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Fundamentals of Risk and Insurance, 11th Edition by Therese M. Vaughan, Emmett J. Vaughan

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CHAPTER OBJECTIVES

When you have finished this chapter, you should be able to

  • Describe the characteristics of the various special life insurance forms discussed in the chapter
  • Explain the circumstances in which each of the specialized forms may be used
  • Identify the economic conditions that led to the new generation of life insurance contracts
  • Identify the advantages and disadvantages of specialized life insurance policies generally

In Chapter 12, we divided available life insurance products into two broad categories: term insurance, which provides pure protection, and cash value life insurance, which combines protection and saving. In addition to this basic distinction, we distinguished between the traditional forms of life insurance (term, whole life, and endowment) and the innovative contracts introduced over the past two decades. In the innovative class, we identified universal life, variable life, and variable universal life as three additional types of contracts that may be considered “basic” today.

In addition to these contracts, life insurance companies offer a wide variety of policies that combine two or more of the basic types into one contract or that provide for an unusual pattern of premium payments. In this chapter, we will examine a few of these specialized contracts that have been developed to fill the particular needs of individuals. The discussion that follows ...

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