3420e Personal Financial Management

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34.20e1 Mar 98

MCI 34.20e, PERSONAL FINANCIAL MANAGEMENT

1. Purpose. MCI course 34.20e, Personal Financial Management, has been published to assistMarines in their management of personal financial matters.

2. Scope. MCI 34.20e addresses the need to inform our Marines of the many aspects of personalfinancial management. Items addressed are collecting and safeguarding important papers;veterans benefits; insurance policies, including Servicemen's Group Life Insurance (SGLI) andVeteran's Group Life Insurance (VGLI); miltary retirement; budget formation and management;choosing financial institutions; check writing, recording, and reconciliation; opening and

maintaining checking accounts; obtaining loans; credit guidelines; and other pertinent subjects.

3. Applicability. This course is intended for instructional purposes only. It is designed for use byMarines in the ranks of Pvt-MSgt in all MOSs.

4. Recommendations. Comments and recommendations on the contents of the course are invitedand will aid in subsequent course revisions. Please complete the course evaluation questionnairelocated at the end of the text and return it to:

DirectorMarine Corps Institute

ATTN: Support TeamWashington Navy Yard912 Poor Street SEWashington, DC 20391-5680

G. WhiteLieutenant Colonel, U.S. Marine Corps

Deputy Director

UNITED STATES MARINE CORPSMARINE CORPS INSTITUTE

912 POOR STREET SEWASHINGTON, DC 20391-5680

IN REPLY REFER TO:


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PERSONAL FINANCIAL MANAGEMENT

CONTENTS

Page

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Student Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Study Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Study Unit 1 Important Papers

Lesson 1 Identify, Locate, and Safeguard Your Important Papers . . . . . . . . . . . . . 1-1Lesson 2 Estate Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-8

Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-15

Study Unit 2 Military Benefits

Lesson 1 Life Insurance Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1Lesson 2 Military Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-17Lesson 3 G.I. Bill Educational Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-22Lesson 4 Other Veterans Administration (VA) Benefits . . . . . . . . . . . . . . . . . . . . . . . 2-25Lesson 5 Retirement Pay Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-31Unit Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-38

Study Unit 3 Financial Planning

Lesson 1 Planning Your Financial Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1Lesson 2 Choosing a Financial Institution and Type of Savings Program . . . . . . . 3-9Lesson 3 Selecting and Maintaining Your Checking Account . . . . . . . . . . . . . . . . . . 3-17Unit Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-32

Study Unit 4 Financing Major Purchases

Lesson 1 Examining Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

Lesson 2 Purchasing a Motor Vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10Lesson 3 Purchasing Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-13Unit Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Review Lesson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R-1

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STUDENT INFORMATION

TITLE&NUMBER: PERSONAL FINANCIAL MANAGEMENT MCI 34.20e

STUDYHOURS 7

COURSEMATERIALS: Text

REVIEWAGENCY: MARINE CORPS FINANCE CENTER

Kansas City, Missouri 64197

RRC: 2 Reserve Retirement Credits

ACE: This course is scheduled for review by the American Council on Educationduring 1998.

ASSISTANCE: For administrative assistance, have your training officer or NCO use the UnitActivity Report (UAR) or MCI Hotline: 1-800-MCI-USMC.

For assistance concerning course content matters, call the instructor at DSN288-0219 or Commercial (202) 433-0219.

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STUDY GUIDE

Congratulations on your enrollment in a distance training course from the Marine Corps Institute(MCI). Since 1920, the Marine Corps Institute has been helping tens of thousands of

hard-charging Marines, like you, improve their technical job performance skills through distancetraining. By enrolling in this course, you have shown a desire to improve the skills you have andmaster new skills to enhance your job performance.

The distance training course you have chosen, MCI course 34.20e, Personal FinancialManagement, provides instruction to all Marines on personal finances. Items addressed arecollecting and safeguarding important papers; veterans benefits; insurance policies, includingServicemen's Group Life Insurance (SGLI) and Veteran's Group Life Insurance (VGLI); miltaryretirement; budget formation and management; choosing financial institutions; check writing,recording, and reconciliation; opening and maintaining checking accounts; obtaining loans; creditguidelines; and other pertinent subjects.

Because you have chosen to learn at a distance by enrolling in this MCI course, your professionaltraits are evident and we know

YOU ARE PROPERLY MOTIVATED. You made a positive decision to gettraining on your own. Self-motivation is perhaps the most important force in learningor achieving anything. Doing whatever is necessary to learn is MOTIVATION. Youhave it!

YOU SEEK TO IMPROVE YOURSELF. You enrolled to improve those skillsyou already possess and learn new skills. When you improve yourself, you improvethe Corps!

YOU HAVE THE INITIATIVE TO ACT. By acting on your own, you haveshown you are a self-starter, willing to reach out for opportunities to learn and grow.

YOU ACCEPT CHALLENGES. You have self-confidence and believe in yourability to acquire knowledge and skills. You have the self-confidence to set goals andthe ability to achieve them, enabling you to meet every challenge.

YOU ARE ABLE TO SET AND ACCOMPLISH PRACTICAL GOALS. You

are willing to commit time, effort, and the resources necessary to set and accomplishyour goals. These professional traits will help you successfully complete this distancetraining course.

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STUDY GUIDE, continued

SEEKING ASSISTANCE

If you have problems with the text or exercise items that youcannot resolve, ask your training officer or training NCO forassistance. If they cannot help you, request assistance from your

MCI distance training instructor by completing the ContentAssistance Request Form located at the back of the course.

THE REVIEW LESSON EXAM

When you have finished all the study units, complete the reviewlesson exam located at the end of the course text. Try to completethe review lesson exam without referring to the text. For thoseitems you are unsure of, restudy the text. When you have finishedthe review lesson exam and are satisfied with your responses, check your responses against the answer key provided with your coursematerials.

PREPARING FOR THE FINAL EXAM

learnedin the course. The following suggestions will help make the reviewinteresting and challenging.

CHALLENGE YOURSELF. Try to recall the entire learningsequence without referring to the text. Can you do it? Now look back at the text to see if you have left anything out. This reviewshould be interesting. Undoubtedly, you'll find you were not able trecall everything. But with a little effort you'll be able to recall agreat deal of the information.

USE UNUSED MINUTES. Use your spare moments to review.Read your notes or a part of a study unit, rework exercise items,review again; you can do many of these things during the unusedminutes of every day.

APPLY WHAT YOU HAVE LEARNED. It is always best to usethe skill or knowledge you've learned as soon as possible. If itisn't possible to actually use the skill or knowledge, at least try toimagine a situation in which you would apply this learning. Forexample, make up and solve your own problems. Or, better still,make up and solve problems that use most of the elements of astudy unit.

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STUDY GUIDE, continued

USE THE "SHAKEDOWN CRUISE" TECHNIQUE. Ask another Marine to lend a hand by asking you questions about thecourse. Choose a particular study unit and let your buddy "fireaway."

MAKE REVIEWS FUN AND BENEFICIAL. Reviews are goodhabits that enhance learning. They don't have to be long andtedious. In fact, some learners find short reviews conducted moreoften prove more beneficial.

TACKLINGTHE

FINAL EXAM

When you have completed your study of the course material andare confident with the results attained on your review lesson(s),

take the sealed envelope marked "FINAL EXAM " to your unittraining NCO or training officer. Your training NCO or officer will

administer the final exam and return the exam and answer sheet toMCI for grading. Before taking your final exam, read thedirections on the generic DP-37 answer sheet carefully andcomplete all requested information.

COMPLETINGYOURCOURSE

The sooner you complete your course, the sooner you can betteryourself by applying what you've learned! HOWEVER--you dohave 12 months from the date of enrollment to complete this

course. In addition, you may be granted one 6-month extension if approved by your commanding officer. If you need an extension,please complete the Student Request/Inquiry form (MCI-R11)located at the back of the course, and deliver it to your trainingofficer or training NCO.

GRADUATING! As a graduate of this distance training course and as a dedicatedMarine, your job performance skills will improve, benefiting you,your unit, and the Marine Corps.

Semper Fi!

