country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Life Insurance: Legal Contract

tag 174 Downloads7 Pages 1,593 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss about a Case Study on Life Insurance for Legal Contract ?

 

Answer:

Introduction

Life insurance can be defined as a legal contract or agreement between insurer and insurance policy holder in which it is promised on the part of the insurer to the policy holder or his or her designated beneficiary to pay a sum of money after death of the insured person (Cockerell, 2005). This thesis provides both theoretical and analytical ideas about the concepts of traditional net cost method and interest adjusted method that are applicable in the process of computing cost of life insurance.

 Presently, it has become necessary on the part of policy holders to understand these concepts so that they can avoid the losses that may occur to them as a result of inaccurate cost variations that exist most of the times among similar or comparable life insurance policies(Murphy, 2010). Because of these erroneous cost variations, different levels of costs get associated with the same level of insurance protection offered by different insurance companies. This means that purchase of high cost policy do not always confirm additional insurance protection thereby resulting in wastage of the extra dollars paid (McKnight et al., 2012). Thus, in order to avoid such circumstances, it is necessary to understand the advantages or benefits of interest adjusted cost method over traditional cost method and this thesis is expected to pave for the same.

Thesis statement     

It is important to accumulate and disseminate detailed ideas regarding the concepts of traditional cost methods and interest adjusted cost methods of calculating cost of life insurance so that the advantages and disadvantages of one over the other can be comprehended on the part of policy holders in an efficient manner and cost methods associated with highest levels of advantages can be applied so as to make sure minimum loss and maximum advantage from a life insurance policy.

Purpose of the paper

The main purposes of the paper are to communicate the advantages of the interest adjusted cost method over traditional cost method to the users of insurance policy and to educate purchasers of life insurance policies on how to deal with a life insurance agent in the process of purchasing life insurance policies.

Overview of the paper

This thesis covers case study summary and the theoretical and practical discussions on the advantages of interest adjusted cost method of calculating insurance policy cost over traditional cost method. This paper also discusses how clients should assess quality of insurance agents before purchasing insurance policies.

 

Body

Background information

It has often been observed that due to the presence of erroneous variations in costs of life insurance among comparable life insurance policies considerable amounts of additional costs are incurred on the part of the insurance policy holders for the same amount of insurance protection (Hardy et al., 2007). In other words, costs vary across similar sort of insurance protections offered by different policies of different companies and this most of the times result in incurrence of extra dollars on the part of policy holders (Vogel & Blair, 2007).

Advantages of interest adjusted cost method over traditional cost method

It is important on the part of the clients to assess relative advantages and disadvantages of costing methods and apply the same in a beneficial manner while selecting insurance policies (Maclean, 2009). It is also important on the part of researchers to communicate to the users of insurance policy holders that when it comes to insurance policy cost,  interest adjusted cost methods are more accurate that traditional cost methods. This is mainly because of the fact that traditional net cost method used in the process of ascertaining life insurance cost fails to take in to account time value of money and these shows insurance to be free which is false. On the other hand, interest adjusted cost methods are more accurate in the sense that they take in to account time value of money through application of interest factor to each cost element (Zartman & Price, 2011). Again, in the context of traditional cash value life insurance policies, data on annual – rates – of – return are not easily available to the consumers. This drawback is absent in the case of interest adjusted life insurance policies as the same make yearly – rates – of – return easily available to the customers.

Insurance industry and insurance agents

It goes without saying that selling is always a tough job and selling life insurance is even tougher (Huebner & Black, 2006). In the insurance industry of today, competition is extremely fierce and under such circumstances, insurance agents are made to sell insurance policies without providing them with sufficient training. Moreover, they are made to work under immense sales pressure so that they can accomplish targeted sales without fault.  This is not only the case with new agents but also with mature agents. Under such circumstances, some agents resort to dishonest sales practices such as misrepresentation of insurance to clients or recommendation of policies to clients that maximise commission and do not fulfil client needs (Zartman& Price, 2011). In this regard, it is important to educate the clients about the matter that interest adjusted insurance costing method is more accurate than traditional method and an agent calculating cost of a proposed insurance policy through traditional costing method can be considered incompetent and unacceptable. To be ideally educated, an insurance agent must be a Chartered Financial Consultant (ChFC) or Chartered Life Underwriter (CLU) or Chartered Financial Planner. Moreover, he or she must be technically competent and a good advisor (Magee, 2010).

