The purpose for this paper is to discuss the importance of transferring risk of one’s assets regarding personal assets through the use of the many insurance models available in today’s market. There will be a discussion of what insurance is and what it represents to those insured. Following will be an explanation of the various insurance models available including whole life, term life, variable life, universal life, and index life programs. All of which are good viable options depending on the needs of potential insurance clients. Also included in the explanation will be the advantages and disadvantages of each insurance option. Finally, there will be a brief summary of the various insurance options and their final outcomes in protecting the policy holder’s family and their future.
In the world of corporate and personal finance everyone is always concerned about risk with one’s cash assets or non-liquid assets known as hard assets. Everyone wants to protect the profits while all the while reducing their risk. Here in BA 312 Business Finance we have learned of many ways in which to maximize company profits while minimizing the risks associated with the day-to-day financial decisions. In personal finance one has to guard against risk as well. After all that has been done both corporately and personally to minimize financial risk, there is still another area where one can transfer their risk in order to protect what took years to build. Most do not consider the option of transferring their risk to someone else or some other company, but risk can be transferred through a vehicle called insurance. Insurance has its costs, but those costs pale in comparison to the costs associated with the possibility of a complete loss of one’s assets. Insurance is usually considered as an afterthought, putting off until a more convenient time presents itself which seems to never come until it is too late. As part of financial planning, applying insurance coverage is one of the better investments to protect a person’s assets for their family’s future. There are many financial institutions that provide financial services such as insurance companies with various products to choose from (Ross, Westerfield, & Jordan, 2011). There are products such as whole life, term life, variable life, universal life, and index life programs available. Depending on the client’s needs there are many things to consider when choosing the various programs based on their advantages and disadvantages.
The term insurance is a method of financial protection paid in a monthly or annual premium in the event damage, total loss of one’s assets, or death covered under the insurance contract between the insurer and the insured. Claims Information Specialists (2010) defines insurance as “a special type of contract between an insurance company and its client in which the insurance company agrees that on the happening of certain events the insurance company will...