Chapter-16-Loss-of-Life-风险管理与保险英文版课件.ppt

1、Trieschmann,Hoyt&SommerLoss of LifeChapter 162005,Thomson/South-WesternChapter Objectives To distinguish among the insurer,the beneficiary,the insured,and the policyowner of the life insurance policy Describe the major characteristics of term life,whole life,universal life,variable life,and other fo

2、rms of life insurance and give examples of appropriate uses for each List three general premium payment arrangements for whole life insurance and discuss the effects of each arrangement on the buildup of the policys cash value Explain how life insurance premiums,death benefits,and cash values are tr

3、eated for federal income tax purposes Chapter Objectives Explain the intent of the following contract provisions Incontestability clause,suicide clause,misstatement-of-age clause,misstatement-of-sex clause,entire contract clause,provisions related to policy assignment clause,war hazard exclusion,avi

4、ation hazard exclusion,spendthrift trust clause,and grace period and reinstatement provisions Explain the nature of policyowner dividends,nonforfeiture options,and settlement options and describe the choices available for each of these terms Give examples of important considerations in wording the b

5、eneficiary designation in a life insurance policy Explain the intent of the waiver of premium benefit,the accidental death benefit,and living benefit options Introduction For many people,the risk management tool most appropriate for dealing with the exposure of premature death is life insurance The

6、standard arrangement is a contract specifying that upon the death of a person whose life is insured A stated sum of money(the policys face amount)is paid to the person or organization designated in the policy as the beneficiary Many life insurance contracts also have benefits that may be payable due

7、 to circumstances other than death One example is the savings element(called the cash value)that accumulates under some policies The cash value can be refunded to the owner of the policy if the contract is terminated prior to death Types of Life Insurance In 2002 the face amount of new life insuranc

8、e sold in the U.S.was$2.9 trillion Total life insurance in force by the end of 2002 was$16.3 trillion Three major types of life insurance Term Whole life Universal life Other types of life insurance exist Some were more prevalent in past years but decreased in popularity as newer forms of life insur

9、ance were developed and marketed Term Insurance Designed to provide protection if the insured person dies during a specified period of time Accounts for a substantial portion of the face amount of all life insurance purchased by individuals in the U.S.each year In most cases it has no cash value and

10、 cannot be used to meet savings needs Its exclusive focus on death protection means that,for a given amount of premium dollars A person can usually buy a larger face amount of term insurance coverage than can be purchased with any other type of life insurance Duration of Term Coverage Term insurance

11、 contracts are issued for a specific period of time Such as 1 year,5 years,or 20 years At the end of the period,the insurance protection ceases unless the coverage is renewed Some term insurance is sold with the expectation that the coverage will be renewed several times Straight term insurance is g

12、enerally not renewable Another way of stating the policys duration of coverage,instead of specifying an exact number of years The contract remains in effect up to a particular age Coverage Options and Guarantees A legitimate concern regarding the purchase of term insurance would arise if there were

13、no guarantees allowing insureds to renew their term insurance protection A persons health might deteriorate while the coverage was in effect The individual could be considered uninsurable in the future Thus,when the term period ended,the insurance protection would expire And the former insured would

14、 be unable to obtain new coverage Because many insureds want to protect their right to buy coverage in the future regardless of their health Most insurance companies issue what is known as renewable term insurance Coverage Options and Guarantees Renewable term policies are written for a specified nu

15、mber of years Are renewable for similar periods of time,regardless of the insureds health Each time the policy is renewed The premium increases to reflect the insureds current age Changes in health status that may have taken place since the policy was issued are not reflected in future premiums Cove

16、rage Options and Guarantees Term insurance renewal rights usually are not completely unlimited Due to insurers concerns about adverse selection Without some limitation on the right to renew Overall mortality rates among insureds would be higher due to these types of behaviors Insurance premiums woul

17、d have to be greater Previously this concern about adverse selection caused many insurers to offer the renewability option only until about age 60 or 65 However,with greater experience and in response to competitive pressures It is now common for insurers to issue policies that can be renewed until

18、more advanced ages Coverage Options and Guarantees Most term policies are convertible into a different form of life insurance Standard conversion provision gives the insured the option to change the term policy into some form of permanent coverage to remain in effect for the persons entire lifetime

19、Rather than expiring on a specified date When term insurance is convertible,the right to change to permanent coverage is provided Regardless of the insureds health at the time of conversion Some policies can be converted at any time before they expire However,term insurance contracts that can be ren

20、ewed up to very advanced ages often are more restrictive regarding conversion rights It is not unusual for conversion rights to end after age 65 for 70 Even though right to renew policy as term insurance extends to age 90 or beyond Face Amount Variability The majority of term policies have a face am

21、ount that does not change over time Referred to as level term contracts Term insurance can also be arranged so that the face amount either Decreases over time(decreasing term insurance)Usually purchased for specific purpose Such as providing cash to pay off a mortgage or other debt if the insured di

22、es with some of the loan still outstanding Increases over time(increasing term insurance)Face amount increases periodically on a predetermined basis A more common approach for meeting an increasing need is through a cost-of-living rider or a guaranteed insurability rider Both of these are endorsemen

23、ts to a basic level term or permanent insurance policy Face Amount Variability Cost-of-living rider Automatically increases the amount of protection by the same percentage that the Consumer Price Index has increased since the basic policy was issued As long as the insured accepts and pays for the ad

24、ditional amount of coverage each time it is offered,no evidence of insurability is required Guaranteed insurability rider Provides that the insured will be able to purchase additional amounts of insurance protection in the future Regardless of health Subject to stated maximums Whole Life Insurance M

