NAVOTAS POLYTECHNIC COLLEGE
Bangus St., Corner Apahap St., NBBS, City of Navotas
NPC ONLINE COURSE GUIDE FOR AY 2021-2022
Course Title: Personal Finance
Course Book Title: Personal Finance 13th edition, E.T. Garman and [Link] (2018)
Name of Faculty: Jerosalem Bagaforo, Joan Jimenez, and Maricar Artuz
Module Number: 8 of 10
Lesson Title/Topic: Life Insurance Planning
Week 8
Intended Learning Outcomes:
After this chapter you should be able to:
1. Understand the reasons why you might need life insurance and calculate the appropriate amount
of coverage.
2. Distinguish among types of life insurance.
3. Explain the major provisions of life insurance policies.
4. Apply a step-by-step strategy for implementing a life insurance plan.
Learning and Teaching Support Materials
1. Document (PPT)
2. Video Clips (supporting video lectures)
Life Insurance Planning – Youtube
3. Book references: German, E.T., and Forgue R.E, T. (2018). Personal Finance, Cengage
Learning.
MODULE 8
Two financial problems arise because you cannot know how long you will live. The first is the risk of
dying too soon. The second problem is the risk of living too long. Life insurance is not the best way to
address the living-too-long problem. Instead, you should invest through tax-sheltered retirement
savings plans.
HOW MUCH LIFE INSURANCE DO YOU NEED?
The primary reason for buying life insurance is to allow the family members of the deceased to continue
with their lives free from the financial burdens that death can bring. Income can be made available for
the surviving spouse. Insurance proceeds can safeguard home ownership.
Make the following your money habits in life insurance planning:
1. Calculate your life insurance needs every three years or when major life events occur, such as the
birth of a child.
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2. Avoid being talked into buying types and amounts of life insurance that you do not need.
3. Shop for term life insurance on the Internet to obtain the lowest possible rates.
4. Employ the principle of “buy term life insurance and invest the rest” with guaranteed renewable
or level-premium term life insurance.
5. Contribute the money saved by purchasing term rather than cash-value insurance into your
retirement plan.
6. If you decide that you need a cash-value life insurance policy, get one with a guaranteed
insurability option.
What Needs Must Be Met?
Final-Expense
Income-Replacement
Readjustment-Period
College-Expense
Other Special Needs
Government Benefits
Existing Insurance and Assets
TWO BASIC TYPES OF LIFE INSURANCE
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Types of Term Life Insurance Policies
Guaranteed Renewable Term Insurance
Level-Premium Term Insurance
Decreasing Term Insurance
Convertible Term Insurance
Group Term Life Insurance
Credit Term Life Insurance
Types of Permanent Life Insurance Policies
Whole Life Insurance
Limited-Pay Whole Life Insurance
Adjustable life insurance
UNDERSTANDING YOUR LIFE INSURANCE POLICY
A life insurance policy is the written contract between the insurer and the policyholder. It contains all of
the information relevant to the agreement. Several parties will be named in the life insurance contract
(policy). The owner, or policyholder, retains all rights and privileges granted by the policy, including the
right to amend the policy and the right to designate who receives the proceeds. The insured is the
person whose life is insured. In addition to the beneficiary, the owner will name a contingent beneficiary
who will become the beneficiary if the original beneficiary dies before the insured. Although the owner
and the insured are often the same person, it is possible for four different people to play all these roles.
Policy Terms and Provisions Unique to Life Insurance
The Application.
Lives Covered.
The Incontestability Clause.
The Suicide Clause.
Cash Dividends.
Death Benefit.
Grace Period.
Multiple Indemnity
Settlement Options Allow the Beneficiary to Decide How to Receive the Death Benefit
1. Lump sum..
2. Interest income.
3. Income of a specific amount.
4. Income for a specific period.
5. Income for life.
Policy Features Unique to Cash-Value Life Insurance
Cash-value life insurance policies
Nonforfeiture Values
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Policy Loans
Waiver of Premium
Guaranteed Insurability
STEP-BY-STEP STRATEGIES FOR BUYING LIFE INSURANCE
1. First Ask Whether or Not, and For How Much, Your Life Should Be Insured
2. Then Properly Integrate Your Life Insurance into Your Overall Financial Planning
Your need for life insurance will change significantly over the course of your life. So should your life
insurance plan. You should reassess your plan every two or three years and any time your family or
employment situation changes. Keep these facts in mind:
• During childhood and while single, your need for life insurance is either nonexistent or very small
because few, if any, other people rely on you for financial support.
• With marriage comes the increased responsibility for another person, although life insurance needs
probably remain low because spouses usually have the potential to support themselves if the other
partner were to die.
• The arrival of children, however, triggers a sharp increase in life insurance needs. Children often
require as many as 25 years of parental support, during which time they usually have little ability to
provide for themselves.
• As children grow older, the number of years of their remaining dependency declines, reducing the need
for life insurance.
• Parents with grown children see a reduced need for life insurance because their retirement investment
program will have grown large enough to cover the losses that death might bring.
• Retirement and widowhood reduce the need for life insurance or may even eliminate it altogether.
Where and How to Buy Your Life Insurance
The most important feature of any life insurance company is its ability to pay its obligations. The
company you choose must have the stability and financial strength to survive for the many years your
policy will remain in force. Ratings of the financial strengths of insurance companies are available from
A.M.
You Can Easily Buy Life Insurance Online
You Can Use a Local Insurance Agent