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STUDY UNIT 1

IMPORTANT PAPERS

Introduction. A key to sound financial management is proper documentation. Most

financial experts agree that preparing the necessary documents and keeping them up-to-dateis the biggest challenge to successfully managing personal finances. These documents areessential to your financial well-being.

Lesson 1. IDENTIFY, LOCATE, AND SAFEGUARD YOUR IMPORTANT PAPERS

This lesson helps you identify important documents--your birth certificate, social security card,leave and earning statement (LES), motor vehicle title, military records, etc.--and providesstrategies for storing and safeguarding them. Since these important papers define your personalfinancial status, it is important to organize and safeguard them.

LEARNING OBJECTIVES

1. Identify three categories of important papers.

2. Identify sources for assistance in locating your important papers.

3. Identify the appropriate places for duplicating your important papers.

4. Identify safe and secure places to store your important papers.

1101. Categories of Important Papers

Important papers generally fall into three categories: financial records, entitlement records, andpersonal records. Each category is broadly outlined below.

a. Financial records.

(1) LES. Each active duty Marine receives a monthly LES. Here is what it provides:

(a) Detailed information (pay entitlements and deductions) covering your payaccount for the previous month

(b) Forecasted amounts due for the paydays of the current month

(c) Leave balance

(d) Pay received

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Note: Each LES shows your cumulative record of pay, leave, and deductions for theyear. This means you will not need to keep every statement, but occasionallyyou will need a copy of your current statement to qualify for a loan orsubstantiate your employment, so treat your LES with respect! Also, as youcan see, you may need to refer to your LES when preparing your financial

plans!

(2) Financial securities and investments. These are records of any stocks or bonds youmay have purchased or sold. (Remember these transactions always affect yourincome tax and should be reported.)

(3) Life insurance policies. These policies guarantee a specific sum of money to adesignated beneficiary upon the death of the insured or to the insured if he or she livesbeyond a certain age.

Note: The danger of loss of life is called "risk." Death is naturally your greatest risk because, in most cases, your spouse and family depend on your income. Youmust plan for their support in case you die before your earning years are over.

(4) Estate planning documents.

(a) Will. A will is a legal declaration of how a person wishes his or her possessionsto be distributed after death. Every Marine should have a will, regardless of how much or how little he or she owns. You will learn how to draw up yourwill in the next lesson, Estate Planning.

(b) Trust. A trust is an agreement where a person (grantor) makes arrangements togive his or her property/assets to someone else (trustee) to manage andadminister for the benefit of a designated third party (beneficiary). Trusts arealso discussed at greater length in the Estate Planning lesson.

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(The four pieces of information are your previous month's pay record; a forecast of your currentmonth's pay record; your leave balance; and finally, your pay received.)

b. Entitlement records.

(1) Titles (boats, cars, RV). A title justifies legal claim to property.

(2) Original deeds and mortgage liens. A deed is a document sealed as an instrument of bond, contract, or conveyance.

c. Personal records.

(1) Birth certificate. Issued by the hospital or attending physician to record parentageand the date, place, and time of birth. This certificate is required for getting apassport, entering the military, applying for a marriage license, and other significantlifetime events.

(2) Death certificate. Issued by the hospital or attending physician to substantiate thedate, place, and time of death. This certificate is needed for insurance claims, socialsecurity, and veteran's benefits, as well as for estate claims.

(3) Social security card. Financially identifies you to the IRS and entitles you to socialsecurity benefits when eligible. These benefits are financed by taxes withheld fromyour earnings and contributions made by your employer. You also need a social

security card to enroll dependents in the Defense Enrollment Eligibility ReportingSystem (DEERS). Your children may need social security numbers to be enrolled inschool. Most states now issue social security cards at birth.

(4) Registration papers. Proves legal ownership of valuable personal possessions, such ascars and boats, and proves permission to be operated in that location.

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Before you go on to the second type of financial documents (entitlement documents), writedown the four pieces of information your LES provides:

a. ____________________________________________________________

b. ____________________________________________________________

c. ____________________________________________________________

d. ____________________________________________________________


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(5) Military records. Includes dates of service at various locations, promotions, awards,and retirement orders. You need your military records to obtain Veteran'sAdministration (VA) benefits or to pursue a career after leaving military service.

(6) School records. Includes diplomas (high school, college) certificates, and other

academic awards. School records are useful when pursuing a career after you leavemilitary service.

(7) Religious records. Documents that may include the date you joined a religiousaffiliation, date of baptism, and day of confirmation. They could also specify yourpreferred burial arrangements.

(8) Marriage certificate. Issued by the state to declare that a man and a woman arelegally married. You need a marriage certificate for BAH or to obtain base housing.

Note: Different states have different marriage licensing requirements!

(9) Power of attorney. A power of attorney provides written authorization for a personyou designate to legally represent you, that is, to be your agent, when you are notpresent. This person may be referred to as your "attorney-in-fact."

Note: Power of attorney is mandatory for all Marines in case of deployment.

Are you familiar with these financial, entitlement, and personal records? Have you been making amental inventory of which of these records you need? Which do you already have? Do you knowwhere they are? Suppose you are unable to find a record? Where would you go to get areplacement copy? Read on!

1102. Locating Important Papers

In your quest to locate these important papers, start with your family (father/mother). Yourparents are likely to have your birth certificate, baptism record, and other legal documentspertaining to your early life. If you can't find a record at home, contact your legal assistanceoffice . They are experts in directing you to the appropriate agency where you may obtainreplacement papers and records. Below are some of the agencies where you might go forreplacement copies.

a. S-1. Your S-1 (personnel office on base) can provide assistance in obtaining copies of military records and other important documents.

b. Hospitals. Normally, the hospital where you were born will be able to send you a copy of your birth certificate. And, if you or a family member dies at a hospital, death certificate recordsare kept there too. Hospitals are a good place to start. If they do not have the record they canoften tell you where to go to get these records.

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c. Circuit courts and agencies. These are referred to as "courts of record." Eventually,hospitals and other agencies file their records here. Circuit courts may hold marriage and divorcerecords. State agencies, such as the Department of Health and Human Services, can oftenprovide replacement copies of important documents. There are so many state agencies, you mayneed to check with your Marine legal assistance officer for further guidance.

Note: You should record your DD-214 (discharge certificate) and the deed to yourhouse (if you own one) at a circuit court. New social security numbers orreplacement cards are obtained at the Social Security Administration.

Now that you have collected your important papers, it would be wise to list them. Then make aduplicate copy of the list and a copy of each important paper or document. This relatively simpleprecaution gives you copies to work with while leaving the originals in a more secure location.Don't forget to update the files periodically.

1103. Duplicating Your Important Papers

There are two kinds of facilities where you can make copies of your important papers:

a. Libraries. Most libraries (base and off-base) have copiers you can use for a nominal fee.

b. Commercial. There are many professional printing and publishing businesses (listed in the"yellow pages") that make copies for you or allow you to use their reproduction equipment.Copy fees are usually not expensive.

(Answers: financial, entitlement, and personal)

IT IS ILLEGAL TO USE A GOVERNMENT COPIER MACHINE TO

DUPLICATE IMPORTANT PERSONAL PAPERS!

Before you consider where to permanently keep your important papers, stop to recall somekey points covered so far.

Can you list the three categories of important papers you will be keeping together?

a. _______________________________________________________________

b. _______________________________________________________________

c. _______________________________________________________________

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(Your list of personal records should include a copy of your LES, your investment papers, estateplanning documents, life (and other) insurance policies, any titles or mortgage papers, and anyother personal records, such as a marriage license.)

(Your legal assistance office or S-1 will guide you in your attempt to replace missing records.Remember to inquire at appropriate hospitals for copies of birth and death certificates and atcircuits courts and state agencies for other records.)

So far, you have identified what kinds of records and documents are important to keep and whomto go to for assistance in replacing them. Now, seriously consider what you will do with yourimportant paper collection to protect it.

1104. Safeguarding Important Papers

After listing your documents and copying them, consider carefully where to file and store theoriginals so they will not be in danger of being misplaced, stolen, or damaged in a fire or flood.

