Life Insurance Keywords and Planning Steps

Vocabulary flashcards covering key insurance concepts, business purchase plans, valuation methods, and the 5 steps of the financial planning process.

Cross-Purchase Plan

A plan that, upon a business owner's death, surviving owners will purchase the deceased's interest, often with funds from life insurance policies owned by each principal on the lives of all the other principals.

Entity Plan

An agreement whereby a business assumes the obligation of purchasing a deceased owner's interest in the business, which proportionately increases the interests of the surviving owners.

Human Life Value Approach

A method of determining an individual's economic worth as measured by the sum of the individual's future earnings that is devoted to the individual's family.

Key Person Insurance

Insurance that protects a business against financial loss caused by the death or disability of a vital member of the company, often individuals who possess special managerial or technical skills or other expertise.

Needs Approach

A method for determining how much insurance protection a person should have by analyzing a family's or business's needs and objectives if the insured were to die, become disabled, or retire.

Gathering Information

Step 1 of the planning process, involving gathering personal information (ages, health history) and financial information (wages, assets, investments, earnings, pensions, savings).

Identifying and Prioritizing Objectives

Step 2 of the planning process, involving understanding what matters most to the client and their family.

Analyzing the Client's Current Financial Condition

Step 3 of the planning process, involving evaluating existing resources and gaps.

Developing and Implementing a Plan

Step 4 of the planning process, involving creating a tailored strategy and putting it into action.

Reviewing the Plan Periodically

Step 5 of the planning process, involving adjusting the plan as life circumstances and goals evolve.