In this session, we have learned the characteristics and limitations of life ins

Question

In this session, we have learned the characteristics and limitations of life insurance underwriting. Explain what the characteristics and limitations are in reference to two, uniquely different environments for the applicant for life insurance. Environment 1 = Married, male, age 37. Two children (5 and 9). Stay at home spouse. Living in a $350,000 single home in Montgomery county. Environment 2 = Married, male, age 48. Three children (23, 17, and 12). Spouse employed part-time. Living in a $175,000 row house in the Germantown section of Philadelphia.

Explanation / Answer

1) In two cases 1st man is of age 37 and 2nd man is of 48 So clearly for 2nd case premium will be higher than the first one.

2) For 2nd case spouse is working in a part time job so it may happen that in 2nd case the person will not be interested to take insurance since risk for loosing money for his family is much lesser than first one.

3) First one has more physical asset than 2nd one so for 1st person marginal disutility of loosing money is lower than 2nd one.

4)Generally middle income people go for more insurance than lower and high income people.

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