Keep in mind three considerations when filing your important papers: affordability, convenience,and degree of safety. Any one of the following types of storage areas would ensure a higherdegree of safety (and peace of mind) than your desk at home.

Name all of the personal records that you now have in your own collection of importantpapers.

a. _________________________________________________

b. _________________________________________________

c. _________________________________________________

d. _________________________________________________

e. _________________________________________________

f. __________________________________________________

Now if one of these documents is missing and your family does not have it, where would yougo for assistance?

____________________________________________________

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a. Special safe. You can purchase or lease safes that are fireproof (and reasonably flood-proof) to store your papers at home. This type of safe isn't expensive and, depending on yourneeds, could be your best choice.

b. Lawyer's office. Your attorney may have special accommodations for storing clients'

important papers. If not, he or she may assist you in your search for safe document storage.

c. Safety deposit box. Visit your financial institution to find out its particular facilities,policies, and procedures since these vary from place-to-place. Be sure you understand theregulations and their meanings. Ensure that someone you trust has access to your safety depositbox in case something happens.

After you have copied your important papers and decided where to keep your original documents,share the information with someone you trust. Tell that person what the documents are, how theyare filed, and where those files are physically located.

(Answer: Commercial printing and publishing businesses or your local base or off-base libraries.)

(Answer: No!)

(Answer: Special safes at home, at your lawyer's office, or in a safety deposit box at your bank.)

Lesson Summary. You must keep your important papers in a safe place where you can locatethem. Be sure to check on them periodically. In lesson 2, you will cover assets and liabilities in

more detail. You will compare wills and trusts as estate planning instruments. This will help youdevelop a perspective on the factors you will need to balance to enhance your financial plan.

Now, test yourself to see if you remember where would you go to duplicate importantpapers? __________________________________________

Will you ever use your government office copier to copy your important papers?____________

Give one example of a location for your important papers that's more secure than your desk athome. _________________________________

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Lesson 2. ESTATE PLANNING

This lesson helps you gauge your financial standing or net worth by determining your assets andliabilities. This lesson also presents guidelines for ensuring these assets are protected and passedon to your loved ones using such legal instruments as a will, trust, or power of attorney.

Your estate is everything you own (and everything you owe). Estate planning is an importantpart of personal financial management. Establishing an estate plan is the best way to ensure yourfamily's future.

LEARNING OBJECTIVES

1. Define the term "asset."

2. Define the term "liability."

3. List two sources available for legal advice in planning your estate.

4. Describe the purpose of a will.

5. Describe the purpose of a power of attorney.

1201. Assets

An asset is defined as something of value which is owned, and is usually something tangible suchas a building or car.

When you talk about assets you immediately think about common ones, such as checkingaccounts and savings account balances. Look at other kinds of assets listed below.

A S S E T S

CASH VALUE OF MUTUAL FUNDS, LIFE INSURANCE POLICIES, BONDS,STOCKS, AND LIQUID ASSETS

REAL ESTATEPERSONAL POSSESSIONS SUCH AS CARS AND JEWELRY

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1202. Liabilities

A liability is a legal responsibility to pay a debt. When you talk about liabilities, you immediatelythink about common ones such as automobile loans, credit card balances, or the balance on amortgage loan for your house.

Take a look at other kinds of liabilities listed below.

ASSETS - LIABILITIES = NET WORTH. By subtracting your liabilities from your assets, youcan determine your net worth. If your assets are greater than your liabilities, you are said to havea negative net worth. Therefore, your goal would be to reverse that and make it positive.

It would be a good idea to take the time now to make a list of your personal assets and liabilitiesand to come up with at least a rough idea of your financial balance. Does it seem generally to bewhat you thought it was, or was it a surprise? Does it suggest a need to adapt a new financialstrategy, especially in these difficult and perplexing economic times? If so, in the process of getting information, you might need to contact a legal assistance agency. Legal assistanceagencies are available to help you understand your legal matters and papers.

1203. Legal Assistance Agencies

There are two types of legal assistance agencies that are available to help you with your legalmatters. These agencies have experience and knowledge that is so essential when it comes tohelping you understand your legal matters and papers. As you may already know, legaldocuments are not written in "plain English." There are clauses, addendums, and attachments thatyou should review and have explained before you dare sign your name to any document.

Here are the two types of agencies you can call on for legal assistance.

a. Staff Judge Advocate (SJA). The Marine Corps legal assistance programs that provide freeprofessional help for Marines falls under the Office of the SJA. The SJA provides legal assistanceattorneys to give legal advice and help prepare legal documents and correspondence. You shouldbe reassured to know that any information you exchange with your legal assistance attorney eitherorally or in writing is confidential since the "attorney-client privilege" protects thiscommunication.

LIABILITIES

BANK LOANS INCOME TAXES OWEDINSURANCE LOANS DPP ACCOUNT BALANCESFINANCE COMPANY LOANS OTHER DEBTS AND BILLSPROPERTY TAXES OWED

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Note: A legal assistance officer is a licensed attorney, though not always licensed inthe state where stationed.

When you meet with your attorney, take with you any relevant background information aboutyour problem, including documents, records, and correspondence. Those well versed in legal

matters will advise that the best advantage you can give yourself in any legal situation is thesound, professional counsel of a lawyer.

b. Private attorneys with private law firms. You always have the option of taking your legalproblem to a private attorney. However, since it is usual for a private attorney to charge a fee forservices rendered, be sure to visit your legal assistance office before trying this route.

You've covered a lot of information so far. Stop to review some key points.

(Credit card balances are liabilities.)

("Savings" are your money; therefore, they are assets.)

(Two legal assistance agencies available to help are the Staff Judge Advocate (SJA) and privateattorneys.)

(Yes, the legal assistance office has licensed attorneys.)

What are credit card balances considered to be?

_______________________________________________

What are savings account balances considered to be?

_______________________________________________

Name the two legal assistance agencies available to help you and your family.

a. _______________________________________________

b. _______________________________________________

Does the legal assistance office have licensed attorneys? _________

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1204. Drawing Up a Will

Every Marine should have a current will that legally specifies the distribution of assets in case of death. This is true regardless of how little he or she owns! If you're married, it's especiallyimportant for both you and your spouse to each have a will. Whatever expense and bother you

incur for the preparation of even a simple will could be very worthwhile and perhaps even paylarge dividends when it's time to settle your estate. A will may save your survivors a small fortunein estate or death taxes. A will clearly stating your wishes could save your loved ones the troubleand cost of repeated court trips and legal fees.

If you die without a will, then you have died intestate . When this occurs, a probate court willdivide your property according to state laws. While intestate laws vary from state-to-state, moststates are very interested in collecting estate taxes. After all, it's their last chance to tax thedeceased! Besides avoiding taxes, there are other reasons why disposing of your estate accordingto a will instead of state law is better. For instance, disposal of your estate according to state lawcould cause serious financial problems and hardships for your survivors. Let's look carefully atwhat a will is and does and then at some precautions and guidelines for drawing one up.

a. Will. What exactly is a will? A will is a legal declaration of how a person wishes his or herpossessions to be distributed after death. It can be very short and simple or very complex andmany pages long.

Since a will is a legal document, you can often do more harm than good by writing it yourself without the benefit of legal guidance. You may use your legal assistance office since it is free orpay a civilian lawyer. After you have selected a lawyer to help you draft your will, you will nextneed to choose an executor. This is the person who will "execute" or carry out the directives of your will when you die. This should be someone you trust and someone who has agreed toadminister your will. Have this person confer with your lawyer to get a clear idea of an executor'sresponsibilities and have any questions answered.

Further, it is not wise to select your executor based on sentiment. Remember, the person youselect is going to decide your affairs after you are deceased. Imagine that you are not able tohandle your affairs right now because of a serious medical problem. Ask yourself if you wouldwant this person to step in and take charge? Think about it!

