14 Life Insurance - Prentice-Hall, Inc....

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Prentice-Hall, Inc. 1 Chapter 9 The Role of Life and Health Insurance The Insurance Industry Over one million people are employed by 35,000 insurance companies. Almost ___ out of every ___dollars spent in theUS economy goes to pay for insurance the U.S economy goes to pay for insurance. Insurance In insurance, _____ is defined as uncertainty with respect to economic loss. When you have a financial interest in something (life health income property something (life, health, income, property)— you face risk that your budget cannot absorb a decrease or a loss of that item. Risk The possibility of experiencing harm, suffering, danger, or loss is known as RISK. Risk Aversion Theory 1) Rational people will try to ____ or _______ risk; and 2) risk is _______ in that individuals define the level of risk and uncertainty they can handle level of risk and uncertainty they can handle. Probability A person weighing uncertainty and risk is judging the Probability, or likelihood, of a good or a bad outcome.
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Prentice-Hall, Inc. 2 Ways to deal with risk Risk avoidance Don’t drive Risk reduction (loss prevention) Seat belts Risk assumption Accept certain level of risk Insurance (share risk) Economically recover from loss Understanding the Logic Behind Insurance Insurance is an example of risk ___________ ‐‐ individuals share their financial risks to reduce catastrophic losses from death, accidents, or health problems. Part 1: Life Insurance Life Insurance Policy Terms Premium ‐‐ the monthly cost of the policy _________ ‐‐ the benefit due upon death Insured ‐‐
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This note was uploaded on 06/06/2011 for the course HACE 3200 taught by Professor B during the Spring '09 term at University of Georgia Athens.

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14 Life Insurance - Prentice-Hall, Inc....

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