CC3152_L05_ch8 - LECTURE 5 LIFE INSURANCE CC3152 Principles...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
CC3152 Principles of Financial Planning LECTURE 5 LIFE INSURANCE
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5-2 (I) Basic Insurance Concepts Basic purposes of insurance i Protect you and your dependents from losing the assets that you’ve acquired. i Shield you and your family from an interruption in your expected earnings.
Background image of page 2
5-3 Insurance Planning Needs i Reimburses for damage or destruction to existing assets i Life Insurance Replaces income lost due to premature death i Disability Insurance Replaces income lost due to disability i Hospitalization & Health Insurance Covers medical costs from illness or accident
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5-4 The Concept of Risk i Risk: uncertainty with respect to economic loss i Insurance planning: reduces the risk that losses will cause financial devastation i Risk can be dealt with in the following ways:
Background image of page 4
5-5 The Concept of Risk (cont d) Risk Avoidance : i Not participating in activities that have the risk of loss. Example —not driving to avoid the risk of an auto accident. Risk avoidance is not always practical or possible.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5-6 The Concept of Risk (cont d) Loss Prevention and Control i Prevention reduces chance that loss will occur Example: Driving within the speed limit reduces the likelihood of an accident. i Control reduces the severity of a loss once it occurs. Example: Wearing a seat belt can minimize the effects of an accident.
Background image of page 6
5-7 The Concept of Risk (cont d) Assuming Risk: i You choose to accept and bear the risk of loss yourself. Example: When your calculator gets stolen, you bear the cost out of pocket. Transferring Risk: i Pay someone else to bear your risk of loss. Example: You transfer the risk to the insurance company when you buy an insurance policy.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5-8 Underwriting Basics It is economically feasible for insurance companies to assume risk because they: i Combine the loss experiences of large
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/17/2009 for the course AF 3152 taught by Professor Peggy during the Spring '09 term at Hong Kong Polytechnic University.

Page1 / 28

CC3152_L05_ch8 - LECTURE 5 LIFE INSURANCE CC3152 Principles...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online