3 - Why Do I Need Insurance Flashcards
What are the 2 measures of risk?
- Severity
2. Frequency
What are 3 predictable risks?
- Death
- Disability
- Old age
How does insurance help with estate planning?
A permanent insurance policy can help offset funeral expenses, estate taxes, and estate creation.
How can insurance help with retirement planning?
A permanent insurance policy provides insurance in the case of death for the surviving spouse.
What are final expenses?
One-time expenses to do with the death of the life-insured. They normally include funeral, legal, and tax expenses and any debt (mortgage etc.).
What are continuing expenses?
These are ongoing expenses that arise from either one of the spouses dying. They include loss of income (from the primary wage earner), or child-care costs (for the spouse in charge of family management).
What is the “dependency period?”
The period during which the children are under the age of 18, or 25 if the child is in school full-time.
What are the 3 risk management strategies?
- Risk Avoidance
- Risk Control (loss-prevention/loss-reduction)
- Risk Financing (transferring and retaining risk - insurance)
What is the difference between term and permanent insurance?
Term insurance only covers set periods of time (5, 10, 15, or 20 years). Relatively inexpensive.
Permanent insurance covers an individual until death. Relatively expensive.
What is a risk not managed by insurance?
A sub-standard risk for which an exclusion rider or waiver has been signed.
What are the different approaches to risk comparison?
- Comparing the risk of dying today with dying 10 years from now.
- Comparing the risk of LTD with a benchmark for the same occupation.
- Comparing the risks of doing/not doing something (establishing an RRSP for instance).
- Comparing the risks between options (investing in low-risk bonds vs. high-risk bonds).
