A producer is helping a married couple determine the financial needs of their children in the event that one or both die prematurely. This personal use of life insurance is known as?
Social Studies · High School · Tue Nov 03 2020
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The personal use of life insurance to determine the financial needs of children in the event of the premature death of one or both parents is known as "Income Replacement" or "Family Protection." Life insurance acts as a financial safety net to ensure that the dependents are not left financially vulnerable in the absence of the primary income earners' economic contributions.
- Life insurance is essentially a contract between an individual (policyholder) and an insurance company, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) upon the death of the insured person. The purpose of life insurance is manyfold, but a fundamental one is to provide financial security to loved ones who might otherwise experience economic hardship without the income of the insured.