ppt16

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Chapter 16
FUNDAMENTALS
OF LIFE
INSURANCE
Methods for Determining the Amount of
Life Insurance to Own
• Human life value approach
• Needs approach
• Capital retention approach
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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Determining the Amount of Life
Insurance to Own—Needs Approach
• Estate clearance fund
• Income during readjustment period
• Income during dependency period
• Life income to surviving spouse
– During blackout period
– After blackout period
• Special needs
– Mortgage redemption fund
– Educational fund
– Emergency fund
• Retirement Needs
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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EXHIBIT 16.1 Improvements in Life
Expectancy over the Past Century
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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EXHIBIT 16.2 How Much Life
Insurance Do You Need?
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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INSIGHT 16.3 Life Insurance Study
Reveals Crisis of Underinsurance
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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INSIGHT 16.3 (continued) Life Insurance
Study Reveals Crisis of Underinsurance
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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EXHIBIT 16.3 Relationship Between the
Net Amount at Risk and Legal Reserve
Copyright © 2005 Pearson Addison-Wesley. All rights reserved.
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