Principles of Risk Management and Insurance, 13th Edition

Summary

• Premature death means that a family head dies with outstanding unfulfilled financial obligations, such as dependents to support, children to educate, or a mortgage to pay off.

• At least four costs are associated with premature death:

  • There is the loss of the human life value.

  • Additional expenses may be incurred, such as funeral expenses, uninsured medical bills, and estate settlement costs.

  • Because of insufficient income, some families may experience a reduction in their standard of living.

  • Noneconomic costs are incurred, such as the emotional grief of the surviving dependents and the loss of a role model and guidance for the children.

• The purchase of life insurance can be economically justified if a person has an earning capacity, and ...