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Risk and Insurance Essay Sample

  • Pages: 2
  • Word count: 478
  • Rewriting Possibility: 99% (excellent)
  • Category: insurance

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Introduction of TOPIC

(a) James should purchase a flexible premium deferred annuity because that would allow him changes in the amount of payments and also the frequency of payments. He has the option of selecting the flexible premium annuity which is either fixed annuity or a variable annuity. (b) Nancy should purchase a fixed annuity and select a life income annuity option that will guarantee her a lifetime income irrespective of how long she lives. Depending on her needs and objectives, the life income option can be selected with a certain number of guaranteed payments. (c) Jennifer should select a life annuity income option with either an installment refund feature or cash refund feature. Under the installment refund option, if the annuitant dies before receiving total income payments equal to the purchase price of the annuity, the payments continue to a designated beneficiary until they equal the purchase price.

Under the cash refund option, if the annuitant dies before receiving total payments equal to the purchase price of the annuity

, the balance is paid in a lump sum to the beneficiary. (d) Fred should purchase a variable annuity,

which is designed to provide an inflation hedge after retirement. (e) Mary should purchase a fixed annuity. She should select the life income annuity option with no refund feature. This option provides a life income to the annuitant only while the annuitant is alive.No additional payments are made after the annuitant dies. A life income option with no refund pays the highest amount of periodic income payments because it has no refund feature. (f) Kathy should purchase an equity-indexed annuity. An equity-indexed annuity is a fixed, deferred annuity that allows the annuity owner to participate in the growth of the stock market and also provides downside protection against the loss of principal and prior interest if the annuity is held to term.

(a) Since Lorri cannot work as a nurse, she meets the definition of total disability. After a 90-day elimination period, she would receive $2800 monthly for the remainder of the period of disability. (b) The policy contains a residual disability benefit. Since Lorri’s earnings are reduced 50 percent, she would receive a pro rata disability income benefit or $1400 monthly. (c) After two years of benefit payments, the second part of the definition of disability becomes operational. A job as a lab technician is reasonably consistent with Lorri’s education, training, and experience. Lorri would be considered capable of working as a lab technician. Thus, disability benefits would not be payable. (d) Since Lorri has a guaranteed renewable policy, it cannot be cancelled. Lorri alone cannot be singled out for a premium increase. However, premiums for the underwriting class in which Lorri is placed could be increased if premiums for the class are inadequate.

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