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THEOFROLEINSURANCEPROTECTING YOUR HEALTH, FAMILY AND FINANCESInsurance? Yikes! This is a topic that few people really enjoy, andyet it is an area that impacts your finances more than you couldpossibly imagine! Can you explain how your life insuranceworks? If your spouse were suddenly widowed, how muchwould he or she need to survive? How does health insurancework? Are specialty plans, such as cancer policies, a good deal?Let’s find out!In The Role of Insurance, Dave walks you through the seven typesof insurance that every adult needs, and he reveals how to avoidthe traps in the insurance industry that can leave you—and yourheirs—flat broke!
Tell Your StoryWeek 6What insurance policies do you currentlycarry? How and why did you select them?DATE
The BIG Question AboutLIFE INSURANCEJoe is age 30 and spends 178 on life insurance each month.What is the best way to spend his money?BADBETTERInsurance 178 InvestmentsMONTHLY 165 21MONTHLYInvestmentsMONTHLY 157MONTHLYINSURANCEINSURANCEINSURANCE 250,000 250,000 500,000in Whole Lifein 20-Year Termin 20-Year TermCASH VALUESAT AGE50AT AGE70 34,483 124,041AT AGE50AT AGE70 164,859 1,960,603AT AGE50AT AGE70 156,866 1,865,539Insurance cost and cash value based on the average of four actual quotes. Investments assume a 12% rate of return.The bottom line should be perfectly clear:Buy term and invest the rest!
Small Group DiscussionTrue life-change happens when you open up and work through this materialtogether.together.materialBreak upBreakinto discussionup into discussiongroups ofgroupsabout of15 nopeoplemoretothantalk 20throughthe followingpeopleto talkquestions.through theBefollowinghonest inquestions.your answers!Be honest in your answers!92The Role of Insurance1We just watched a powerful, sobering story about why having theright kind of life insurance is so important. Take a few minutes torespond to the Steve Maness story. What, if anything, does thisinspire you to do regarding your own insurance plans?2Having the correct types of insurance is vital to the physical andemotional health of your family. What would happen to you andyour family if a catastrophic event happened and you had no orinsufficient insurance coverage in one of the key areas of insurance?
Breakout Group ExerciseBreak into smaller groups of 4–5 people to work through the following activity.Choose a leader to read through the exercise aloud and keep the group ontask. Your coordinator will call the groups back together to report your findings.Case Study 1Corey is a recent college graduate who needs help figuring out which insurancepolicies he needs. He lives in a two-bedroom apartment with his wife, Laura,who is currently not working as she finishes up school. The couple lives onCorey’s 41,000 salary, they are debt-free, and they share one car.Corey already has the following policies in place:Renter’s InsuranceAuto InsuranceCancer InsuranceDiscuss which policies Corey and Laura should keep, cancel and add:POLICIESTO KEEPPOLICIESTO CANCELPOLICIESTO ADDThe Role of Insurance93
BREAKOUT DISCUSSIONCase Study 2Vickie has been driving for 12 years without any major auto accidents—until today. It was pouring rain when she left the office, and withinminutes of leaving she was forced to make an evasive maneuverthat caused her to go into a spin on the wet road. After knocking anexpensive, high-end luxury car down an embankment, Vickie came to astop by smashing into the side of a mid-range sedan.She was found to be at fault in the accident, so let’s look at the extent ofthe damage she caused:Luxury car: This car was totaled at 95,000.Sedan: This car will need 4,000 in repairs.Hospital bills: The driver of the luxury car had 15,000 inmedical bills for a broken arm, while his passenger had 185,000 in medical bills for emergency surgery and recovery.Like many Americans, Vickie carries a 100/300/100 liability policy. Here’s abasic look at what that covers:100/300/100194The Role of Insurance21Bodily Injury Per PersonThe most your insurance will pay(in thousands of dollars) for anyinjuries you cause per person.2Bodily Injury Per AccidentThe maximum combined amount(in thousands of dollars) yourinsurance will pay for any injuriesyou cause per accident.3Property DamageThe most your insurance will pay(in thousands of dollars) to repairor replace any vehicles or objectsyou damage during an accident.3Make sure youcatch this.
