Question

1. List 2 factors that would influence the amount of life insurance an individual would require and EXPLAIN how or why each factor would influence the amouht of insurance needed (Hint: Insurance Needs Analysis)

2. Todd is a heart surgeon. He is looking at purchasing some individual disability insurance. He can't decide between any occupation coverage and own occupation coverage. Briefly explain the features of each type of disability insurance and, assuming cost is not an issue, suggest which is likely most appropriate and why.

3. There are different types of permanent insurance available in the market place for clients. A popular product is universal life insurance. Identify the features of a universal life policy by comparing it to a whole life policy with an equivalent face value.

Answer 1

1. Two factors that influence the amount of life insurance required by an individual are:

1. Age: Age is an important factor in deciding the amount of life insurance required. If a person is young, he can pay the premium for longer duration than the older person. So, it's better to have a life insurance in the younger age.
2. Gender: Women generally lives a longer life than men. Therefore, lower premiums are paid by women.

2.Own Occupation coverage is an insurance poicy that covers individual who become disable and are unable to perform majority of his own occupational duties. But to claim, he is not restricted to his occupation and can be employed in another profession after the diability occurs. In the above case, Todd is a heart surgeon. He can purchase the own occupation coverage as it provides the flexibilty to the policy holder to take another profession after the disability occurs in his own profession. If any kind of disability occurs to Todd while performing his duties a surgeon and won't be able to perform it after the disability, he can claim for the amount and insurance carrier is bound to pay him the amount even he chooses another profession. On the other hand, occupation coverage doesn't provides the flexibilty to work in another profession after the disability. Thus, own occupation coverage is the better option for Todd.

3. Permanent insurance provides the lifetime coverage to individual. Whole life insurance includes the consistent premiums and guaranteed cash value accumulation. Whereas, Universal life insurance is flexilble in terms of premium and death benefits. Universal policyholder can increase or decrease his death benefit and if any kind of financial crisis occurs to him, he can stop paying the premium or can pay at anytime subject to predetermined conditions.