Chapter 9. The Role of Life and Health Insurance. Understanding the Logic Behind Insurance. Insurance is an example of risk pooling -- individuals share their financial risks to reduce catastrophic losses from death, accidents, or health problems. Life Insurance Policy Terms.
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The Role of Life and Health Insurance
Life Insurance Needs =
Income x (1 – % of income spent on the deceased) x PVIFA i%, n yr
Assume earning $75,000, less $25,000 for remaining 30 years at 5 %, how much insurance should one have?
1. Buyer beware -- a little knowledge goes a long way
2. Select a high-quality insurance company based on company ratings
3. Select an insurance agent with whom you feel comfortable
4. Compare costs of competing policies
5. Consider alternative approaches: the net or an advisor
See examples in notes