BREAKOUT DISCUSSIONDISCUSSION QUESTIONS1.Using the summary of the accident, calculate the total dollar value of theproperty damage Vickie caused.TOTAL2. Does she have enough coverage to cover the damages?3.YesNoHow much per person and per accident will Vickie’s insurance pay for bodilyinjury that she caused?Bodily Injury Per Person:TOTALBodily Injury Per Accident:TOTAL4. Given the fact that Vickie does not have an umbrella policy in place, how muchof the remaining hospital bills for the passenger in the luxury car will she beheld personally responsible for?TOTALDid something in this case study make you question whether or not you haveenough liability coverage? If you need to update your policy, do it immediately!Accidents never happen on schedule. Call your insurance agent and take care ofthis as soon as possible!The Role of Insurance95
Small Group DiscussionBREAKOUT DISCUSSIONTrue life-change happens when you open up and work through this materialBreak up into discussion groups of about 15 people to talk throughCase Studytogether.3the following questions. Be honest in your answers!Bill and Katie want to save money on their monthly insurance expenses, butthey’re being careful not to make any big mistakes. They are both 32 years oldand in great physical health, and each has a 50,000 income. The couple tookFPU two years ago, and they’re now totally debt-free with a fully fundedemergency fund.They have several insurance policies in place, but in this exercise, we’ll onlyfocus on these three:Life: Bill and Katie each have a 20-year 500,000 term life policy.Health: Each has a PPO plan with an 80/20 copay and 500 deductible.Long-Term Care: Bill has a 10-year policy with a 180-day elimination period.DISCUSSION QUESTIONS1.Bill is trying to convince Katie to lower their term life policies to 250,000,but Katie does not think the savings of 8 a month is worth it. Explain toyour group who you think is right and why.2. Because Bill and Katie are in such great health, they have considereddropping their health insurance altogether. Discuss how and why theycould come to regret this decision.3.Identify three wise things Bill and Katie could change in their healthinsurance policy that would lower their premium.4. Is long-term care insurance a wise choice for Bill right now?Why or why not?96The Role of Insurance
This Week’s HomeworkPersonal finance is 20% head knowledge and 80% behavior. Take chargeof your financial behaviors by completing the following tasks this week. Besure to work with your spouse or accountability partner where noted!Identify your insurance coverages.Use the Insurance Coverage Recap form in the back of thebook or online to list the policies you currently have. Note anyof Dave’s recommended seven basic types of coverage that aremissing from your list as well as any policies that you need toupdate or remove. Make sure your spouse or any dependentsknow where to find this form in the event of an emergency.Discuss the Insurance Coverage Recap form.Singles: Review your Insurance Coverage Recap form withyour accountability partner and discuss any changes you’reconsidering making.Married Couples: Review the Insurance Coverage Recap formtogether and discuss any changes that need to be made. Makesure you both know where to find the form in the event ofan emergency.Adjust your zero-based budget.If you changed or added any insurance policies as a result ofthis lesson, be sure to make the necessary updates to yourmonthly zero-based budget to account for any changes toyour premiums.The Role of Insurance97
FINAL WORDA Bittersweet Victory“Whereas you do not know what will happen tomorrow. For what is your life?It is even a vapor that appears for a little time and then vanishes away.” —JAMES 4:14AS SCRIPTURE SAYS, you are notguaranteed tomorrow. You knowthis is true, but it’s so much easierto look the other way and pretendto be invincible. Sadly, reality canbe a lot less pleasant than fantasy.That’s why Dave encourageseveryone—both young andold—to purchase quality term lifeinsurance. Wise adults and lovingspouses realize if they wait untiltragedy hits to make provisionsfor their family, they’ve waited fartoo long.This small effort now may end upleaving a lasting impression onyour loved ones, just like it did forKirstie and her two daughters.Before they were married, Kirstieand her husband, Brad, tookFinancial Peace University. They98The Role of Insurancewalked through the Baby Steps,lived on less than they made, usedthe cash envelope system, andgot a good life insurance policy.for 13 months, but then Brad, 38,went to be with the Lord.