Note: Most people appoint their spouse as the executor. But, this is not always thewisest choice. You must keep in mind that there is a possibility of both spouses

dying simultaneously. Not only does this reinforce the need for both spouses tohave a will, but to appoint someone else as executor too.

b. Trusts. A trust is an agreement which a person (grantor) makes arrangements to give his orher property/assets to someone else (trustee) to manage and administer for the benefit of adesignated third party (beneficiary). The beneficiary is usually an individual, but it can be anestate. So, to repeat the definition of a trust in a slightly different way, it is a legal arrangementwhere the beneficiary has been designated by the grantor to receive the benefits of the property

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being managed and administered by the trustee. The trustee may be an individual, a bank, or atrust company.

There are two basic types of trusts.

(1) Living Trust is a trust that takes effect while you are still alive.

(2) Testamentary Trust can be created after your death by your will or your "last will andtestament," as it is sometimes called. An important factor for you to examine whencreating a testamentary trust is possible income and estate tax savings. Seek soundlegal advice, because sometimes those tax savings may not be enough to justify theadded expense of setting up the trust.

When a living trust is created, you have the choice of making it revocable or irrevocable. Arevocable trust can be changed or canceled as you wish. However, once an irrevocable trust isestablished, you cannot change it.

All trusts have certain advantages and disadvantages, but a living revocable trust has a distinctadvantage. Imagine that you have named a third party as trustee to a trust. Now you are in aposition to observe and evaluate the trustee's performance and skill in managing the trust assets.If you are not satisfied with the results, you can revoke the trust or appoint another trustee. Besure to choose someone you trust.

For guidance concerning trusts, contact your legal assistance office. Trusts can be quitecomplicated, so it is important to make sure yours is drawn up by a lawyer who knows the pitfallsto avoid. Only careful preparation and drafting can ensure a sound trust.

c. Guidelines for drawing up a will. As we have said before, a will (or a trust) is a specializedlegal document, and you can often do more harm than good by writing it yourself without thebenefit of legal guidance. Keep in mind the precautions listed below when planning your will:

(1) Don't write it yourself unless you're a lawyer. It is possible that if you omit a singleword or phrase you could cause your survivors considerable problems andunexpected costs. Since lawyers generally charge by the hour, have your records inorder and decisions made before seeing the lawyer. You may even have your ownoutline or rough draft of your will for your lawyer to use.

(2) Don't make changes by marking out some information and writing in new informationwithout getting legal advice. This kind of do-it-yourself rewrite of a will couldinvalidate the document entirely.

(3) Sign only the original copy of a will.

(4) Don't postpone the preparation of your will--tomorrow may be 1 day too late!

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(5) Review your will from time-to-time and have it updated as necessary to reflect thechanges in your life. While having a will or trust is very important, make sure to keepit current. Keep in mind that tax laws change, as well as your personal circumstances.Consider changing your will or trust, for example, upon the following life events:

(a) The value of your assets changes substantially.(b) The birth or death of an immediate family member or loved one.

(c) You marry, remarry, divorce, or separate.

(d) The executor named in your will dies or can no longer be consideredcompetent.

(e) You change your legal residence.

(f) A guardian for a minor child is named or a new one is appointed.

(The four guidelines are don't write it yourself; don't make changes without legal advice; sign onlythe original copy; and don't postpone the preparation of your will.)

1205. Power of Attorney

a. Definition and purpose. From time-to-time, most people will face some situation in whichthey are unable to be present for a legal transaction. Again, choose someone you trust when yougrant power of attorney. For example, you are being deployed next week, you want to sell yourcar but you won't have time to do it before you leave. Therefore, you need to have someone youtrust sell it for you. This person will be your agent, will be present at necessary transactions, andwill act as your "attorney-in-fact." To do this, legally arrange to give your substitute person a"power of attorney," which is a written document transferring your legal authority to anotherperson in the terms you set forth.

Note: A power of attorney is mandatory for all Marines in case of deployment.

Now for a quick review! You've looked at what a will is and how important it is to have one.Do you remember four guidelines to follow when you draw up a will for your family?

a. ________________________________________________________

b. ________________________________________________________

c. ________________________________________________________

d. ________________________________________________________

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b. Types. There are basically two types of power of attorney:

(1) General gives broad power and authority.

(2) Special (or limited) gives power confined to the specific act(s) described or for a

specified time frame.

c. When a power of attorney is needed. A U.S. Marine needs a power of attorney more thanmost people. Legal situations can arise at any time, often when it is inconvenient or impossiblefor you to be present. You could be on leave, involved in permanent change of station (PCS)orders (especially while moving overseas), or away on TAD orders. These are ideal times to havegranted a trusted person back home your power of attorney.

d. The dangers of executing a power of attorney. Since the acts of your "attorney-in fact" arelegally binding, there are two dangers to consider before giving someone power of attorney.

(1) The first danger is there is always the possibility the person assigned with your powerof attorney will be negligent or even malicious and abuse the power.

Example: Marital or family problems could occur. An angry spouse or familymember who had earlier been given power of attorney could exact revenge byemptying bank accounts or selling property.

(2) The second danger is that, once arranged, it is extremely difficult to revoke a powerof attorney. Drafting a special power of attorney for a limited time and specificevents can narrow this danger.

Because of problems like these, many people, especially in real estate transactions, will not accepta power of attorney.

The dangers of a power of attorney can be limited by giving a special power of attorney instead of a general power of attorney. In a special power of attorney, both the power and the time arelimited. You may also prefer to frequently renew a power of attorney rather than grant a singleone for unlimited or very long duration. Because of these dangers, it is obvious that a power of attorney should not be drawn until a legal assistance officer or a civilian attorney has beenconsulted.

Lesson Summary. As you can see you must total your assets and liabilities to understand youroverall financial status. We discussed how to obtain and keep important papers and how to planyour estate. To help you with these important legal matters, use a legal assistance agency. Keepin mind that all agencies providing assistance are very busy operations. So call ahead and make anappointment!

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Study Unit 1 Exercise: Complete items 1 through 9 by performing the action required. Check your responses against those listed at the end of this study unit.

1. What are the three categories of important papers?

a. _____________________________________________________

b. _____________________________________________________

c. _____________________________________________________

2. Identify who will first provide assistance in locating important papers.

_____________________________________________________

3. The one place that is inappropriate to duplicate your personal papers is

_____________________________________________________.

4. List suggested safe storage areas for your important papers.

a. _____________________________________________________

b. _____________________________________________________

c. _____________________________________________________

5. Define "asset."

_____________________________________________________

_____________________________________________________

6. Define "liability."

_____________________________________________________

_____________________________________________________

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7. List two sources available for legal advice.

a. _____________________________________________________

b. _____________________________________________________

8. State the purpose of a will.

____________________________________________________

____________________________________________________

9. State the purpose of a power of attorney.

____________________________________________________

____________________________________________________

STUDY UNIT 1 SUMMARY

This study unit identified your important papers and discussed why each is important. Youdiscovered where you could find missing papers, where to make copies, and how important it is tostore them in a safe place. Then, you were encouraged to take an inventory of your personalassets and liabilities, to consult with a legal assistance agency for professional guidance, and thento seriously consider planning for your estate using either a will or a trust. Finally, you describeda power of attorney and how you may need to use one in your legal transactions when you cannotbe physically present.

Study Unit 2 will introduce you to Government Issued (GI) and VA benefits and retirement paysystems, all of which are special assets for you in military service.

Study Unit 1 Exercise Solutions

Reference

1. a. Financial 1101

b. Entitlementc. Personal records2. Legal assistance office personnel 11023. Government office copier 11034. a. Special safe 1104

b. Lawyer's officec. Safety deposit box

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Study Unit 1 Exercise Solution, continuedReference

5. Something of value which is owned 12016. Legal responsibility to pay a debt 1202

7. a. Staff Judge Advocate (SJA) 1203b. Private attorneys

8. A will is a legal declaration of how a person wishes his 1204or her possessions to be distributed after death.

9. A power of attorney is a written document 1205transferring legal authority to another person in theterms you set forth.

