Life Insurance
2 types of life insurance:
o Term – for a period of time, always less expensive, no dividends
Level term – face & premium stay the same
Annual renewable term – policy renews every single year, premium goes up every year
Decreasing term – Premium stays the same, coverage goes down in value each year (covers mortgages)
o Permanent – till you die or cash in, have a cash value, always more expensive, some pay dividends
Whole Life – Level premium for entire life of the product, face value increases
Universal Life – 2 types, has to do with cash value & dividends, also can change the premium & death benefit, be careful – you can lose a lot of cash value
Variable Life – Similar to universal, but uses the cash value in your policy to invest in the stock market, instead of guaranteed returns
General Questions:
o Which is better? Depends on what you are using them for.
For him – Has both, term to take care of wife & kids while at home, whole for his life and for wife once kids are gone (Needs more when the kids are younger)
o How much life insurance do I need? Don’t know until you have all of the facts. Your scenario will dictate what you need. (Some people will tell you 7X your wage)
o Why buy? Protect your heirs, funeral/medical expenses, replace income, for business (collateral for loan, protect key individuals), for estate planning (its tax free, buy a policy to pay taxes on your estate so your heirs get what you leave), could be decreed buy court to protect kids, as of today, death benefit is TAX FREE, but may not always be.
o Can you buy a policy on anyone you want? NO, you have to have a relationship with the individual to buy (insurable interest)
o Who needs? Do kids need insurance? Everyone needs life insurance. Kids should have life insurance. Can be funeral or medical expense, but really, to protect them for future. If they come down with a disease this protects their future insurability. If they were to get ill in the future, they might not be able to afford the premiums.
When should you buy life insurance? As soon as you can, your premiums are less the younger you are.
Do you need life on a wife that is a stay at home mom? YES, you have to cover daycare costs, hire help so that you can keep making money
o What is premium based on? Health, age, gender, occupation, lifestyle (smoking, OWI, the activities you do (pilot, skydiving, scuba diving)), weight & height
o Is life insurance an investment? NO, technically. But if you cash out, it can be an investment.
When built up cash value, you have to pay capital gains taxes on money that has been earned, not the death benefit, but the gains.
You can also borrow against your cash value (either pay it back or if you die first, it’s taken out of your death benefit)
o Can you lie on your insurance form? How would they know? If they find out, they can cancel your insurance (not pay your policy on your death)
Terminology:
o face value – death benefit, amount you determine you want to give to your beneficiary when you pass away
Who decides who the beneficiary is? You? Maybe – who owns the policy? Owner decides who the face value goes to.
o Premium – bill, price
o Dividends – overpayments of premiums, the insurance company made too much money and is refunding you the extra, you can either buy more insurance or invest and bring up the cash value
o Estate Planning Policy – 2nd to die policy, covers for estate planning, only kicks in once the last spouse dies. To pay taxes for heirs.
Thursday, May 27, 2010
Wednesday, May 26, 2010
Final Exam Review
Final Exam Review
Employee Pay and Benefits
Concepts:
Understanding your paycheck
Deductions – required – social security, Medicare, fed/state taxes
Gross pay/ net pay/ overtime
Salary – monthly/yearly
Benefits
Unions
Budgets and Financial Records
Concepts:
What is a financial plan?
Disposable income
% of money to save (safe range too)
Fixed and variable expenses (safe range too)
Assets, liabilities, and net worth
Statement of Net Worth
Checking Accounts/Banking
Concepts:
Terminology – (vocabulary terms – hint)
Understanding parts of a check
How to write a check
Deposits (fill out deposit slip too)
Checkbook register / reconciling
3 types of endorsements
Credit
Concepts:
Calculating interest – simple
Terminology
Reading a credit report
3 Cs of credit – Character, Capital Capacity
Types of credit - single-payment (utilities), installment (mortgage), and revolving (credit card)
Adv/disadv. of credit
Finance charges~determining cost of credit & monthly payments
Insurance
Concepts:
Terminology
Health, Life, Disability, Car, Renters/Home
How much do I pay when I have insurance coverage versus when I don't have insurance coverage
Types of coverage
Premiums/Co-pays/Deductibles
Employee Pay and Benefits
Concepts:
Understanding your paycheck
Deductions – required – social security, Medicare, fed/state taxes
Gross pay/ net pay/ overtime
Salary – monthly/yearly
Benefits
Unions
Budgets and Financial Records
Concepts:
What is a financial plan?
