Chapter THREE Life Insurance And Annuities Lecture 8 Chapter THREE Life Insurance And Annuities Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.2 Endowment insurance: The insurer promises to pay a stated amount of money either to the beneficiary, at once, if the insured dies during the life of the policy (the "endowment period"), or to the insured if he or she survives the endowment period. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.2.1 Premiums: Premiums for endowment policies are some how high. Endowment policies most always are issued on an annual level - premium basis, single premium forms are available under which the insured pays the entire premium at the inception of the policy. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.2.2 Uses: Because the endowment policy produces a large savings accumulation. It may be useful as a method of building funds to finance retirement income. There is danger, however, in the use of an endowment policy for this propose since a person's most important need may be for protection against dying too soon rather than protection against living too long. Therefore endowment insurance is not recommended unless the need for death protection is secondary. 5. Given the following items from a certain table of mortality, deduce the corresponding values for dx, qx, px . Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.3 Whole insurance: Whole life insurance is a type of life insurance contract under which the subject of life insurance is covered an entire life regardless of the number of premiums scheduled to be paid. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.3.1 Premiums. Premiums on whole life policies may be paid under the single - premium, limited number on continuous- premium, plan a relative large sum at the issuance of the policy. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

The limited payment plan is an arrangement for a period of years (or until death, if sooner) after which no further premium payments need be made. The most common plan of whole life insurance is written on a continuous-premium basis and is "ordinary life" policy, "straight life" policy. Under this plan the insured pays a flat amount (the same amount year after year) as long as the policy remains in force. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.3.2 Uses of whole life: Few people ever outlive the usefulness of life insurance as an estate asset-death at any age caste money the post-death resources or estate clearance is the most efficient method of arranging for these resources because it eliminates the need for (and cost of) maintaining liquid pre-death resources. Consequently; there is nearly always a use for life insurance regardless of the age of the individual. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

A whole life policy, taken at an early age, makes it possible for the insured to obtain a relatively high amount of protection against premature death per dollar of premium during the " family years", when this amount of protection is needed most, and yet automatically and at the same time- accumulate funds for old age. Moreover, there will be a yearly increasing emergency fund on which the insured can draw for a loan if necessary. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.1.4 Special-purpose policy plans: Addition to writing the three basic types of insurance policies, life insurers offer several special policy forms. A number of the special forms combine the basic policies into various packages to meet particular life insurance needs, other special policy forms simple reflect sales gimmicks not at all related to buyer needs. All too often they are designed to confuse buyers who seek to compare the prices and 'products' of various insurers, and only complicate the difficult purchase decision of the typical life insurance buyer. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.2 Classes of life insurance: As distinguished from types, there are several classes of life insurance: ordinary insurance industrial insurance, and (3) group insurance. 3.2.1 Ordinary life insurance: Ordinary life insurance usually issued in amounts of $1.000 or more with premiums payable annually, semiannually, quarterly, or monthly at the office of the insurers is their largest department. In many, ordinary is the only life insurance written. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.2.2 Industrial life insurance: Industrial life insurance contract to ordinary life insurance is usually written with face amounts less than $1,000. The premiums are payable weekly or at intervals of less than one month and may be collected at the insured’s home by an insurance agent, who often is referred to as all debit man". Although many policies written in industrial insurance are the same type as in ordinary insurance, limited payment whole life policies are by far the most popular. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

The premiums charged for industrial life insurance are generally higher than those charged for ordinary life insurance, and for several reasons: (1) the higher cost of administration (it is more expensive, per dollar of insurance, to handle small amounts of insurance and to collect premiums weekly at the home of the insured); (2) the higher mortality rate of persons covered by industrial insurance (generally, more liberal underwriting standards are applied in industrial insurance than in ordinary insurance); Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

and (3) a greater lapse rate. It costs an insurance company more than the first premium to sell and issue a policy, but this cost is captured from subsequent premiums over the years policy is in force. However, if large numbers of persons buy policies and keep them only a short time, the insurer will not be able to recover its acquisition costs on large amounts of business and must shift these costs to policy-holders who retain their insurance. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

3.2.3 Group life insurance: Group life insurance is issued usually without medical examination on a group of persons under a master policy. Only one policy is issued; but members of the insured group receive certificates of participation the plan. Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University

Thank You 16 Instructor: Dr. Lobna M Farid, Copy rights for Dr. Ibrahim Morgan and Dr. Raafat A. Ibrahim, " Life Insurance", Faculty of Commerce, Cairo University