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STUDY UNIT 2

MILITARY BENEFITS

Introduction. Do you know how lucky you are as a Marine to have service-sponsored lifeinsurance, Veterans Administration (VA) GI benefits, and special retirement benefits? Theseprograms have generous provisions. At first, digesting all the details of each program canbe overwhelming. However, before planning how to use these programs to optimumadvantage in your personal life, you will need to digest the details and consider your needs.This study unit will devote a lesson to each of these special benefit programs and describeits financial value to you.

Lesson 1. LIFE INSURANCE OPTIONS

Most people jump into a policy without having enough information about insurance. They alsodo not reevaluate their insurance coverage as their circumstances and needs change. This lesson

will help you understand general life insurance and the benefits available to you from yourServiceman's Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI) militaryinsurance.

You will see definitions to common insurance terms and discussions of different insurance optionsthat are available outside of government-sponsored programs. This information may help youmake appropriate choices when buying civilian life insurance.

LEARNING OBJECTIVES

1. Match insurance terms with their correct definitions.

2. Identify a description of the Servicemen's Group Life Insurance (SGLI).

3. Identify a description of the Veterans Group Life Insurance (VGLI).

4. Identify a description of a term life insurance policy.

5. Identify a description of a whole life insurance policy.

2101. Why You Need Life Insurance

Arranging for life insurance coverage now may seem unimportant. But think about those whorely on you financially. Your death would deprive your family of your income, yet they wouldstill have to pay rent, car payments, credit card bills, and medical expenses.

Life insurance provides the financial cushion that allows your loved ones to adjust financially tolife without you.

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Most people buy life insurance to provide financial protection for their dependents in the event of their death. Some people buy financial protection for their retirement years. For those in themilitary, maintaining adequate insurance is especially important. As a responsible, thoughtfulMarine, you will want to carefully provide for your family in the event of your death, no matterhow remote it may seem today.

Think of your insurance needs in these terms. You will read about them in the next few pages.

ACTIVE SERVICEINSURANCE BLOCK

SEPARATIONINSURANCE BLOCK

RETIREMENTINSURANCE BLOCK

2102. Language of Life Insurance

While some companies are beginning to issue policies with simplified language, most policiesremain hard to understand because the insurance industry seems to have a language all its own.Here are some of the common terms you will be seeing in this study unit:

Policy, premium, and beneficiaryTerm and whole life insuranceGrace period and lapsed policyFace amount and cash surrenderPolicy loanAnnuityParticipating policyRiderSettlement optionAccidental death benefit

The definitions that follow are meant to help you understand these terms so you can begin to usethem comfortably.

a. Policy. A written contract or certificate issued by the insurance company that dictates theterms of the insurance.

b. Premium. The amount of payment for insurance coverage paid by the policyholder to keepa policy in force. Depending on the terms of the policy, the payment could be made weekly,monthly, or yearly.

c. Beneficiary. The person who is to receive the insurance proceeds when the insured dies.

d. Term insurance. Provides protection only for a specific period (number of years) at acertain cost. There are many types because the amounts of coverage and premiums change basedon the age of the insured and the period of time (term) of coverage. The face amount of thepolicy is only payable if death occurs. Term insurance usually costs less than other types.

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e. Whole life insurance. Provides protection (and keeps its annuity value) for the entire lifespan of the insured person. This type of insurance is initially more expensive than term insurancebut premiums remain constant.

f. Grace period. A set period of time during which overdue payments may be paid withoutpenalty and the insurance coverage remains in effect.

g. Lapsed policy. A policy that has terminated because premium payments to keep theinsurance policy in force were not paid.

h. Face amount. The amount of money stated on the policy to be paid upon the death of theinsured person. The amount paid might be decreased by the amount of any policy loans.

i. Cash surrender value. The money to be paid upon voluntary termination of a policy by thepolicyholder. The cash surrender value is always less than the face amount of the policy.

j. Policy loan. A loan made by the insurance company to the policyholder. Generally, theface amount that would be paid upon the death of the insured person is decreased by the amountof the loan until it is repaid. For example, a policy with a face amount of $15,000 would only pay$10,000 to the beneficiaries if there was a $5,000 policy loan outstanding.

k. Annuity. An investment yielding fixed payments beginning at a certain time in thepolicyholder's lifetime. Although sold by insurance companies, an annuity does not provideinsurance, which means it does not pay a face amount to a beneficiary at the death of the insured.With an annuity, the policyholder is betting that he will live a long time and receive manypayments.

l. Participating policy. The premium is set high enough to build cash value that can be passedon to the policyholder as dividends. The premium is higher than that of a non- participatingpolicy.

m. Rider. An addendum the insurance company can attach to your life insurance policy.

n. Settlement option. The choice a policyholder or beneficiary makes concerning the waybenefits are paid on an insurance policy. For example, the beneficiary could receive the money asa lump sum or as periodic payments over a time span.

o. Accidental death benefit. An added policy provision for payment of a special extra benefitin case of accidental death. (An "accidental death benefit" is often referred to as a "doubleindemnity" clause.)

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(Term insurance is defined as protection only for a specific period (number of years) at a certaincost.)

2103. Servicemen's Group Life Insurance (SGLI)

ACTIVE SERVICE

INSURANCE BLOCK SEPARATION

INSURANCE BLOCKRETIREMENT

INSURANCE BLOCK

Remember the chart shown at the beginning of this lesson? SGLI fills the first block, whichrepresents your active service timeframe. The government-sponsored SGLI program was createdin 1965 to provide term insurance to all active duty personnel to cover their military years in agroup plan. It was created to cover all active duty personnel and has the following features:

Provides term life insurance to cover a serviceman's military years.Does not build cash value.Premiums depend on the level of coverage desired.Any individual or legal entity can be designated the beneficiary.Proceeds are payable to the beneficiary as a lump sum or in 36 equal payments.Continues to provide insurance protection for 120 days following separation fromactive duty. During this period, you can convert your SGLI coverage to VeteransGroup Life Insurance (VGLI) without taking a medical examination.

Although SGLI is probably a better deal than civilian policies, it is not mandatory. If you choosenot to accept SGLI, you may so indicate on the SGLI application form. Additionally, coveragefor less than $200,000 can be requested, in writing, at $.90 per $10,000 of coverage.

(SGLI costs $.90 per $10,000 of coverage).

Take a moment to see if you remember what you've read by answering the followingquestion.

Term insurance is defined as _________________________________________________.

How much does SGLI cost you per month?____________________________

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2104. Veterans Group Life Insurance (VGLI)


SEPARATION

INSURANCE BLOCK RETIREMENT

INSURANCE BLOCK

The VGLI is an opportunity to extend your previous SGLI coverage. You then have the option torenew every 5 years through your life, so VGLI transitions from the active service to theseparation timeframe block. Your VGLI program is designed to go into effect on the 121st dayfollowing your separation, thereby providing continuous insurance protection.

Payments for VGLI coverage are made by you and sent directly to the Office of Servicemen'sGroup Life Insurance.

VGLI has the following features:

It's an optional term insurance.The face amount is based on and limited to the amount of coverage carried underSGLI.Coverage begins on the 121st day following military separation and lasts up to 5years. (Renewable every 5 years thereafter.)Premiums range from $12 to $450, depending on age and level of coverage.Payments are sent to the Office of Servicemen's Group Life Insurance (OSGLI) inNewark, NJ.

(SGLI covers the period of time when you are in the military and for 120 days afterward, andVGLI covers from the 121st day after your separation and is renewable every 5 years for the restof your life.)

Can you remember which periods of time during and after service your SGLI and VGLIinsurance covers?

SGLI ________________________________________________________________

VGLI ________________________________________________________________

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SEPARATIONINSURANCE BLOCK

RETIREMENT

INSURANCE BLOCK

Government-sponsored SGLI and VGLI programs are good, but you may want to supplementyour SGLI or VGLI coverage. To do so, you should be familiar with other types of life

insurance, especially when your retirement or separation draws near or as your life circumstanceschange. 2105. Comparison of Term and Whole Life Insurance Policies

While whole life and term insurance are the basis for virtually all forms of life insurance, there areother types of insurance that combine the features of term and whole life insurance. Rememberthe definition for term insurance: It provides protection for only a specific period of time (numberof years) at certain cost. The face amount of the policy is only payable if death occurs. a. Your term policy limits coverage to a specific period of time. As you get older, you maypay more for that coverage or the coverage may be for a smaller amount. The insurance companycan also decide you are no longer eligible for their coverage, if the company deems you anunacceptable risk.