Disposable income
% of money to save (safe range too)
Fixed and variable expenses (safe range too)
Assets, liabilities, and net worth
Statement of Net Worth
Checking Accounts/Banking
Concepts:
Terminology – (vocabulary terms – hint)
Understanding parts of a check
How to write a check
Deposits (fill out deposit slip too)
Checkbook register / reconciling
3 types of endorsements
Credit
Concepts:
Calculating interest – simple
Terminology
Reading a credit report
3 Cs of credit – Character, Capital Capacity
Types of credit - single-payment (utilities), installment (mortgage), and revolving (credit card)
Adv/disadv. of credit
Finance charges~determining cost of credit & monthly payments
Insurance
Concepts:
Terminology
Health, Life, Disability, Car, Renters/Home
How much do I pay when I have insurance coverage versus when I don't have insurance coverage
Types of coverage
Premiums/Co-pays/Deductibles
Health Insurance
2 Types of Health Insurance
• Individual – Covers you, your spouse, and your children only. Individual means that you are paying for the policy yourself instead of your employer.
• Group – Covers multiple people from an employer’s standpoint,
o If you have 18 months of continuous (permanent product) coverage prior to your insurance policy, the insurance company cannot deny you (or add a rider clause) for pre-existing conditions.
• NOTE: Dental and Vision are completely separate from Health insurance. You have to buy separate policies to cover services for these areas or pay more for the premiums and the coverage isn’t always as good.
Terminology
• Deductible – The first amount you pay before the insurance company pays anything. You can choose different deductible.
• Coinsurance – You pay for a percentage and your insurance pays the rest.
o If it says 100% after deductible, it means that the insurance company pays the total amount.
o 80/20 is the most common. It means that the insurance company pays 80% of the bill; you will pay 20% until you reach the “Out of Pocket Maximum”.
• Out-of-Pocket Maximum – The most you would have to pay out of your pocket, after your deductible has been reached in a coinsurance plan. Pay your deductible first, then you start to pay coinsurance (20% of bill) until you reach the max. (Kind of a deceptive term, as it doesn’t count your co-pays or deductibles.)
• Network – these are the doctors and medical providers that belong to a special group that you have to see for your insurance to be in full effect, they have agreed to take a discounted price from the insurance company for their services. You pay more money if you see providers that are not in your network, this is extremely important. It is your responsibility to know that you are in network.
o Usual & Customary Charges – if you go out of network, your insurance company can deny charges that they say are more than the “usual and customary” charges for a visit or procedure. Part of your contract.
• Initial Rate Guarantee – Will hold the rates stable for a certain amount of time. As an individual, you can choose 12, 24, 36 months. With group, only 12 months.
• Lifetime Maximum Benefit – The maximum dollar amount that they will pay on your behalf. Listed per person on the plan.
o You should increase beyond $1 million if you have the option. Sometimes even $3 million is not enough.
• Co-pay – An agreed amount that you will pay the doctor for a standard office visit. Usually ranges from $30-$50. You pay this BEFORE you pay your deductible and coinsurance.
o Sometimes there are “split co-pays” on group plans, one price for your normal or primary care doctor (general practitioner, pediatrician, etc..) and another price for specialists. Usually that amount is higher.
• Prescription Co-pay – Similar to office co-pays, except for prescription drugs. Usually these are tiered by generic, brand name, and super brand name/specialty (newest drugs on the market). Does not count toward your deductibles.
