entire rate class?a. cancellableb. noncancellablec. conditionally renewabled. guaranteed renewable
9-25
Question 5
Which one of the following is not an ADL (activity of daily living) in the standardized definition as put forth by HIPAA for policy qualification?a. eatingb. hearingc. bathingd. transferring
9-26
Question 6
An annuity that begins payments to the annuitant within 30 days of receipt must be which one of the following?a. deferred annuityb. refund annuityc. single premium annuityd. joint and survivor annuity
9-27