Chapter 11 - Life Insurance
Case Application a-e
5 year renewable and convertible because of the small premium and conversion
Ordinary because it is more affordable and she can surrender it for cash when he
reaches college age.
Universal life insurance, permits her to take cash out and she can pay a reduced
Cash value insurance is more expensive, and may not meet all her needs
Probably can be converted to a life/universal policy
Review Question 1
The death of a family head with outstanding unfulfilled financial obligations, or the
death of a person that creates negative business consequences.
Loss of income, leftover debts or expenses, can't continue to maintain standard of living,
plus the usual grief from inconsolable loss.
If people depend on your income to survive, you need life insurance to replace that loss
of income if the worst were to happen.
Application Questions 2, 7
1: as it rises, the value of life insurance will fall, meaning the present value will
2: Since present value is going up, the amount to own will also increase
3: Opposite of the one above, if income is lower then amount of insurance
needed will decrease
B: Doesn't account for the non-financial cost of a life, Doesn't take personal
circumstances into consideration, doesn't take short term needs into account, doesn't