• Maternity – Covers a female’s pregnancy and birth of the child, covered for persons on the insurance plan. Spouses only if it is a family plan.
o Covered differently for individual policies as opposed to group policies. Usually there is a waiting period on individual plans. Make sure you do research if you are buying an individual plan.
o Generally fairly expensive on individual policy, the insurance company is looking to recover their expected payout.
• Preventative Care – the insurance company will pay a certain amount for items like an annual physical, to encourage people to use specific services to catch serious illnesses at an early stage, before there is a larger payout.
• Rider – A separate condition (clause) listed on a policy that charges extra for another medical condition, or refuses coverage for a certain illnesses or injuries. It can be for a short period of time or indefinite. Be careful if an insurance company is offering a policy with a rider clause. It might be a good idea to shop around at this point.
• Pre-existing Condition – Something that happened medically (either illness or injury) prior to you getting this insurance.
How to Choose Between Policies
1. What are they covering? Just because it’s more expensive, doesn’t mean it’s better. You need to research what the policy includes and excludes.
2. What’s the maximum out-of-pocket that you will have? How much is the deductible? What is the coinsurance?
• Individual – Covers you, your spouse, and your children only. Individual means that you are paying for the policy yourself instead of your employer.
• Group – Covers multiple people from an employer’s standpoint,
o If you have 18 months of continuous (permanent product) coverage prior to your insurance policy, the insurance company cannot deny you (or add a rider clause) for pre-existing conditions.
• NOTE: Dental and Vision are completely separate from Health insurance. You have to buy separate policies to cover services for these areas or pay more for the premiums and the coverage isn’t always as good.
Terminology
• Deductible – The first amount you pay before the insurance company pays anything. You can choose different deductible.
• Coinsurance – You pay for a percentage and your insurance pays the rest.
o If it says 100% after deductible, it means that the insurance company pays the total amount.
o 80/20 is the most common. It means that the insurance company pays 80% of the bill; you will pay 20% until you reach the “Out of Pocket Maximum”.
• Out-of-Pocket Maximum – The most you would have to pay out of your pocket, after your deductible has been reached in a coinsurance plan. Pay your deductible first, then you start to pay coinsurance (20% of bill) until you reach the max. (Kind of a deceptive term, as it doesn’t count your co-pays or deductibles.)
• Network – these are the doctors and medical providers that belong to a special group that you have to see for your insurance to be in full effect, they have agreed to take a discounted price from the insurance company for their services. You pay more money if you see providers that are not in your network, this is extremely important. It is your responsibility to know that you are in network.
o Usual & Customary Charges – if you go out of network, your insurance company can deny charges that they say are more than the “usual and customary” charges for a visit or procedure. Part of your contract.
• Initial Rate Guarantee – Will hold the rates stable for a certain amount of time. As an individual, you can choose 12, 24, 36 months. With group, only 12 months.
• Lifetime Maximum Benefit – The maximum dollar amount that they will pay on your behalf. Listed per person on the plan.
o You should increase beyond $1 million if you have the option. Sometimes even $3 million is not enough.
• Co-pay – An agreed amount that you will pay the doctor for a standard office visit. Usually ranges from $30-$50. You pay this BEFORE you pay your deductible and coinsurance.
o Sometimes there are “split co-pays” on group plans, one price for your normal or primary care doctor (general practitioner, pediatrician, etc..) and another price for specialists. Usually that amount is higher.
• Prescription Co-pay – Similar to office co-pays, except for prescription drugs. Usually these are tiered by generic, brand name, and super brand name/specialty (newest drugs on the market). Does not count toward your deductibles.
• Maternity – Covers a female’s pregnancy and birth of the child, covered for persons on the insurance plan. Spouses only if it is a family plan.
o Covered differently for individual policies as opposed to group policies. Usually there is a waiting period on individual plans. Make sure you do research if you are buying an individual plan.
o Generally fairly expensive on individual policy, the insurance company is looking to recover their expected payout.
