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DR. FILEMON C. AGUILAR MEMORIAL COLLEGE

College of Business Administration
Golden Gate Subdivision, Talon 3, Las Piñas City

Course code and Title : FINE 2/MKTE2/HRME2 / PERSONAL FINANCE

LESSON NUMBER : Module 13

Topic : Life Insurance

Introduction:
Many financial experts consider life insurance to be the cornerstone of sound
financial planning. If you have financial responsibilities, life insurance could be worth
considering at any age. However, life insurance tends to be cheaper when you’re
younger, as your premiums are calculated on the basis of your age and health, among
other factors. Aside from age factors, you may want to consider life insurance during
particular periods in your life when other people depend on you financially, whether
that’s a partner, your children, elderly parents or a dependent family member.

So, is it worth having life insurance? Every household has different

needs, but if you want to help provide for your family at a difficult time, life
insurance really could be worth it.

Learning Objectives :

After this lesson, the student should be able to :

1. Valuing the importance of investment planning in the financial planning

process.

2. Identify the types of investment products.

3. Analyze the concept of investment.

Pre-Assessment:

 Instruction: Write your answer in ½ sheet of paper or in a document file.

1.Give 5 reasons that life insurance is worth paying for.

1. INSURANCE IS LESS EXPENSIVE WHEN YOU'RE YOUNGER:
The younger and healthier you are, the less expensive life insurance
becomes. This is because, as you become older, you are more likely to
 develop health issues that will raise your insurance premiums or make you
uninsurable. When a life insurance company assesses an application,
they look at the likelihood that the applicant would file a claim in the future.
When it comes to life insurance, the ultimate risk to the firm is the
applicant's death.
2. LOOKING AFTER YOUR LOVED ONES EVEN AFTER YOU'VE GONE:
This is the most significant part of life insurance that must be considered.
Your family will rely on you even after you're gone, and you don't want to
let them down. Life insurance could save the day for your surviving
dependents, whether it's to replace lost income, pay for your child's
school, or provide much-needed financial stability to your spouse.
3. TO LEAVE AN INHERITANCE
Even if you have no other assets to leave to your heirs, you can leave
them an inheritance by purchasing a life insurance policy and identifying
them as beneficiaries. This is an excellent method to prepare your children
for a secure financial future and to provide for any financial requirements
that may arise.
4. PAY YOUR FINAL EXPENSES
Funeral and burial fees, probate and other estate administration charges,
debts, and medical expenditures not covered by health insurance can all
be covered by life insurance.
5. LIFE INSURANCE BENEFITS YOUR RETIREMENT GOALS:
Who wouldn't want their retirement funds to endure as long as they did?
With a life insurance policy, you can assure that you have a consistent
monthly income. Investing in an annuity is similar to putting money into a
pension plan: deposit money into a life insurance policy on a regular basis
and enjoy a consistent monthly income even after retirement.
Lesson Presentation:

What is Life Insurance?

If a loved one depends on your income, or you want to ensure they are
taken care of financially in case you pass away, life insurance is worth considering.

To help you determine if a life insurance policy makes sense for your
financial needs, here’s a breakdown of everything you need to know about life
insurance so you can make an educated decision about purchasing a policy.

Life insurance is a contract between you and an insurance company.

Essentially, in exchange for your premium payments, the insurance company will pay a
lump sum known as a death benefit to your beneficiaries after your death. Your
beneficiaries can use the money for whatever purpose they choose.Often this includes
paying everyday bills, paying a mortgage or putting a child through college. Having the
safety net of life insurance can ensure that your family can stay in their home and pay
for the things that you planned for.
 Choosing life insurance

Once you understand the importance of taking out a life insurance policy, you need to
make the right choice. To do this, you need to ask yourself about your needs and
purchase a product that works for your family and insurance premiums that fit your
budget. A financial security advisor can help you with this.You need to ask yourself
three main questions to figure out what type of life insurance would work best in your
situation.

1. Family and work situation

First of all, your insurance needs will be influenced by the following: your family
situation, your age, your health situation and whether you are an owner or self-
employed.

Life insurance is important, whether you are single or in a relationship. In the event of
your death, your loved ones will have to pay your funeral expenses and pay off any
financial liabilities you have, such as your debts. If you have insurance coverage, your
debts will not be a burden for your family members.

In addition, your loved ones may also have to bear some of your shared responsibilities,
such as your credit card fees, your lease, your car payment, your mortgage payment,
your student debt, or other. If you have children, life insurance will let you replace the
lost income from one of the parents to provide for the children’s needs.

Life insurance is also an effective financial tool for protecting your business. It lets you
ensure you and your loved ones’ financial security should something bad happen.

If you start your own business with a partner who passes away prematurely, will you
have the funds needed to buy out his/her shares and continue moving forward with your
dream? An unfortunate event like this could have a major impact on your company. So
you need to start thinking about it now. If you don’t have coverage, getting a policy will
let you cover your needs as a self-employed person and will avoid future concerns for
your family.

2. Variable life

Your personal, family and professional goals will also determine your choice of life
insurance. For example, do you plan on having children? What are your career and
income goals? At what age would you like to retire?

This will help you evaluate how much life insurance you should take out to protect your
loved ones in the event of death.

