Final answer:
In the context of life insurance, retention means keeping the policy active. This involves the insured retaining responsibility for potential financial losses and maintaining the paid premiums to ensure the support and financial stability a life insurance policy provides, which can be critical for family protection and old age saving strategies.
Step-by-step explanation:
When assessing needs for life insurance, an individual may use retention, which means:a) Keeping the policy active. Retention in the context of life insurance refers to the insured choosing to retain responsibility for a certain level of potential financial loss rather than transferring that risk to the insurer. This does not typically involve cancelling or transferring the policy to another individual. Indeed, life insurance can be an important part of financial planning, helping to protect your family's financial future.
By retaining a policy, an individual might also borrow against the policy's cash value if it is a cash-value (whole) life insurance product. It's necessary to repay any loans taken against the policy plus interest, to avoid reducing the death benefit. Additionally, funds accrued in a life insurance policy could also provide a financial resource for other needs, potentially enhancing one's ability to save for old age and secure a stable income for retirement.
The payments people make into their insurance policies over time are meant to cover not only their claims but also contribute to the costs of running the insurance company and its profits. Therefore, maintaining an active life insurance policy and paying premiums is crucial for keeping the financial protection it provides in force.