“Had we not had the foresight tolive differently than the rest of“Wise adults and loving spousesrealize if they wait until tragedy hitsto make provisions for their family,they’ve waited far too long.”A few years into their marriage,while proudly following bothDave’s and her granny’s advice,Kirstie was happy to find herselfpregnant with their second child.Unfortunately, the joy of a growingfamily was soon overshadowedby devastating news: Brad wasdiagnosed with stage IV lungcancer. They fought the cancerAmerica, we wouldn’t have beenable to plan as well as we did. Wewouldn’t be where we are, hadwe not taken your class and reallylistened,” an emotional Kirstie toldDave when she called in to TheDave Ramsey Show.Kirstie and Brad not only listenedto the FPU principles, they were
KEY TERMSCash Value Life Insurance:Generally a permanent lifeinsurance policy that funds anattached savings accountalso inspired by other people’s storiesto take action. They each purchaseda 250,000 life insurance policy,deciding this amount would morethan cover the remaining balance onthe house. If something happenedto one of them, the grievingspouse wouldn’t have to worryabout this debt.Claim: Paperwork filed with aninsurance company in order toget them to cover a lossCoverage: The amount ofprotection through an insurancecompany in the event of a lossBy working through Dave’s processand applying God’s ways of handlingmoney, they tackled their debtstogether, with only the mortgage“The simple task of getting life insuranceis one of the most loving gifts you canever give your family.”remaining. When Brad lost his battlewith cancer, Kirstie used the lifeinsurance proceeds to pay off thehouse. “It’s kind of a bittersweetvictory,” she said, “but it’s honoringwhat our original plan was together.”As a couple, they were dedicated toachieving their FPU goals, includingmaking insurance an important partof their financial plan. In total, they paidoff 136,000.Because oftheir focus anddetermination,Kirstie is ableto raise herdaughters, Elizabeth and Sophia,with the financial peace of mind thatonly comes from being completelydebt-free.At the end of the call, Dave challengedhis listeners: “If you don’t have lifeinsurance by the end of the day afterlistening to that call, and you have afamily, I think something’s probablywrong with your brain.”It’s the hearing and the doing thatreally count. The simple task ofgetting life insurance is one of themost loving gifts you can ever giveyour family. So do it!It’s extremely difficult, if not impossible,to get good term life insurance afteryou’ve been diagnosed with a serious,life-threatening illness. And the truthis, you could go from totally healthyto terminally ill in a single doctor’svisit. Once you get the bad news, yourchances of getting life insurance couldbe gone forever.Brad left a legacy for Kirstie and theirkids because he bothered to do thisstuff. If you don’t have quality lifeinsurance, it’s time to move this to thetop of your family’s to-do list today!Deductible: Amount of moneyan insured person must payout of pocket before insurancepayments/benefits beginDisability: A physical or mentalcondition that limits or preventssomeone from working toproduce an incomeHealth Savings Account(HSA): A tax-free savingsaccount for medical expensesthat works with a highdeductible insurance policyLiability: One’s financialobligation when found at fault inan accidentPolicy: In insurance, a contractstating the conditions and limitsof specific coveragePremium: Amount paidmonthly, quarterly, semiannuallyor annually to purchaseinsuranceStop Loss: An insured person’smaximum out-of-pocketexpense per yearTerm Life Insurance: Lifeinsurance policy that remainsin force for a specified periodof timeThe Role of Insurance99
LIFE INSURANCE Joe is age 30 and spends 178 on life insurance each month. What is the best way to spend his money? BAD BETTER BEST Insurance cost and cash value based on the average of four actual quotes. Investments assume a 12% rate of return. Insurance Investments 21 MONTHLY 157 MONTHLY CASH VALUES INSURANCE INSURANCE INSURANCE 250,000 .
