Risk management and insurance / discussion questions / 200~300 for
1. Imagine that you have been married for three years and that you and your marital partner have just given birth to twin babies – a girl and a boy. Several months later, an insurance salesperson comes knocking on your front door on a Saturday afternoon. You welcome her into your home and she explains that she has stopped by to explain to you the benefits of purchasing whole life insurance policies for both children. In doing so she cites the painful realities of dealing with a premature death in the family, further pointing out that families living “pay check-to-pay check” often face great difficulty in covering funeral costs.
Explain how receptive or non-receptive you would be to the salesperson’s “sales pitch” and why, given the circumstances involved.
I will be utterly non-receptive to the salesman’s sales pitch. Whole life insurance policies are meant for the purpose of premature death of a family member who is having some liabilities to deal with. The life insurance ensures that these liabilities are discharged appropriately by lump sum amount received by the insurance policy and does not burden any other family member after the insurer’s death. As the twin babies have no liabilities and are completely dependent on their parents, whole life insurance does not make sense here.
2. Given your choice, explain whether you would be better off investing in a fixed annuity policy or a variable annuity policy and explain the reasons why.