FIN 502 Chapter Notes - Chapter 9: Disability Insurance, Life Insurance, Term Life Insurance
Document Summary
Fin chapter 9 risk management and chapter 10. Speculative risk involves loss and gain, but in uncertain amounts. Generally those that you choose to accept rather than those that you encounter simply because of your circumstances. Pure risk the possibility of loss only. Happen to us without us having made a conscious choice to seek them out. Is a means of financing the risk of the premature and untimely death of a family member: the loss of income due to the unanticipated death of a family member is an insupportable risk for most families. What kind of life insurance should you buy: t(cid:449)o app(cid:396)oa(cid:272)hes to (cid:272)al(cid:272)ulate o(cid:374)e"s (cid:396)e(cid:395)ui(cid:396)ed life insurance face value: income approach and the expense approach. If there is no income shortfall there is no need to buy life insurance under expense approach: approximate benchmark: divide average annual income shortfall by the discount rate and multiply the anser by an adjustment factor of 70-80%