25、ay be kept in force for the insureds entire lifetime Has accounted for more than half of all life insurance policies sold in the U.S.in recent years Lags behind term insurance with respect to the total face amount of coverage issued Contains the savings elements called cash values If the owner of th

26、e whole life policy decides to terminate it before the insureds death,the cash value can be refunded Whole Life Insurance A straight life contract is arranged so that the premiums are payable as long as the insured lives A limited-pay life policy requires that the premiums are payable for only a spe

27、cified period of time Such as 20 years or until age 65 After that time,no further premiums are necessary,but the coverage remains in effect until the insureds death Is also possible to pay for a whole life policy with only one premium Called a single-premium life Whole Life Insurance When a premium

28、for whole life insurance is paid to the insurer Part of that premium is used to help pay the policys fair share of death benefits for insureds who die that year Part of the premium not needed to pay that years death benefits is used to pay current expenses of the insurer Any remaining amounts are in

29、vested to earn interest Life insurance premiums are calculated such that,when they are combined over time with the premiums and investment earnings from other similar policies All mortality and expense costs can be paid as incurred until all insureds are dead Whole Life Insurance If insureds termina

30、te their whole life contracts before death They are entitled to refunds of the excess premiums that have accumulated for their policies to date Called the policys cash value The more premium dollars that are paid earlier in the life of the contract The greater the cash value available on policy term

31、ination Life insurers make various assumptions about mortality costs,interest earnings,and expenses On the basis of these assumptions,it is possible to guarantee within the contract the cash values that will be generated by policy termination at various times Universal Life Insurance First introduce

32、d in the U.S.in 1979 Offers more flexible premium payment options than do most other forms of life insurance The minimum initial premium required to activate the policy is specified by the insurer But the policyowner usually decides the timing and size of subsequent premiums Policyowners can also pe

33、riodically adjust the size of the death benefit in most universal life contracts Although insurers may require proof of insurability if a request is made to increase the death benefit Universal Life Insurance The cash value of the universal life policy is established deliberately and varies regularl

34、y Depending on such factors as The insurers investment savings,mortality experience,and expenses The amount and timing of premiums paid by the insured Basic versions of life insurance contractsdiffer only with respect to how the death benefit is designated Type A universal life Type B universal life

35、 Universal Life Insurance Type A universal life The death benefit is an amount that remains the same while the policy is in force The death benefit is the cash value plus whatever amount is necessary to bring the total to the specified amount Type B universal life Has fluctuating death benefits that

36、 are made up of a specified amount of death protection plus the policys cash value Table 16-1 provides an illustration of the structure of the Type B universal life policy As the cash value grows over time so does the death benefit The actual rates credited correspond closely to money market rates T

37、he interest rate credited is an especially crucial item in determining the size of the cash value and the death benefit for Type B contracts Table 16-1:Illustration of Type B Universal Life Insurance Policy Structure(Male,age 25)Universal Life Insurance In the first several years following their int

38、roduction Universal life cash values were credited with interest that substantially exceeded the minimum guarantees Illustrations for selling policies were often based on the assumption that interest rates of 10 or 11%would continue throughout the life of the policy However,in the early 1990s intere

39、st rates dipped to their lowest levels in decades Insurers were forced to credit universal life cash values with much lower interest rates Leading to dissatisfaction among many policyowners For the policy illustrated in Table 16-1,a wide range of potential cash values may result at various ages Depe

40、nding on the interest rate assumption Table 16-2 shows some of the possible results Table 16-2:Interest Rate Sensitivity of Type B Universal Life Policy Cash Values(Initial Death Benefit of$100,000)Variable Life The death benefit and cash value fluctuate with the investment performance of one or mor

41、e portfolios of securities Policyholders can designate the types of investments that they want supporting their policies If the selected investments increase in value Both the face amount and the cash value of the variable life contract will also increase Poor investment performance will result in d

42、ecreasing coverage and cash values Although a minimal face amount is usually guaranteed Originally designed to provide an inflation hedge for both the death protection and savings elements of the policy Variable Universal Life Combines some of the features of both universal life and variable life in

43、surance Referred to as flexible premium variable life Contract usually is designed similarly to a universal life policy with respect to death benefits and flexible premium arrangements A primary difference is that policyowners are given a choice of investments to be used to support the contract Rath

44、er than using only high-grade,short-term money market investments as in the standard universal life policy Usually only the cash value of a variable universal policy varies with the performance of the underlying securities Modified Life Can describe many different policy structures Usually the contr

45、act is a form of whole life insurance with premiums that are lower than usual for an initial period of time After that time,the premiums are somewhat higher than they otherwise would be Can be especially appropriate for insureds with limited incomes who want to own permanent life insurance they cann

46、ot currently afforded Convertible term insurance can meet the same need But many persons who plan to convert their term insurance do not actually do so because of the substantial premium increase An advantage of modified life is that the policyowner does not have to initiate any type of positive act

47、ion to obtain the permanent insurance Endowment The amount of endowment insurance sold in the U.S.is now negligible Provides death benefits for a specified period time Has a cash value,and the policyowners pay the contracts face amount at the end of the protection period if the insured is still aliv

48、e While the policy does provide death protection On a relative basis it emphasizes savings to a much greater degree than any policy discussed so far Most insureds now seek other alternatives because of the adverse tax treatment now accorded to endowment policies Industrial Life Known variously as in

49、dustrial life,home service life,or debit insurance Type of cash value life insurance that is sold in very small amounts Primarily to meet burial needs of low income insureds The face amount is only a few thousand dollars Premiums are only a few dollars each week and are usually collected personally

50、at the insureds homes Industrial Life More expensive on a relative basis than other forms of life insurance because Of the high cost of its premium collection method Mortality rates tend to be higher for persons who purchase this form of coverage Because the face amount is so small,underwriting stan