lOMoARcPSD|46354221
Life Insurance and Health Coverage Insights: RMIN Exam 3
Study Guide
Security Risk Management and Internal Controls (California State University, Los
Angeles)
, lOMoARcPSD|46354221
Life Insurance and Risk Management
Life Insurance Fundamentals
● Definition: A risk management tool for premature death
● Key Function: Pays stated sum (face amount) to beneficiary upon insured's death
● Important Feature: Many contracts include cash value (savings element)
Understanding Premature Death (Exposures)
1. Key Point: Risk is about premature death, not death itself
2. Major Impacts:
○ Business losses when key employee dies
○ Financial hardship for dependents (can be devastating)
Cost Considerations
3. Executor Fund Needs:
○ Funeral and burial costs ($7,000-$10,000)
○ Administrative expenses (Casket, Headstone, Hearse, Visitation room, etc.)
4. Income Needs for Survivors:
- Full or partial monetary support for other family members
- Degree, which others are financially dpndnt on income earner (change overtime)
○ Children
○ Spouse
○ Elderly parents
○ Business exposures
5. Likelihood (Frequency of Premature Death):
● Consideration must be given not only to the severity (cost of loss) by also to the
likely occurrence (frequency) of premature death
Insurance Calculation Methods
1. Needs Approach (Determining how much to purchase)
Examples of Needs:
● Surviving Children & Spouse, Other surviving dependents, & Business Exposures
Specific Possible Uses:
● Education funds
● Funeral costs (estate clearance)
● Extra income during Readjustment period
Life Insurance and Health Coverage Insights: RMIN Exam 3
Study Guide
Security Risk Management and Internal Controls (California State University, Los
Angeles)
, lOMoARcPSD|46354221
Life Insurance and Risk Management
Life Insurance Fundamentals
● Definition: A risk management tool for premature death
● Key Function: Pays stated sum (face amount) to beneficiary upon insured's death
● Important Feature: Many contracts include cash value (savings element)
Understanding Premature Death (Exposures)
1. Key Point: Risk is about premature death, not death itself
2. Major Impacts:
○ Business losses when key employee dies
○ Financial hardship for dependents (can be devastating)
Cost Considerations
3. Executor Fund Needs:
○ Funeral and burial costs ($7,000-$10,000)
○ Administrative expenses (Casket, Headstone, Hearse, Visitation room, etc.)
4. Income Needs for Survivors:
- Full or partial monetary support for other family members
- Degree, which others are financially dpndnt on income earner (change overtime)
○ Children
○ Spouse
○ Elderly parents
○ Business exposures
5. Likelihood (Frequency of Premature Death):
● Consideration must be given not only to the severity (cost of loss) by also to the
likely occurrence (frequency) of premature death
Insurance Calculation Methods
1. Needs Approach (Determining how much to purchase)
Examples of Needs:
● Surviving Children & Spouse, Other surviving dependents, & Business Exposures
Specific Possible Uses:
● Education funds
● Funeral costs (estate clearance)
● Extra income during Readjustment period