There are two general types of term insurance:

Level-term - the amount of insurance coverage remains the same over each renewalperiod; however, at the start of each renewal period the cost of the insuranceincreases.

Example: A $100,000 level-term policy for a male nonsmoker might costapproximately $173 a year at age 35 and $443 per year at age 50. The increase inpremium cost is the insurance company's way of addressing the increased risk that thecompany faces in providing $100,000 of insurance coverage for someone who is 50versus someone who is 35.

Decreasing term - provides a reduced amount of coverage for the same premiumcost at each renewal.

Example: The same 35-year-old nonsmoking male will continue to pay $173 peryear, but by the time he is 50 years of age, his insurance coverage will have decreased

to approximately $50,000.

b. Your whole life policy provides the maximum amount of protection against your death foran indefinite amount of time, or throughout your "whole life."Premiums remain at a fixed rate and there is no change in the amount of insurance coverage forthe entire lifespan of the policyholder. Whole life insurance companies also include a savingselement called cash value. You may borrow against the cash value of your policy.

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The comparison is easiest to understand when you first look at the way whole life works. Whenyou buy a certain amount of whole life at a certain price, there generally will be no change in theamount of premium you will have to pay, no change in the period between payments, and nochange in the amount of insurance coverage you will have for the rest of your life, no matter whathappens to you!

But, if you were to buy that same amount of coverage as term insurance, as you got older youwould pay more for that coverage or the coverage would be for a shorter period. In fact, theinsurance company could decide you were no longer eligible for their coverage. You see, withterm insurance the company underwriters (who determine the acceptability of risks) adjuststandards as insurance conditions change. This means you become, in effect, a new "case" forthem to evaluate at the beginning of each new term.

So, while term insurance looks great at the beginning because it is cheaper, you now understandthat there are benefits to whole life coverage too!

("Term" insurance is purchased for specified time periods.)

These two basic types of coverage, whole life and term , structure virtually all forms of lifeinsurance. If you get professional guidance to help you understand the details of different plansunder these two basic types, then choose according to your personal needs, you will be able to

design a basic life insurance program most appropriate for your personal situation. Then, afteryou've set up your basic plan, you can explore ways to modify or increase that coverage.

2106. General Types of Insurance Policies

Following are general types of insurance policies that are either term policies or combinations of term and whole life policies.

a. Universal life. This is a type of term insurance policy that builds a cash reserve accountsimilar to the cash value associated with whole life insurance. With a universal life insurancepolicy, the amount of premiums you pay is more than the actual cost of the term insurance. Afterthe insurance company deducts its administrative expenses, the additional premium amount isallowed to build up for the policyholder. Then, the policyholder has the option of choosing eithera fixed amount of death benefit to be paid to his or her beneficiary (the actual face amount of theinsurance coverage) or a death benefit that increases (the face amount of the insurance coverageplus the cash value of the policy).

Do you remember what kind of life insurance is purchased for specified time periods?

________________________________________

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There are some special features to universal life insurance policies:

The policyholder may pay premiums at any time in virtually any amount (up to certainlevels).

Payment of income tax on this cash reserve is deferred until the cash value is actuallywithdrawn.

This cash value reserve can be used to borrow against for emergencies, to pay off amortgage, for retirement income, or can be used to provide increased death benefitsto the insured person's beneficiaries. However, because it is term insurance, the costof a universal life policy will increase as you get older.

b. Permanent (cash value). This insurance provides the same coverage for the entire life spanof the insured person. There are participating and nonparticipating features in different typesof permanent policies ranging from whole life to retirement insurance. Here are some of the ways

this policy can be used:

For loan purposes with the insurance company or a bank (the policyholder must payinterest on the loan to replace the cash value of the interest the company would haveearned on that money if they had invested it themselves).

The cash value of the policy is paid to the policyholder in cash should he or shedecide to surrender the policy.

c. Ordinary whole life. Whole life is also "permanent" (providing the same coverage for life)and you usually pay the same premium as long as you live, although some whole life policies let

you pay premiums for a shorter period (such as 20 years or until age 65).

d. Adjustable life. This type of policy protects through a combination of term and permanentcoverages. The policyholder may "adjust" coverage by increasing or decreasing it as his or herneeds increase or decrease by changing the amount paid as a premium (within certain limits), bychanging the period of coverage, or even by switching coverage between the term and permanentlife insurance aspects of a policy.

e. Variable life. This is a form of permanent insurance where a portion of the amounts youpay as premiums is invested and the death benefit can "vary" by going higher than the originalamount (depending on the earnings from your investment).

f. Annuity and endowment. These pay a lump sum or income to you if you live to be acertain age, or pay a specified amount to your beneficiary if you die before then.

Sorting out the differences between these types of insurance policies can be very confusing. Youare learning a new but very important language!

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The chart below will help you review the main differences between the various types of insurance.

Table 2-1. Characteristics of Insurance Types

TYPE FEATURES

UNIVERSAL Cash reserves build from the amount you pay over the premium.The increase can be borrowed against or paid to the beneficiary.Policyholder can pay premiums at any time in any amount (withlimitations).Income tax is deferred until the cash is withdrawn.

ORDINARY The policyholder usually pays the same premium throughout the life of the policy (although sometimes he/she can arrange to pay a specifiedamount for a specified period of time).

PERMANENT Covers whole life span.Premium can be borrowed with interest or paid to the policyholder upon

surrender of the policy.ADJUSTABLE Policyholder can "adjust" coverage to meet his/her needs by increasing

or decreasing the premium amount or period covered.

VARIABLE What "varies" could be the amount of death benefit or profits from theportion of the premium invested.

ANNUITY ANDENDOWMENTS

Pay a lump sum or income to policyholder who lives to a certain age orafter a certain amount is paid (or pays a beneficiary).

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(1. b; 2. c; 3. d; 4. e; 5. a)

Match each insurance type from column I with its special feature from column 2 by writingthe letter of the special feature on the line before each type.

Column 1 Column 2

Type Special Feature ___ 1. Ordinary a. Owner can increase or decrease

(whole) coverage.___ 2. Universal

b. Usually pay same premium for life (or___ 3. Variable for a specified time period). ___ 4. Permanent c. Builds cash reserves from amount paid

over the premium.___ 5. Adjustable

d. Because part of the premium isinvested, the profits from this and/orthe death benefit can vary.

e. Covers whole life span.

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2107. Choosing the Best Insurance Policy

Before buying insurance, read the policy and understand the coverage you are buying. Make sureyou consider the information in Table 2-2.

Table 2-2. Insurance Purchase Considerations

Know your insurancerights

Make sure your insurance company is licensed with the state. If it is,the insurance commission can be helpful if a misunderstanding ordispute occurs between you and the insurance company. Insuranceprofessionals can give you general guidelines about your rights whenbuying insurance.

You can cancel or lapse a policy at any time, but you must pay thepremium for the time the policy was in force.

If your insurance company collects personal information aboutyou, ask how it will be used.

If your insurance company has incorrect information about you intheir files that resulted in your being turned down for insurance,

make sure it is corrected.

Know the insurancecompany's rating

Insurance companies are rated by independent rating services, such as Best's Insurance Reports (available in most libraries). A rating of "A" or better (A+ or A++) indicates financial stability and that thecompany is good on paying claims. Your insurance broker or stateinsurance commissioner can give you the rating. Use "A-rated"companies only!

Evaluate your needs The amount of insurance you need depends on your situation, howold you are, marital status, number of dependents, income, etc.

Read the free Federalgovernmentpublication

"What You Should Know About Life Insurance" is a free publicationavailable quarterly. Contact: Consumer Information Center, Pueblo,CO 81009.

