Case Application: Life Insurance Policies

Case Application: Life Insurance Policies

Best insurance policy to the protection of Sharon’s son in case of premature death

If Sharon happened to pass away prematurely, the best insurance policy to consider should be the five-year renewable and convertible term. The policy is classified in size and can be acquired at a minimal premium (Url, 2017), thus suitable to Sharon’s income.

Policy that meets need to accumulate a college fund for Sharon’s son

Universal life insurance is the paramount insurance policy that Sharon can secure for her son’s college payments. Sharon will make cash deposits to pay for all his college bills. Universal life insurance helps raise college school funds via cash withdrawal authorizations (Url, 2017).

Policy that meets the need to accumulate money for a down payment on a home

Sharon should opt for the Universal Life Insurance policy to make an accumulated home down payment. Ideally, universal life insurance offers principal plans by allowing cash withdraws (Url, 2017).

Major obstacle from purchasing cash-value life insurance

Ideally, life insurance offers cash interest protection for the entire life of the policyholder (Url, 2017). Above all, Sharon wants a lot, and the money available is minimal because life insurance with cash-value is costly, and she could not raise sufficient funds to cover herself. The biggest challenge for Sharon would, therefore, be paying for all her benefits and fulfilling basic financial provisions. Cash-value life insurance is inflated compared to other insurances.

Essential characteristic of a typical term insurance policy that helps accumulate funds for retirement.

Typical term insurance offers fixed premiums on limited time.  It does not provide any returns other than the prescribed benefit, unlike cash-valued life assurance policies. Thus, Sharon can only collect pension funds if she insures other insurances, such as universal life or regular life insurance instead of term insurance (Mulholland, Finke & Huston, 2016). However, term insurance is normally convertible. Therefore, Sharon can save funds for retirement if insurance policy terms are converted to either universal life policy or other conventional policy insurance.

References

Mulholland, B., Finke, M., & Huston, S. (2016). Understanding the shift in demand for cash value life insurance. Risk Management and Insurance Review, 19(1), 7-36.

Url, T. (2017). Life Insurance from an Individual and Macroeconomic Perspective. WIFO Studies.