Question

A jumping juvenile policy is unique in that the death benefit automatically A) Doubles at a predetermined age B) Pays out to the insured C) Increases at a predetermined age D) Decreases at a predetermined age

Answer 1

A jumping juvenile policy's death benefit increases at a predetermined age. Life insurance policies pay out when the policyholder dies. Determining actuarially fair premiums requires calculating the expected cost of death claims, and charging a single premium to a diverse group could lead to adverse selection.

Step-by-step explanation:

A jumping juvenile policy is unique in that the death benefit automatically increases at a predetermined age. This type of life insurance policy is designed to take into account the changing financial needs as a child grows into an adult. As for the insurance scenarios presented, life insurance typically pays out when the policyholder dies, providing a death benefit to the beneficiaries. Cash-value life insurance not only has a death benefit but also accumulates a cash value over time, which the policyholder can use during their lifetime. In the scenario about 50-year-old men with and without a family history of cancer, determining an actuarially fair premium involves calculating the expected cost of death claims for an insurance company.

For men with a family history of cancer:

(20% of 1,000 men) x (1 in 50 chance of death) x ($100,000 death benefit) = $40,000 in expected claims.

For men without a family history of cancer:

(80% of 1,000 men) x (1 in 200 chance of death) x ($100,000 death benefit) = $40,000 in expected claims.

The actuarially fair premium for each group would be the expected claims divided by the number of policyholders. If the company charges a single premium to the entire group regardless of cancer history, this could lead to adverse selection, as healthier individuals may choose not to purchase the insurance, perceiving it to be a bad deal, potentially resulting in financial loss to the insurance company.

Answer 2

A jumping juvenile policy is a type of life insurance that automatically increases the death benefit at a predetermined age, such as when a child reaches adulthood.

Step-by-step explanation:

A jumping juvenile policy is unique because it has a feature where the death benefit automatically increases at a predetermined age. This is typically designed to account for the increase in financial responsibility as the child grows older. For example, if the policy starts with a $50,000 death benefit, it might be structured to increase to $100,000 when the child reaches the age of 21.

Insurance products like the jumping juvenile policy are part of life insurance options that can also provide a cash value. This accumulated amount within a whole life insurance plan can be accessed by the policyholder for various uses like loan collateral or even to withdraw during their lifetime, providing a financial safety net beyond the death benefit.

Insurance payouts occur in different scenarios, such as when medical expenses are incurred, when the policyholder dies, when a car is damaged, stolen, or causes damage to others, and when a dwelling is damaged or burglarized. These payouts are key benefits of holding an insurance policy, as they offer financial support during hard times.