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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

  • Identify the three major decisions that must be made in buying life insurance and the sequence in which the decisions should be made
  • Identify the ways in which a consumer can determine the financial strength of a life insurer
  • Discuss the relative merits of term insurance and cash value insurance for meeting financial security needs
  • Explain how differences in cost among traditional life insurance policies can be compared
  • Explain how differences in cost among universal and variable life insurance policies can be compared
  • Discuss the deficiencies in the current price disclosure system used in the life insurance field
  • Briefly summarize the advantages and disadvantages of life insurance as an investment

The purchase of life insurance differs in many ways from the other purchases that the average consumer makes every day. In many ways, it differs from the purchase of other forms of insurance since it sometimes combines protection with savings. In addition, because of the long-term nature of most life insurance contracts, the decision normally calls for committing funds well into the future to pay for the policy. Such a long-term commitment requires forethought and consideration of objectives. One out of every five life insurance policies purchased is dropped within the first two years of its purchase, and ...

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