Also, be aware that there are two types of insurance professionals: agents and brokers.

a. An agent represents the insurance company. An advantage for using an agent is theinsurance company must honor everything the agent promises you. A disadvantage is the agentcan help you with just one company's policies.

b. A broker sells a wide range of products from many companies. An advantage for using abroker is that he or she can help you compare many different policies and represents you, theconsumer, not the interests of the insurance company. A disadvantage is the insurance companyis not bound by the promises the broker makes to you.

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2108. Determine the Amount of Life Insurance You Will Need

Here are some money-saving tips:

Shop around. Call at least three insurance agents. Make sure to ask each agent thesame questions. Compare rates, ask about discounts and special rates.

Read sources of information such as Consumer Reports .Purchase more than one kind of insurance from the same company (automobile,homeowner's, renters, etc.)Do not smoke; take care of your health.Carefully consider the reasons for adding riders or floaters to your coverage.Make sure your policy is guaranteed renewable.Decide how much life insurance you need.

As you can see, picking a life insurance policy is a multifaceted problem. Since there are manyfactors involved in projecting the future economy (like inflation and recession) and one's futureemployment, there cannot be any fixed formula for determining the amount of life insurance a

person should have--but, you could take one of the following approaches: multiple earnings,needs, or common sense. Table 2-3 will help you review the main differences between the varioustypes of insurance.

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Table 2-3. Differences Between Insurance Formulas

APPROACH DESCRIPTION

MultipleEarnings

Under this model the required amount of life insurance is a direct function of the insured annual income. One version of this approach multiplies current

earnings by a factor of five and increases that amount by the value of theunpaid home mortgage plus $50,000 for each child living at home.

EXAMPLE: A member with a spouse, two children in high school, $125,000outstanding mortgage, monthly gross income (base pay, BAH) of $5,100.

Required insurance:Salary: $5,100 x 12 x 5 = $306,000Outstanding Mortgage Balance 125,000Children: $50,000 x 2 = 100,000Total Insurance Requirements $531,000

Needs This technique of estimating insurance requirements examines the financialsituation of the insured and considers other resources that may be available.While it takes more effort than the multiple earnings method, it produces anestimate specifically tailored to an individual's situation. The worksheetprovides an outline for developing insurance requirements under the "needs"approach and explains the eight steps involved. (See the worksheet on page2-14.)

Common Sense Calculates the future financial expenses of your family (like car, house,education). Based upon these expenses, you purchase the amount of lifeinsurance you need. Use the life insurance calculation worksheet on page

2-16 to estimate your current and future insurance needs using the commonsense approach.

(Answer: d)

Try this situation to see if you remember how to calculate your insurance needs based on themultiple earnings approach:

Situation: You are a sergeant with a spouse and no children. You have an outstandingmortgage of $63,000 and a monthly gross income (base pay, BAH) of $2,300. Using themultiple earnings approach, how much life isurance would you carry?

a. $100,000 c. $170,000b. $138,000 d. $201,000

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INSURANCE WORKSHEET(Needs Approach)

Step No. 4: Information on Family's Insurance Policies Already in Force.

Policy No. Type Insurance Name of Insurance Company Beneficiary Face Value

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Step No. 1: Income for My Family When I Die.

Determine the amount of income survivors have available:

Military Death Gratuity Pay $___________Back Pay and Allowances $___________VA Death Benefit Payment $___________Social Security Death Benefit $___________Proceeds of SGLI/VGLI Insurance $___________

Policy No. ________________ $___________Policy No. _______________ $___________

Other Sources of Income (explain)From ___________________ $____________From __________________ $____________From _________________ $____________From __________________ $____________

Total Income Available to Survivors $_____________

Step No. 2: Expenses of My Family When I Die.

Special Expenses (not continuing financial needs)

Executor's Fund (Count of $5,000) $__________Home Mortgage Payoff (1st Mortgage) $__________Home Mortgage Payoff (2nd Mortgage) $__________Funeral Expenses (Count on $5,000) $__________Emergency Expenses (Count on $5,000) $__________Auto Loans to be Paid Off $__________Other Loans to be Paid Off (explain)

For:_______________________ $__________For:______________________ $__________For:_____________________ $__________For:______________________ $__________

Other Expenses (explain)For:_____________________ $__________

Total Expenses Upon My Death $____________

Step No. 3: Reconciliation of Family's Immediate Income Versus Immediate Expenses.

Total Income Available to Survivors immediate expenses-it does not provide for a continued source of (from Section 1, above) $___________ income for their day-to-day, month-to-month living expenses. This

LESS: Total Expenses Upon My Death will be the next greatest concern you will face.(from Section 2, above) $___________

Excess Income Available Or Shortage On the other hand, if the computation shows that your survivors(if shortage, show here in brackets) $__________ will not have enough immediate cash available to cover their

expenses, they will be in deep trouble and you'll need to takeIf the above "Income Minus Expenses" computation indicates immediate actions to ensure their financial security.that your family's income is enough to cover the immediateexpenses they will face, your first concern about their financial Other than to immediately increase the amount of your life securitywell-being is satisfied, but remember, this only covers their insurance, there are very few actions you can take to provide a

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INSURANCE WORKSHEET, (Continued)(Needs Approach)

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Step No. 5: Family's Monthly Income From:

Surviving Spuse's Salary $___________Survivor Benefit Plan Payments $___________Dependency & Indemnity Comp.

Payments $___________VA Pension $___________VA Benefits (explain)

For Spouse: $___________For Children: $___________For Parents: $___________

Social Security Benefits:For Spouse: $___________For Children: $___________For Parents: $___________

Other Income (explain):For: ________________________ $___________For: ________________________ $___________

Total Monthly Income for Family $___________

Total Monthly Income for Family $___________

Step No. 6. Family's Monthly Living Expenses.

Rent Payment: $________________Mortgage Payment $________________Electricity/Gas Payment $________________Telephone Payment $________________Food $________________Clothing $________________Entertainment $________________Transportation $________________Loan Payments (explain) $________________

For: ________________________ $________________For: ________________________ $________________For: _______________________$________________

Other Expenses:For: _______________________$________________For: _______________________$________________For: _______________________$________________

Total Monthly Living Expenses $________________

Step No. 7. Reconciliation of Family's Monthly Expenses Versus Monthly Income.

Total Amount of Monthly Income for Family While it appears they will be provided for, they should have an(From Secion 5 above) $___________ income "cushion" to guard them against emergencies, inflation,

Total Amount of Monthly Expenses disasters, and the death of other family members.(From Section 6 above) $___________

Excess Income Available or Shortage On the other hand, if the computation shows that your survivors(If there's a shortage, show the will not have enough monthly income to cover their expenses, theyamount in brackets.) $___________ will surely be in deep trouble and it is time to take immediate

action to preclude this from happending. The quickest and leastIf the above monthly "Income Minus Expenses" computation expensive way to accomplish this is to immediately increaseindicates that your family's monthly income (after your death) your insurance. Little can be done to protect your family afteris enough to cover their anticipated monthly expenses, your you are gone - and you could be "gone" tomorrow!

immediate concern regarding their financial security shouldbe at ease.

Step No. 8. Determining How Much (If Any) Insurance You Need.

After the above computations, you might find yourself in the As your income level increases and you are able to place morefortunate position of having enough insurance to satisfy your money into sound investments which provide you the financialpresent financial needs, as well as the needs of your survivors security you seek, your insurance needs might very well decline.after you are gone. If this is the case, your family is indeed But until you reach that "safety net," it is better to be safe thanfortunate to have someone who cares so very much about sorry!their protection.

At the end of this study unit, you will find different methods of By the same token, you might have determined that the determining how much, if any, insurance you need. Afteramount of life insurance protection you are presently carrying reviewing the income and expenses your survivors would incur,will be insufficient to provide your family with the financial it might be prudent to re-read this section of the lesson and take

protection they will need and deserve. another look at your requirements.

Notes, Comments & Points to Check:____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


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INSURANCE WORKSHEET(Common Sense Approach)

Directions: Use this worksheet to estimate how much insurance you need.