Calculations and inferences

Computation of annual net cost per $1000

Annual net cost = (tenure of life insurance x annual premium) – total dividends for 20 years – cash value at the end of 20 years

= [(20 x 230) – 1613 – 3620]/ (20 x 10) = - $3.165

The above figure of annual net cost is indicative of the fact that the insures will have to pay $3.165 to the client each year for every $1000 of life insurance coverage bought on the part of the client(Gerber, 2008). No insurance company is expected to accept this as this a loss go the company.

Computation of annual surrender cost index per $1000

Annual surrender cost index = [(tenure of life insurance x Annuity due factor for 20 years) – accumulated value of dividends for 20 years – cash value at the end of 20 years] / annuity due factor for 20 years x 100

= [(230 x 34.719) – 2353 - 3620)] / (34.719 x 10) = $0.58

The above figure of annual surrender cost index indicates that if the stated policy is held on the part of the client for 20 years and then surrendered, it would cost $0.58 per $1000 per year(Gaines, 2012).

Computation of annual net payment cost index per $1000

Annual net payment cost index = [(tenure of life insurance x Annuity due factor for 20 years) – accumulated value of dividends for 20 years] / annuity due factor for 20 years x 100

= [(230 x 34.719) – 2353)] / (34.719 x 10) = $1.622

The above figure of annual net payment cost index indicates that if the stated policy is held by the client for 20 years and then the client continue to hold it or died, it would cost $1.62 per $1000 per year(Gaines, 2008).

Conclusion

Lessons learned

An educationally competent insurance agent is a Chartered Financial Consultant (ChFC) or Chartered Life Underwriter (CLU) or Chartered Financial Planner (Raynes, 2013).

In addition to having proper educational qualifications, an insurance agent needs to be technically competent and a good advisor.

Interest adjusted cost method is more appropriate than traditional cost method because of the fact that the former one takes in to account time value of money(Gaines, 2010).

In order for an insurance company to make profit, annual net cost index has to be positive

Annual net payment cost index is usually higher than annual surrender cost index (Zartman and Price, 2014)

Recommendations

A number of recommendations have been given at the end of the thesis. First an insurance clients should take in to account professional qualifications, technical competencies and advisory capabilities of an agent before purchasing a life insurance from him or her. Second an insurance client should make sure that his or her insurance costs are calculated through interest adjusted cost methods and not through traditional cost method as the former one is more efficient than the later one(Gerber, 2008). Third, an insurance company should not make a deal until and unless annual net cost index is positive, otherwise the company would make a loss from the deal.

 

References

Cockerell, H. (2005). Insurance. London: English Universities Press.

Gaines, P. (2008). Interest-adjusted index. Cincinnati: National Underwriter Co.

Gaines, P. (2010). Interest-adjusted index; life insurance payment and cost comparisons. Cincinnati.

Gaines, P. (2012). Cost facts on life insurance: interest-adjusted method. Cincinnati: National Underwriter Co.

Gerber, H. (2008). Life insurance mathematics. Berlin: Springer.

Hardy, E., Huebner, S., Michelbacher, G. and Mudgett, B. (2007). Insurance. New York: Alexander Hamilton Institute.

Huebner, S., & Black, K. (2006).Life insurance. Englewood Cliffs, N.J.: Prentice-Hall.

Maclean, J. (2005).Life insurance. New York: McGraw-Hill.

Maclean, J. (2009). Life insurance. New York: McGraw-Hill.

Magee, J. (2010). Life insurance. Homewood, Ill.: R.D. Irwin.

McGill, D. (2013). Life insurance. Homewood, Ill.: R.D. Irwin.

McKnight, R., Reuter, J., &Zitzewitz, E. (2012).Insurance as delegated purchasing. Cambridge, Mass.: National Bureau of Economic Research.

Murphy, S. (2010).Investing in life. Baltimore, Md.: Johns Hopkins University Press.

Raynes, H. (2013). Insurance. London: Oxford University Press.

Sneyd, M. (2013). Insurance. New York: Prentice Hall.

Vogel, R., & Blair, R. (2007).Health insurance administrative costs. Washington, D.C.: U.S. Department of Health, Education, and Welfare, Social Security Administration, Office of Research and Statistics.

Zartman, L. and Price, W. (2014). Life insurance. New Haven: Yale University Press.

Zartman, L., & Price, W. (2011).Life insurance. New Haven: Yale University Press.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2016). Life Insurance: Legal Contract . Retrieved from https://myassignmenthelp.com/free-samples/life-insurance-legal-contract.

"Life Insurance: Legal Contract ." My Assignment Help, 2016, https://myassignmenthelp.com/free-samples/life-insurance-legal-contract.

