FIN 3440 Final

Premature Death
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Terms in this set (83)
Premature Death
Death of a family head with outstanding unfulfilled financial obligations
Life expectancy at birth in 2010
78.7
Life expectancy at birth in 1970
70.8
Human Life Value
present value of family's share of the deceased breadwinner's future income
Needs Approach
Various needs of the family is analyzed
Mortgage Redemption Fund
Amount of monthly income needed to pay off mortgage
Educational Fund
educational fund needed for children
Emergency Fund
Large amounts of cash needed in case of an emergency
Term Insurance is appropriate in 3 situations
1. Amount of income is limited.
2. Need for protection is temporary.
3. Guarantee future insurability
Major Limitations of Term Insurance
1. Premiums increase with age
2. Inappropriate if you wish to save money for a specific need
3 Major Causes of death in USStroke, Heart Problems, CancerDo young singles with no dependents need life insurance?No they don't need coverageWhat is the difference between term insurance and permanent or whole life insurance?Term covers an individual for a period of time while permanent covers for the life of that person til age 121At the end of a term policy, can you renew?YesWhat percentage of individual life policies have term insurance?36%Advantages of term insuranceRenewable, lower premiums - more coverage, provides coverage for a period of timeDisadvantages of term insuranceDoesn't provide savings called cash value, benefits only received if death occurs during the term, premiums increase at each renewalWhich is more expensive - permanent or term?PermanentAnnual Renewal or Term considerationsCost, How long you need coverage, plan with a relevant planning periodConvertible InsuranceAllows a policy holder to convert the term policy to a permanent policyDecreasing Term, IncreasingAllows the decrease of the death benefits over its term; vice versaWhat has been the main product of the US life insurance industry?Whole life insuranceWhat percentage of life policies were permanent?64%Advantages of permanent life insuranceFixed for life, benefits as long as you live, age limit of 121, excess funds, loans against policyDisadvantages of permanent life insuranceMore expensive than term insurance, less coverage, investments are conservativeWhat type of permanent insurance does this class focus on?Whole life insuranceWhat offers an ideal approach to estimate life insurance needs?SpreadsheetsFinal Expensesamount of expenses your survivors will have to pay when you dieUp to how much is exempt from estate taxes?5 millionAverage cost of a funeral4000, 8000 with flowers etcHow man months of disposable income in an emergency fund?3 monthsWhat happens to the money in an IRA or keogh plan at your death?Money becomes availableEmployee BenefitsEmployer sponsored benefits other than wages which improve an employee's economic statusFirst health plans designed to compensate workers for what instead of medical expenses?Loss of incomeWhen did plans begin to change?Great DepressionWhat happened to hospitals during the great depression?Began to go out of business because of people's inability to payWhat is considered the forerunner for the Blue Cross plan?The Baylor plan of 1929When was major medical insurance introduced?1949How does the IRS support health insurance?Employer's contributions are exempt from taxesWhat is an indemnity plan?Fee for service planWhat is a fee for service plan?insured could use any medical provider and send the bill to insurance who would pay for all or part of the feesWhat is it called when a company pays 80% and you pay 20%?CoinsuranceWhat year was Medicare formed?1965What does medicare do?provides health coverage to those over 65 years oldWhat is the emphasis of managed care organizations?To address the rising costsHealth Maintenance Organization (HMO)offered more direct relationship between health care and financingWhat were HMO's criticized for?Not controlling cost and lack of quality careWhat replaced fee for service plans as the dominant force?Managed care organizationsTraditional plans that allowed alot of freedom to select providers account for how many plans in the 90s? How many today?50% ; 3%Managed Careterm for medical care that provides services to its members in a cost effective wayWhat is a capitation?What a HMO charges as a feeWhat is a subscriber to an HMO forced to choose?Primary care physician (PCP) or gatekeeperWhat percentage of medical care participants use HMOs?24%What does a preferred provider organization do?contracts a network of providers for members at a discount rateAre patients required to use a preferred provider in a PPO?No but it is discounted if they doPPOs compose what percentage of plans?64%Employer Insurance provider percentage55%Medicare provider percentage30%Individual provider percent10%Military provider percent4%Percent uninsured in US16%What percentage of employees receive insurance benefits from employers?50%When choosing health plan should you try to group health plan or individual?GroupAffordable Care Act (ACA) provides?high quality affordable care for all citizensDoes the ACA require people to have insurance?yes most people are requiredWhat ratio of bankruptcies were related to medical expenses?2/3Pension Retirement Age65Pension early retirement age55Pension deferred retirementwork beyond retirement ageWhat is the most prevalent DC plan? (defined contributions?401KWhat accounts for most of the retirement growth in the private sector?401kWhat is a defined benefit plan?Pension, guaranteed retirement from employerWhat percentage is DB plans down to?22% percentWhat formula is used to determine retirement benefits in DB?Unit BenefitsPercent with DC plan68%percent with DB plan22%What year was SS signed into law?1935 after the Great DepressionSS is funded by ?Payroll taxSS is a what kind of system?pay as you goWhat is pay as you go?Payroll taxes are used to fund current retireesAge of SS full retirement?65, 62 for earlySS acts as a what to the broad population?safety netWhat are pension benefits related to?how long you stay with an organization