1. Life Insurance How is whole life insurance a form of savings to policyholders
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Question
1. Life Insurance How is whole life insurance a form of savings to policyholders?
2. Whole Life versus Term Insurance How do whole life and term insurance differ from the perspective of insurance companies? From the perspective of the policyholders?
3. Universal Life Insurance Identify the characteristics of universal life insurance.
4. Group Plan Explain group plan life insurance.
5. Assets of Life Insurance Companies What are the main assets of life insurance companies? Identify the main categories. What is the main use of funds by life insurance companies?
9. Managing Credit Risk and Liquidity Risk How do insurance companies manage credit risk and liquidity risk?
10. Liquidity Risk Discuss the liquidity risk experienced by life insurance companies and by property and casualty (PC) insurance companies.
16. PBGC What is the main purpose of the Pension Benefit Guaranty Corporation (PBGC)?
17. Defined-Benefit versus Defined-Contribution Plan Describe a defined-benefit pension plan. Describe a defined-contribution plan, and explain how it differs from a defined-benefit plan.
18. Guidelines for a Trust What type of general guidelines may be specified for a trust that is managing a pension fund?
21. Exposure to Interest Rate Risk How can pension funds reduce their exposure to interest rate risk?
Explanation / Answer
Whole life insurance is a form of savings to the policy holders. The premium has to be paid for a longer period of time. The customer is also staying invested for a longer period of time. If the customer has to quit in the initial stages of the policy year, it will not be very beneficial for him. It will be beneficial for him only when he comes out of the policy when the investor retires. A sufficient amount of corpus would have been generated by that time in the policy account. Hence whole life policy is a great savings instrument. The whole life policy is explained above, by when compared to a term insurance, only the death benefits will be paid to the nominee in the policy. The policy holder cannnot enjoy the benefits in the policy. The term insurance policy is only for the well being of the family. In a term insurance policy no terminal benefits will be paid when the policy term is over. The policy ends at the end of the policy year. From the policy holders perspective, if someone wants to safeguard their family, this type of insurance will be aptly suited. Universal life insurance is the one which has the option to have the sufficient insurance cover and also the required investment aspect in the policy. You can also have the option to change the premium for the policy that you are paying. You can change your investment option according to the current needs of the family. You will also have the option to pay higher premiums as your income increases. Like the whole life policy, it also give payout upon the death of the policy holder. You can also have the tax rebate benefits under the policy. Since the amount is invested for a longer period of time in the equity market, there is all possibility that your investments will grow for a longer period of time. Group life insurance is policy where the lives of a group is covered. There will be a master policy under which all the individual lives will be linked into. It mainly takes by the employees working in the organization. The company on behalf of their employees, takes this group life insurance policy. The individual employees get enrolled only by giving their employee number under this scheme. The company pays the premium on the employees behalf. All the enrolled employees will be covered for the predefined assured amount.
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