My Assignment Help (2016) Life Insurance: Legal Contract [Online]. Available from: https://myassignmenthelp.com/free-samples/life-insurance-legal-contract
[Accessed 18 January 2020].

My Assignment Help. 'Life Insurance: Legal Contract ' (My Assignment Help, 2016) <https://myassignmenthelp.com/free-samples/life-insurance-legal-contract> accessed 18 January 2020.

My Assignment Help. Life Insurance: Legal Contract [Internet]. My Assignment Help. 2016 [cited 18 January 2020]. Available from: https://myassignmenthelp.com/free-samples/life-insurance-legal-contract.


At MyAssignmenthelp.com, we understand that when students get stuck with tough assignments, they look for affordable services. To assist students with complex assignments, we have built a team of skilled cheap essay writers. MyAssignmenthelp.com has become one stop solution for all students who often look for answers related to their search similar to do my essay at the cheap rate or who can write my essay at affordable prices. Students prefer hiring us as we have the best provisions to render services related to do my essay online at a reasonable rate.

Latest Management Samples

UNCC300-Inequity In The Distribution Of Educational Resources

Download : 0 | Pages : 4

Answer: Introduction There are several challenges with realizing aspirations of the common good in professional community whether locally or globally. In this opinion editorial, it is going to focus on inequity in the distribution of resources as a challenge in realizing aspiration for the common good in a professional community. Inequity in the distribution of educational resources In a professional society, knowledge and skills is a key f...

Read More arrow

MBA402 Governance, Ethics, And Sustainability Report

Download : 0 | Pages : 11

Question: Introduction: Organisation sustainability is one of the major development aspects of the productive nature of the organisation in case of employees’ engagement and productivity. There are some situations where business dealings are not justified their places and that create a problem for the company as well as for employees. Some rules are needed to be revised as the report detailing form the commission are not highlighted at ...

Read More arrow

BSBCUS501-Customer Service Plan Of Innovative Widgets

Download : 0 | Pages : 6
  • Course Code: BSBCUS501
  • University: Victoria University
  • Country: Australia

Answer: Vision and Mission Vision The vision of Innovative Widgets is to render the best quality and reliable widgets for different machines at reasonable prices to its customers and also to meet customer servicing needs in an effective fashion. Mission The mission of Innovative Widgets is to render innovative product solutions to the customers and also to provide the right quality of customer services both for its internal and external cu...

Read More arrow

MGT726 Managerial Project Resolution Of Scaffolding

Download : 0 | Pages : 14

Answer: Introduction The purpose of this project report is to give an overview regarding the progress to date of the management problem regarding the complaints received by Caledonia scaffolding from residents of the locality and regarding utilisation of resources due to construction of scaffolding (Kumar et al. 2013). This project will address the progress done so far about analysing the various research objectives and research problem relat...

Read More arrow

ONPS1050 Guidelines For Postgraduate Report

Download : 0 | Pages : 12

Answer: Introduction Immunotherapy is used for the purpose of treating the disease by two different ways, suppressing or activating the immune system. Immunotherapies are designed to trigger or exhibit an immune response are called activation immunotherapies. On the other hand, the therapies that suppress or reduce the immune response are known as suppression immunotherapies (Gorelik et al., 2015). Immune therapies can be used to treat the in...

Read More arrow
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,180,194

Orders

4.9/5

Overall Rating

5,056

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

755 Order Completed

95% Response Time

Douglas Cowley

Masters in Finance with Specialization in Audit

Wellington, New Zealand

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

440 Order Completed

99% Response Time

Jack Arens

MBA in HRM

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

134 Order Completed

95% Response Time

Thomas Nelson

MS in Information Systems Technology with Specialization in Database Administration

New Jersey, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

1692 Order Completed

98% Response Time

Alfred Dodd

PhD in Computer and Information Science with specialization in Database

Wellington, New Zealand

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

Not only helped me to understand the material but helped me out of a serious time crunch.

flag

User Id: 365583 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating

Thank you for the good write up. lecturer was satisfied with the essay. Thanks again for the prompt reply.

flag

User Id: 351442 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating

Thank you for putting together this project. I helped me to understand more in detail how elders would find healing.

flag

User Id: 181203 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating

I HAVE SUBMITTED THE ASSIGNMENTS AFTER ONE MONTH ONLY I HAVE THE RESULTS SO JUST WAITING FOR THAT AND AFTER THAT I WILL RESPONSE...

flag

User Id: 362913 - 18 Jan 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?