NEEDS AMOUNT Immediate ExpensesFuneral Costs $__________Uninsured Medical Costs $__________Estate Settlement Costs $__________

Long-Term NeedsEmergency Fund $__________Repayment of Debts $__________Family Living Expenses $__________Homemaking Expenses (child care, house

and lawn care, etc.) $__________

Education Fund $__________Retirement Fund $__________Other $__________TOTAL NEEDS: $__________

ASSETSCurrent Life Insurance $__________Any pension benefits $__________Cash and Savings $__________Equity in real estate (if it is to be sold) $__________Investment (stocks, bonds, mutual funds,

IRA, & Keogh plans) $__________Social Security Survivor Benefits

(monthly amount X # months) $__________Other $__________

INSURANCE CALCULATIONTotal Needs $__________Total Assets $__________Life Insurance Needed $__________

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(Answer: c.)

Lesson Summary. In this lesson you learned to talk the language of insurance, the timeframes of your SGLI and VGLI coverage, the typical options included in private insurance policies thatyou'll need to investigate as your separation or retirement draws near, and the three approachesyou can take to determine your insurance needs. As you can see, insurance is an importantconsideration in your financial planning. Another important consideration is health and dentalcare for your dependents. You will cover these topics in the next lesson.

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Lesson 2. MILITARY HEALTH BENEFITS

Military benefits are based on the need to maintain an effective, combat-ready force by rewardingthose who have served their country and providing them with benefits and retirement pay basedon their service. The system is meant to be attractive enough to encourage retention of highlyqualified individuals to meet the military's needs. The military provides for the well-being of thosewho have served faithfully. As a Marine, you are entitled to many financial benefits.

LEARNING OBJECTIVES

1. Identify the system that authorizes medical care for active duty, retired military, andtheir dependents.

2. Identify the person whom most military hospitals employ to assist active duty andtheir dependents in using health care benefits.

3. Identify the free hospital care facilities for Department of Defense (DoD) eligiblepersons.

4. Identify the system that brings together the health care delivery systems and the

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

5. Identify the person to contact to enroll your dependents in the Family MembersDental Plan (FMDP).

How many steps are in the needs approach?

a. 3 c. 8b. 4 d. 10

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2201. Health Care Benefits

Health care costs are drastically increasing. Fortunately, from your active service throughretirement, you and your dependents are covered for both general medical and dental care.These are the options you have available to you:

Health Benefits Advisor (HBA)Military Treatment Facility (MTF)TricareDefense Enrollment Eligibility Reporting System (DEERS)Family Members Dental Plan (FMDP)

The health care services provided to military personnel and dependents are complicated, but notimpossible to use. Just like everything else, the more you know about how your health careservices work, the better you will be at using the systems.

2202. Defense Enrollment Eligibility Reporting System (DEERS )

DEERS is a computerized data bank maintained by DoD. Its purpose is to serve as the officialrecord of eligibility for individuals receiving uniformed service benefits. Active and retiredmembers are listed automatically, but members must initially report their dependents and anysubsequent changes to dependent status (for example, birth, divorce, or marriage).

Important papers needed for DEERS enrollment are: birth certificate and social security number.

Registration in DEERS is absolutely critical to maintaining your official record of eligibility forhealth care treatment. PRIMUS and NAVCARE clinics and Tricare claims processors all use the

system to verify specific eligibility.

Questions regarding DEERS enrollment can also be directed to the DEERS BeneficiaryTelephone Center at 1-800-538-9552; in California call 1-800-334-4162; in Alaska, Hawaii, orPuerto Rico call 1-800-527-5602.

2203. Health Benefit Advisors (HBA)

To assist you and your dependents in using the health care services, almost every military hospitalor medical facility employs HBAs. HBAs are consultants, but are not responsible for Tricarepolicies and procedures, and may have no authority to make benefit determinations or to obligatefunds.

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2204. Military Treatment Facilities (MTF)

MTFs provide free health care services for DoD active duty personnel, their dependents, andretired military personnel. MTFs are opertated by military personnel. First priority is the activeduty member. All other DoD beneficiaries receive care on a space-available basis. MTF issuesnonavailability statements, which may be required for civilian inpatient care and certain outpatientprocedures.

2205. Tricare Overview

Tricare is the DoD regional managed care program for members of the uniformed services andtheir families, and survivors and retired members and their families. Tricare brings together thehealth care delivery systems of each of the military services, as well as CHAMPUS, in acooperative and supportive effort to better serve you and your family.

All active duty members will be enrolled in Tricare Prime. All Medicare-eligible DoD

beneficiaries, and those CHAMPUS-eligible beneficiaries who elect not to enroll in Tricare Prime,will remain eligible for care in MTFs on a space-available basis.

Tricare introduces to beneficiaries three choices for their health-care delivery:

StandardExtraPrime

a. Tricare standard is a fee-for-service option which is the same as standard CHAMPUS.Annual deductibles under Tricare Standard and Extra are

E-4 and below: $50 for one person$100 for two or more

`E-5 and above: $150 for one person

$300 for two or more

Beneficiaries should check with their Tricare service center to determine if they need anonavailability statement which may be required for civilian inpatient care and certain outpatientprocedures.

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Tricare Standard benefits:

Greatest flexibility in choosing health care providers.Most convenient when travelling or away from home.Enrollment not required.Space-available care in military hospitals, but at low priority.Pays for 80 percent of the approved or allowable cost.

The disadvantage to Tricare Standard is its expense over all the other options.

b. Tricare Extra offers a preferred provider option with discounts. The annual deductible isthe same as for Tricare Standard.

Tricare Extra benefits:

Can choose any doctor in Tricare network.

Is less expensive than Tricare Standard.Enrollment is not required.Can still seek space-available care in military hospital, but at low priority.Will pay for 85 percent of the approved or allowable cost.

The disadvantage to Tricare Extra is it may still be expensive.

c. Tricare Prime is an enrolled Health Maintenance Organization (HMO) option that providesguaranteed access to timely medical care.

Tricare Prime benefits:

Automatic enrollment for active duty personnelPriority for care at military hospitals and clinicsPrimary Care Manager provides and guides health care deliveryLowest cost for treatment among the three options

Tricare Prime disadavantages:

Requires enrollment for 1 yearRetirees pay enrollment feeRetirees and their families must elect this optionVery expensive to receive care outside Tricare Prime (Point of Service Option)Not available everywhere

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2206. Family Members Dental Plan (FMDP )

Military dependents are covered for dental care through FMDP. As with Tricare, active dutyMarines are not eligible for coverage since their treatment is free in military dental facilities.

Your Health Benefits Advisor (HBA) or FMDP Customer Service (1-800-866-8499) can answerany questions you may have about the extent of your FMDP coverage and guide you through itsrelated paperwork.

FMDP benefits:

Covers all types of professional dental services.Coverage ranges from 50 to 100 percent, depending on type of dental service.Low premiums with no deductible.Participating dentists will complete and submit your claim at no additional charge.Participating dentists are monitored to ensure a high level of quality in the service

they provide.

(Answer: c.)

Lesson Summary. This lesson introduced you to the range of health and dental benefits coveringyour dependents from the time you are actively serving through your retirement. These benefitsare provided through Tricare and the Family Members Dental Plan (FMDP). Your HealthBenefits Advisor (HBA) can give you updated and detailed information about both programs.These programs can save you money and time as long as you follow their procedures verycarefully before getting treatment. Next, we will discuss your education benefits both duringactive duty and later under the G.I. Bill.

To obtain care in service hospitals or to have claims for civilian health care processed, allmilitary members and their dependents must enroll in ______.

a. Tricare c. DEERSb. HBA d. FMDP

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Lesson 3. G.I. BILL EDUCATIONAL BENEFITS

LEARNING OBJECTIVES

1. Identify the agency that administers the educational benefits of the G.I. Bill.

2. Identify the type of discharge that qualifies you for the educational benefits of the G.I.Bill.

In today's economy, the value of education is obvious. Yet, at the same time, educational costskeep spiraling upwards! The good news is that, as a service member, you have access to atremendous cost-saving educational program called

3420e Personal Financial Management

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Transcript of 3420e Personal Financial Management