• Preventative Care – the insurance company will pay a certain amount for items like an annual physical, to encourage people to use specific services to catch serious illnesses at an early stage, before there is a larger payout.
• Rider – A separate condition (clause) listed on a policy that charges extra for another medical condition, or refuses coverage for a certain illnesses or injuries. It can be for a short period of time or indefinite. Be careful if an insurance company is offering a policy with a rider clause. It might be a good idea to shop around at this point.
• Pre-existing Condition – Something that happened medically (either illness or injury) prior to you getting this insurance.
How to Choose Between Policies
1. What are they covering? Just because it’s more expensive, doesn’t mean it’s better. You need to research what the policy includes and excludes.
2. What’s the maximum out-of-pocket that you will have? How much is the deductible? What is the coinsurance?
Friday, March 26, 2010
Guest Speaker~Budgeting
Today we had a guest speaker, Stacy Whiteman from Edward Jones, come in to talk to us about budgeting. She discussed the importance of setting goals for us to work towards when creating and "living" our budget. She quoted a Harvard study that stated that you are 94% more apt to meet your goals if you write them down. So, set some goals in life and make sure you set some short-term, intermediate, and long-term goals.
Budgets are a financial tool that set guidelines for us financially and help us move towards meeting our S.M.A.R.T. goals. When developing a budget, you should make yourself a fixed expense....you should be Paying Yourself First 10% of your net pay.
You should start investing as soon as possible. You NEED to make sure you are making yourself a priority and taking the steps to ensure you can support yourself financially when you hit retirement age. Remember that savings and investing are two separate activities. Don't wait....do this as soon as you can!!
Budgets are a financial tool that set guidelines for us financially and help us move towards meeting our S.M.A.R.T. goals. When developing a budget, you should make yourself a fixed expense....you should be Paying Yourself First 10% of your net pay.
You should start investing as soon as possible. You NEED to make sure you are making yourself a priority and taking the steps to ensure you can support yourself financially when you hit retirement age. Remember that savings and investing are two separate activities. Don't wait....do this as soon as you can!!
Thursday, February 4, 2010
Gross Pay to Net Pay
To determine gross pay, we must always remember to consider the pay period before calculating (weekly, bi-weekly, semi-monthly, monthly).
Multiply the rate of pay x the hours worked to calculate the base pay. Overtime will be paid in an hourly position after 40 hours. To determine overtime rate multiple the base rate x 1.5. After determining overtime rate (don't round here) calculate this by the number of hours worked over 40 hours (now round). Add this to the base pay to determine gross pay.
There are some salaried jobs that will pay overtime (not required). You will calculate the overtime pay and add to the salaried base pay.
There are four required deductions:
Multiply the rate of pay x the hours worked to calculate the base pay. Overtime will be paid in an hourly position after 40 hours. To determine overtime rate multiple the base rate x 1.5. After determining overtime rate (don't round here) calculate this by the number of hours worked over 40 hours (now round). Add this to the base pay to determine gross pay.
There are some salaried jobs that will pay overtime (not required). You will calculate the overtime pay and add to the salaried base pay.
There are four required deductions:
- Federal income tax (use tax tables)
- State income tax (use tax tables)
- Social security (6.2% of gross pay)
- Medicare (1.45% of gross pay)
Thursday, January 28, 2010
Paychecks & Benefits
Today we are starting our Paychecks & Benefits Unit. We discussed today there are hidden costs and other factors you should take into consideration when determining which job to take. You should be aware of what your salary will be and what the pay periods are for your employer. These are questions you should ask during the job interview (probably not the first questions though).
There are various pay periods that will determine how many times you receive a paycheck from your employer. Your employer will decide what the pay period is for his/her company.
The pay periods are:
There are various pay periods that will determine how many times you receive a paycheck from your employer. Your employer will decide what the pay period is for his/her company.
The pay periods are:
- Monthly (12)
- Semi-monthly (24)
- Bi-weekly (26)
- Weekly (52)
- Hourly (2080)
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