Risk Principles

Question 1

a) Describe life insurance and discuss the benefit to the insured and dependents.

Answer:

Life insurance is one type of personal insurance. The life insurance is insured based on the insured’s life or health and the payment of life insurance is based on the insured’s life or death. Like all insurance, the insured will shift the risk to the insurer, accept the terms of the insurer and pay insurance premium.Unlike other insurance, life insurance is to pass on the risk of the survival or death of the insured. From the point of the whole society, there are always some contingency happened around some people, there are always some people which may suffer for disease, all kinds of risk in the society are affecting people's lives now and then, so we must adopt a method of dealing with personal danger, that is, to provide material help for the people who suffer from disease or even death , the life insurance is belong to this method.

There are many benefit for life insurance in terms of the insured and dependents. Firstly, it is a risk transfer. Our society contains a lot of uncertainties. A life insurance would ensure that your family will continue to enjoy a relatively stable living standard when someone in the family suffered a serious illness or even past away. Secondly, it can be a long term investment planning. For example, an annuity is one of the typical instrument for retirement planning. The money that one saved in the early stage of life could be used to provide financial support for a stable old age living guarantee. Lastly, the life insurance could provide tax benefit. Insurance indemnity is the compensation of the loss of individual who suffers accident unfortunately, it does not belong to personal income, so there is no tax.

b) Discuss social insurance, private insurance and their combination by providing three examples and the application of each.

Answer:

Social insurance refers to the forms of compensation provided by governments in...