FIN 502 Chapter Notes - Chapter 10: Disability Insurance, Insurance Policy, Life Insurance

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emeraldllama178

30 Nov 2014

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Document Summary

Chapter 10 life, health, and disability insurance. Many families are exposed to risks that are insupportable. Insured the person upon whose death the death benefit (or the face value) of the insurance policy will pay. Beneficiary the person(s) who receives the death benefit or face value of the policy upon the death of the insured dies. Death benefit or face value the dollar amount that will be paid to the beneficiary if the insured. Premium the dollar amount that must be paid to the insurance company. the premium may be payable in one lump sum or periodically monthly, quarterly, semi-annually or annually. Owner the person who pas the premiums. The owner can be the insured, his or her employer, the beneficiary, or other 3rd parties. If you buy life insurance for your son, you are the owner and your sun is the insured. Policy term the period during which the insurance is in force.

Related Questions

True or False

____1. Pure risks are those that, when they occur, create a loss.

____2. Insurance is a contract of indemnity, which means that a person is entitled to compensation only to the extent that an actual financial loss has been suffered.

____3. The principle of insurable interest states that a person is entitled to compensation only to the extent that financial loss has been suffered.

____4. When a person or firm is exposed to risk and decides to bear all or part of the financial burden if a loss occurs, this is known as risk retention or risk assumption.

____5. Exposures that are high in frequency yet low in potential severity are best handled by insurance.

____6. Financial planners recognize two fundamental needs for the monies generated by a life insurance policy: replacing income and preserving assets.

____7. Life insurance death proceeds are taxable as income to the recipient.

____8. The capital retention approach determines the amount of life insurance needed by first determining what level of annual income the insured wishes to provide for the family.

____9. Term life, because it is temporary pure death protection, tends to be quite expensive in the early years of the policy.

____10. Unlike whole life in which premiums increase with age, term life policies are based on a level premium throughout the duration of the payment period.