Studyspark Study Document

Risk Management and Insurance Questionnaire

Related Topics: Disability Pension Plan Tax Death

Pages:4 (1093 words)

Sources:1

Subject:Business

Topic:Insurance

Document Type:Questionnaire

Document:#95274016




Q1

Annuities account for a great part of the protection one affords self against death. They do not follow the application of the law of large numbers as the law is traditionally utilized in life insurance. It has, therefore, been referred to as “upside-down life insurance.” When an annuitant passes away during the period of accumulation, their beneficiaries are paid a death benefit. The common treatment of annuities is to account for gross premium returns excluding interest or to account for the cash value, whichever is greater. The principle is for the principal sum to be liquidated over the annuitant’s lifetime regardless of the means of accumulation.

Q2

Annuities can fall under various classes. Traditionally, the following classifications have been used to differentiate annuities:

i. Individual vs. group annuity

ii. Fixed-dollar vs. variable annuity

iii. Deferred annuity vs. immediate annuity

iv. Installment annuity vs. single-premium annuity

v. Single life vs. joint life annuity

vi. Annuity certain vs. pure life annuity

In the case of specialized annuities, the contract options available include:

i. Single-premium deferred annuity (SPDA)

ii. Two-Tier Annuity

iii. Market-Value-Adjusted Annuities

iv. The Variable Annuity

v. Index Annuities

vi. The Contingent Deferred Annuity

vii. Survivorship or Reversionary Annuity

Q3

Investors have to account for inflation when projecting the future value of their investments. The Variable Annuity helps investors cope with the effects of inflation on investment portfolios. The underlying theory is that while the value of a dollar will change over time, a diversified investment portfolio will adjust to reflect the prevailing prices of commodities and services in the economy with inflation factored in. Common stocks represent the value of companies offering goods and services in the economy and their value will generally move in the direction of the general prices. Variable annuities have been consistent with this theory. The number of accumulation units credited to an investor’s account will reflect the current market value of the same units. This value is determined by dividing the current securities value accumulated by a client by the outstanding number of accumulation units.

Q4

Just like in life insurance, annuities’ earned investment income during the period of accumulation is not taxable. Taxation happens only when the income is disbursed. The disbursed amount is taxed on the basis that the payment made is in excess of the investment made in the contract. Further, an early withdrawal of an annuity attracts a premature penalty of 10 percent. However, this penalty is not applicable where the holder of the contract suffers a disability during the life of the contract.

Q5

In the case of the joint and last-survivor annuity, the contract is such that the insurance company makes payments until the death of the two annuitants. This makes the contract attractive to retired married couples. There are variations to the contract that may provide for the amount being paid out to be reduced after the passing of one annuitant with the reduced disbursement continuing until the passing of the second party.

In the case of joint life annuity, the contract is such that payments stop on the passing…


Sample Source(s) Used

References

Vaughan, E. J., & Vaughan, T. (2007). Fundamentals of risk and insurance. John Wiley & Sons.

 

Cite this Document

Join thousands of other students and "spark your studies."

Sign Up for FREE
Related Documents

Studyspark Study Document

Corporate Risk Management: Insurance Currently,

Pages: 2 (629 words) Subject: Business Document: #5713896

Another alternative for companies with uninsurable risks is mutualization. However, this category of insurance carries further risks that may not be suitable for all companies. The main problem is that mutual insurers require participants to be from a homogenous population, making this alternative unviable for a variety of clients. Some companies are however working on overcoming such problems to make mutualization less problematic for their investors. Some insurance companies now

Studyspark Study Document

Risk Management the Objective of This Study

Pages: 5 (1690 words) Sources: 5 Subject: Business - Management Document: #79769469

Risk Management The objective of this study is to discuss the role and nature of organizational risk management in justice and security organizations and why it is so important. The following will be addressed in the assessment; (1) risk planning and resource identification; (2) management of risk in justice and security organizations; (3) costs associated in managing risk; (4) consequences of failing to manage risk; and benefits; and (5) benefits a

Studyspark Study Document

Risk Management Applications in Hospitals the Concept,

Pages: 4 (1322 words) Sources: 4 Subject: Healthcare Document: #2078049

Risk Management Applications in Hospitals The concept, usage and learning of risk management phenomenon are important for all institutions in healthcare industry. The most important purpose of risk management in healthcare industry is learning from errors, it is these human errors that pave the way for us to learn prepare and not repeat these errors again. These errors can lead to a medical incident and the learning from them occurs when these

Studyspark Study Document

Risk Management in British Hedge Funds

Pages: 60 (19188 words) Sources: 40 Subject: Economics Document: #89099157

Risk Management in Hedge Funds A research of how dissimilar hedge fund managers identify and achieve risk The most vital lesson in expressions of Hedge Fund Management comes from the inadequate name of this kind of alternative investment that is an alternative: The notion that all methodical risks are differentiated away is not really applicable here, with the Hedge Fund returns, in realism, representing a mixture of superior administration of market

Studyspark Study Document

Risk Management: Improving Communication Amongst

Pages: 6 (2012 words) Sources: 1+ Subject: Healthcare Document: #32761856

(Smith, 2003) Checking twice, or more than twice may be less important than securing a diversity of views in such an arena. (Smith, 2003) The ability adequately communicate risk levels amongst providers can become difficult. Also, hasty words can create a misperception in the minds of patients, if a doctor speaks too casually. "Science cannot prove a negative, but, where their children are concerned, parents want to be assured that

Studyspark Study Document

Risk Management Financial Derivatives Are an Innovation

Pages: 10 (4597 words) Sources: 1+ Subject: Economics Document: #63055861

Risk Management Financial derivatives are an innovation in the field of finance that enable us to understand, measure and manage our financial risks. The definition of financial derivative according to the textbooks is of a financial instrument, and the value of any financial derivative is based on the value or values of the underlying securities or groups of securities that constitute the derivative. It can be said that there have been

Join thousands of other students and

"spark your studies".