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RMI270 Class Lecture Notes

by: Danielle Notetaker

RMI270 Class Lecture Notes RMI 270

Danielle Notetaker
GPA 3.8

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About this Document

These notes cover chapters 6 and 11, which will be included on the final exam
Dr. Fitzgerald
Class Notes
Risk, Management, Insurance, term, whole, life
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This 2 page Class Notes was uploaded by Danielle Notetaker on Wednesday April 20, 2016. The Class Notes belongs to RMI 270 at Ball State University taught by Dr. Fitzgerald in Spring 2016. Since its upload, it has received 22 views. For similar materials see in Risk Management And Insurance at Ball State University.

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Date Created: 04/20/16
Class  Lecture  Notes  for  RMI  270  Final  Exam     Ch.6  Operations     • Ratemaking-­‐  the  pricing  of  insurance  and  calculations  in  premiums   • Underwriting-­‐  process  of  selecting,  classifying,  and  pricing  applicants  for   insurance   o Underwriting  Principles:   § Attain  profit   § Select  insureds  according  to  standards   § Provide  equity   • When  making  decisions  you  can::   o Accept  it   o Accept  it  with  changes   o Reject  it   • Production  =  Sales   • Producers  =  Agents     Different  Types:   • Agent  –  represents  the  company,  they  have  a  contract  with  the  company   • Broker  –  represents  the  insured,  NOT  restricted  to  one  company   • Solicitor  –  hired  by  agent  to  solicit  for  them,  go  door  to  door  to  sell  future   business   • Consultant  –  independent,  does  not  work  for  a  company     Investments:   • General  account  –  all  investments  for  all  insureds   • Separate  account  –  variable     Ch.11  Life  Insurance   • Death  –  is  a  certainty   • Premature  death  –  if  you  die  prior  to  your  life  expectancy     Why  you  need  life  insurance   • Paying  for  final  expenses  such  as….   o Nursing  home   o Funeral/burial   o Personal  bills   o Paying  mortgage  debt   o Legal  fees     How  much  life  insurance  do  you  need?   • Multiple  of  earnings  method:  multiple  annual  earnings  by  an  arbitrary   number   • Capital  Retention:  determine  how  much  capital/money  you  need,  you   RETAIN  the  capital  investment  and  NEVER  spend  it,  you  just  live  off  the   earnings  from  returns     Term  Insurance   • Straight  term  –  coverage  remains  the  same  while  premiums  increase   • Decreasing  term-­‐  premiums  remain  the  same  while  coverage  decreases   • Renewability  –  renew  policy  without  evidence  of  insurability   • Convertibility  –  covert  to  whole  life  policy  without  evidence  of  insurability   • If  you  want  maximum  coverage  and  the  maximum  amount  of  protection,  you   should  buy  term  life  insurance     • Term  insurance:  least  expensive  policy,  but  gives  you  the  most  protection  per   dollar   o Only  pays  if  death  during  the  term   o No  savings  component  (not  used  for  retirement  savings)   Disadvantages:   • Does  NOT  build  cash  value   • Premiums  increase  as  you  get  older   • Low  interest  rates  raise  premium  prices     Whole  Life  Insurance   • More  expensive,  but  it  has  cash  value   • Has  limited  payment  (only  pay  for  a  fixed  number  of  years)   • Promises  to  pay  the  face  amount  of  the  policy  at  death  or  age  100   • Permanent  protection   • Non-­‐forfeiture  protection   o Options  include:  guaranteed  cash  value,  reduced  paid  up  insurance,   extended  term   • Reasonable  cost   • flexibility  


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