3. Coverage type

You have thought about your situation and life goals. Now all you need to do is figure
out what type of life insurance is best for you.
For example, you might ask yourself if you need short-term or long-term coverage. Do
you want coverage that generates liquidity and surrender value that you can use to
reach your goals, etc.?

Once you answer these questions, you will be well equipped to choose the life
insurance that works best for you.

A financial security advisor will be able to guide you in answering all these questions,
and based on your answers, can direct you to life insurance that meets your needs.

Best Age to Get LifeInsurance

When it comes to buying life insurance, younger is better. The right time to buy
life insurance varies from person to person, depending on family and financial
circumstances. Generally, you need life insurance if other people depend on your
income,or if you have dept that will carry on after your death. After all, you don’t want to
leave your loves another without money to live on…….or on the hook for your credit
card debt.
However, younger people faced with mortgages, car payments, and student loan
debt tend to put off buying life insurance. While paying off current debt is critical,
missing out on buying life insurance at a young age has a significant economic impact,
much like delaying saving for retirement. The sooner it is purchased, the better.

Types of Life Insurance

1. Term insurance: is the simplest form of life insurance. It pays only if death
occurs during the term of the policy, which is usually from 1 to 30 years. Most
term policies have no other benefit provisions.

There are two basic types of term life insurance polices:

a. Level term insurance – means that the death benefit stays the
same throughout the duration of the policy
b. Decreasing term insurance - a form of term insurance in which
that will be paid to the beneficiary are reduced over time and the premium
remains constant.

2. Whole Life / Permanent :whole life or permanent insurance pays a death

benefit whenever you die—even if you live to 100.

Three major types of whole life or permanent life insurance:

 Traditional whole life – both the death benefit and the premium are
designed to stay the same level throughout the life of the policy.

 Universal life - with a universal life policy, the insured person is

covered for the duration of their life as long as they pay premiums
and fulfill any other requirements of their policy to maintain
coverage.
  Variable life - this policy combines death protection with a savings
account that you can invest in stocks, bonds and money market
mutual funds. The value of your policy may grow more quickly, but
you also have more risk. If your investments do not perform well,
your cash value and death benefit may decrease. Some policies,
however, guarantee that your death benefit will not fall below a
minimum level.

Generalization:

The important thing is to choose the right life insurance for your budget and your
needs. Over the years, your needs, your family situation and your life goals will evolve.
When that happens, it will be time for you to re-evaluate the right type of insurance for
you to ensure you are covered properly.

Remember that you are never too young to buy life insurance, since the younger
you are, the lower the cost of your premium. Your financial security advisor is there to
provide some guidance in this process, based on your reality and your goals.

Remember that life insurance can be tailored to meet your specific needs; you
can decide on the type and amount of cover you need, the premium you can afford and
how long you want it for. Not everyone needs life insurance, but if your children,
partner or other relatives depend on you financially, including parental responsibilities,
taking out life insurance could be worth it to help provide for your family in the event of
your death.

If you’re a homeowner, a parent, or responsible for anyone else’s financial

security, life insurance is something you may wish to think about. If you pass away
during the policy term, your loved ones could receive a cash sum, which can be used to
meet their ongoing living costs.

Please remember that life insurance is not a savings or investment product and
has no cash value unless a valid claim is made.

Application:

 Prepare and Develop Personal Finance Plan.

Evaluation :

1. Give 5 Importance of Life insurance.

1. TO BE FINANCIALLY SECURED
Whatever your current financial situation is, an unforeseen occurrence
might cause everything to fall apart very rapidly. Insurance provides a
payment in the case of an unanticipated disaster, allowing you and your
family to go on with your lives.
2. SECURITY FOR YOU AND YOUR FAMILY
 Your family relies on your financial assistance to maintain a respectable level
of life, which is why insurance becomes even more crucial if you have a
family. It implies that the people who are most important in your life may be
safeguarded from financial difficulty if something unforeseen occurs.
3. REDUCE YOUR STRESS DURING DIFFICULT TIMES.
We have no idea what is around the corner. Unforeseen calamities – such as
sickness, injury, or lifelong handicap, or even death – can cause significant
emotional stress and even sadness for you and your family. With insurance,
you or your family's financial burden will be eased, and you will be able to
focus on recuperation and rebuilding your life.
4. PEACE OF MIND
There is no amount of money that can compensate for your health and
happiness — or the role you play in your family. However, you can have
peace of mind knowing that if something were to happen to you,
insurance would help your family's financial security.
5. A LEGACY TO BE LEAVE BEHIND
A lump sum death benefit can preserve your children's financial future
and level of life.

Reinforcement:

Instruction: Write in 1 whole sheet of yellow paper then upload your reinforcement
toyou’re your Google drive folder in word, pdf, or jpeg (picture ) format

 Note: Upload using this file name format:

SURNAME_NAME_MO1_ EVAL

SURNAME_NAME_MO1_ REIN

Example : MERCADO_GRACE_M01_EVAL

1. Create a personal cash flow statement measures your cash inflow ( money you earn )
and your cash outflow ( money you spend ) to determine if you have a positive or
negative net cash flow for week 7.

Online resource:
https://bench.co/blog/accounting/cash-flow-statements/
Personal Finance 2nd edition, Jeff Madura, 2017 Pearson Education
Investment Management with Personal Finance, 2014-2016 edition, Lawrence J. Gitman

https://www.investopedia.com/terms/s/simple_interest.asp