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Chapter 1 - RISK AND LIFE INSURANCE - Coggle Diagram
Chapter 1 - RISK AND LIFE INSURANCE
Risk and Insurance
Life insurance products are designed to provide protection against the risk of financial loss
Risk: Speculative Risks (loss, gain, or
no change. And Pure Risks (no possibility of gain))
Requirement of Insurable Risks
insurance plays an important function in acting as a risk transfer mechanism
TYPES OF PERSONAL RISKS THAT CAN BE INSURED
premature death- Premature death is defined as the death of a breadwinner as a result of illness or accident with unfulfilled financial obligations.
outliving resources - insufficient capital and income during retirement;
poor health and disablement - includes both the payment of catastrophic medical bills and the loss of earned income
Hazards
Physical Hazards
Moral Hazards
Methods to minimise anti-selection
underwriting or selection of risks
offer policies with different excesses and offering policies with pre-existing condition exclusions.
Life insurance
Term insurance: provides a death benefit if the insured dies during a specified period.
Whole life insurance: provides life insurance coverage throughout the insured’s lifetime and also build up cash values which can be used as a form of savings for the policy owner.
Endowment Insurance :provides a policy benefit that is paid either when the insured dies or on a stated date if the insured lives until then.provides life insurance coverage for only a stated amount for a specific period of time.has savings element
Universal Life Insurance is a form of “interest sensitive” Whole Life Insurance that offers a death benefit, and because of its flexible premium feature, provides the opportunity to build cash values which the policy owner can borrow from or withdraw. The cash values earn interest at a declared rate, which may change over time.
Annuities And Investment Products
An Annuity is a series of periodic income payments to a named individual in exchange for a premium or a series of premiums.
Investment-linked Life Insurance policies (ILPs) provide a combination of protection and investment elements. Premiums buy life insurance protection and investment units in professionally managed investment-
linked sub-funds. Structured ILPs are ILPs where the sub-funds are invested in structured products and other structured funds.
Health Insurance Products
Key-Person Insurance
The Principle of Indemnity applies to General Insurance as well as Health Insurance.it does not apply to Life Insurance and Personal Accident Insurance.
MoneySense
3 tiers
Basic: budgeting and saving, and the responsible use of credit;
Tier II - Financial Planning - equips Singaporeans with the skills and knowledge to plan for their long-term financial needs;
Tier III - Investment Know-How - imparts knowledge about the different investment products and skills for investing.
Five core financial capabilitie
Understanding money - evaluate the costs and benefits of options understanding how economic conditions can affect a person;
Understanding yourself, your rights and responsibilities:
Managing everyday money is about being able to budget, to live within one’s means and to use credit facilities responsibly
Planning ahead is about being able to put together a financial plan to help one manage one’s resources (e.g. income, debt, savings and investments) prudently.
Selecting financial products is about understanding the purpose, features,
risks and costs of common financial products
SINGAPORE DEPOSIT INSURANCE CORPORATION (SDIC)