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.
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