Family Finance Final

What are the four ways to deal with risk?

Assume it (financially)

Reduce it

Avoid it

Transfer it (Insurance is a way to transfer risk)

Policy owner

The person who pays for the insurance

Insured

The things and or the people protected by the policy.

Premiums

The money that you pay regularly to keep your insurance policy active

Claims

When a customer of the insurance company asks the insurance company for money because a negative event in the policy has occurred.

Deductible

An amount of money you have to pay before you can make a claim or before the insurance company will pay out money on your claim

Beneficiary

(Mostly just life insurance) The person who receives the payout from a life insurance policy upon the death of the insured.

Exclusions

Things that insurance won’t cover, explicitly stated in the contract

Rider

A way to modify the insurance policy.

What are the two main types of life insurance discussed in the sources, and what are their key characteristics?

Term Life Insurance and Whole Life insurance

Explain term life insurance

Pays the face value of the policy to the beneficiary upon the death of the insured.

Generally the least expensive for the most protection.

Expires after a set time (the "term," usually 20-30 years).

Premiums can become expensive at higher ages, and you can't buy it past a certain age.

It is recommended to buy "fixed" or "level" term so that premiums don't increase with age.

Explain whole life insurance: (A type of “cash value” policy)

Has both a death benefit that lasts your entire life and a savings/investment component ("cash value").

Premiums are fixed.

The cash value component grows tax-deferred.

Has expensive premiums (10x-20x more than term).

You must keep paying premiums or surrender the policy; surrender charges can be substantial, especially in the first 10 years.

The investment portion typically gives poor returns (average 1%).

The estate typically does not get the cash value of the policy when you die, only the death benefit (unless a rider is purchased)

How much life insurance should you typically buy?

A common rule of thumb is to get 6-10 times your annual income in life insurance (face value)

What kind of life insurance is generally recommended based on the sources?

Term life insurance is generally recommended as it is the least expensive for the most protection and is easy to understand. Whole life insurance has expensive premiums and poor investment returns.

What are the advantages of having health insurance?

Reduce stress.

Protect income and assets from high medical costs.

Show that you love your family by providing for their well-being.

Provide access to necessary expenses relating to health and medical procedures.

Deductible

An amount of money you have to pay for your health care before the health insurance starts to pay.

Co-payment

A fixed amount of money that you pay upfront to access care at a health care provider (a flat fee that varies)

Co-insurance

A percentage of the bill that you pay after your deductible has been met. The insurance company might say, "We will pay 80%, and you pay 20%".

Maximum annual co-payment

After you pay a predetermined total amount in co-payments, the insurance will often start to pay 100% of items that are co-insured.

Maximum Annual out-of-pocket cost

The limit on how much you have to pay for your healthcare in total for anything.

Explanation of Benefit (EOB)

A form you should receive from your insurance after every medical procedure. It itemizes the costs, shows what insurance paid, and shows what you are responsible for. It's important to check these forms for mistakes or fraud.

What is the purpose of automobile insurance?

Damage to your vehicle.

Damage to another vehicle.

Bodily injury.

Damage to property resulting from an accident involving a vehicle.

What are the X, Y, and Z of autoincurance

X is per injury per person, Y is per person per accident, Z is property damage.

Medical payment coverage

pays for medical bills of you and passenger after accident

Uninsured mortors coverage

protects you if someone doesn’t have insurance or enough and hits you

Collision coverage

pays to fix car if you hit another person or an object no mattter who’s at fault

Comprehensive coverage

covers car for non collision events like fire, theft, vandalism, and natural diasters

No fault insurance

insurance pays medical bills after accident no matter who caused it.

How does paying taxes relate to your financial stewardship according to the sources?

Obeying the laws of the land: The 12th Article of Faith states we believe in obeying the laws. Doctrine and Covenants 58:21-22 also supports following the laws. Romans 13:7 advises to pay taxes owed.

Honesty: The 13th Article of Faith emphasizes becoming like our Heavenly Parents, who are 100% truthful. This implies honesty in fulfilling our tax obligations

What are the very general steps of the federal income tax form?

• Adjusted Gross Income (AGI) (subtraction of certain adjustments from gross income)

• Calculate families taxable income

• Calculate families Tax Liability

• Calculate taxes due or refund

What is the difference between refundable and non-refundable tax credits?

Non-refundable credits can reduce your tax liability to $0, but you won't get any of the credit back as a refund if your liability goes below $0.

Refundable credits can reduce your tax liability below $0, and you will receive the excess amount back as a refund.

Based on the slides, what are some key indicators or red flags of a financial scam?

• Promises of high reward with low risk.: ALWAYS A SCAM

What is Fishing

The practice of trying to require information; usually comes in the form of emails

According to the sources, why can money be such a significant problem in marriage?

Money acting as a stress point.

Money serving as a proxy for deeper relationship issues.

Different orientations toward money between spouses (e.g., saver vs. spender)

What are the three things to overcome finical differences with your spouse

Listen and understand your spouse
Try to help each other as equal partners
establish a joint financial goal and stick to it

Doctrine related to marriage and money

Becoming one; research shows joining back accounts makes couples happier

Based on the slides, what are key ways to teach our children about finances?

Share financial mistakes with your children; don’t try to hide
be intentional to show good financial management behavior