RMI270 Class Lecture Notes
RMI270 Class Lecture Notes RMI 270
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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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