Looking for the answer to the question below related to  Management ?

Frank is shopping for a disability income policy. Which of the following would have the HIGHEST premium?

 Options:

a) 14 day waiting period / 5 year benefit period b) 14 day waiting period / 10 year benefit period c) 28 day waiting period / 5 year benefit period d) 28 day waiting period / 10 year benefit period

The Correct Answer Is:

• b) 14 day waiting period/10 year benefit period

Answer Explanation:

Family Maintenance Policy (Correct Answer – Option A):

A Family Maintenance Policy is a type of insurance policy that provides an income stream over a set period of time when the insured individual dies. This policy is designed to financially support the surviving family members or beneficiaries after the death of the insured. Here’s why this answer is correct:

Income Stream After Death: A Family Maintenance Policy is specifically structured to provide financial support to the family of the insured individual after their demise. This income stream can help cover living expenses, debts, and other financial obligations that the family may have.

Set Period of Time: The policy specifies a predetermined period during which the income stream will be paid out. This ensures that the beneficiaries have financial support for a defined duration, which can be crucial for their financial stability.

Survivor Benefit: The policy comes into effect upon the death of the insured, making it a survivor or beneficiary-centered insurance product. The primary purpose is to support the surviving family members during a difficult time.

Maintenance of Lifestyle: The income provided by a Family Maintenance Policy helps maintain the lifestyle and standard of living of the insured’s family, allowing them to meet their ongoing financial needs and obligations.

Distinguishing from Other Policies: It’s important to distinguish between different types of life insurance policies, such as term life insurance, whole life insurance, and universal life insurance. While these policies may provide death benefits, they don’t necessarily guarantee an income stream over a set period like a Family Maintenance Policy does.

Now, let’s explain why the other options are not correct:

b) Family Income Policy (Option B):

A Family Income Policy does provide an income stream to beneficiaries, but it differs from a Family Maintenance Policy in a significant way:

Immediate Income: A Family Income Policy typically provides a regular income to beneficiaries immediately upon the death of the insured, rather than starting after a set period of time. The income stream is often in the form of monthly payments and may continue for a predetermined number of years.

Temporary Income: Unlike a Family Maintenance Policy, which offers income support for a set period, a Family Income Policy typically offers temporary support until a specified term or until the beneficiaries reach a certain age. This policy is designed to replace the insured’s income in the short term.

c) Survivor Policy (Option C):

The term “Survivor Policy” is quite generic and can refer to various insurance products. It doesn’t specifically indicate a policy that provides an income stream over a set period of time after the insured’s death. It lacks the specificity required to match the description provided in the question.

d) Family Survivor Policy (Option D):

Similar to option C, the term “Family Survivor Policy” is not a widely recognized insurance product, and it doesn’t clearly specify a policy that provides an income stream over a set period of time after the insured’s death. The answer lacks the specificity required to match the description provided in the question.

Conclusion:

In summary, the correct answer, a Family Maintenance Policy, aligns with the description of an insurance policy that supplies an income stream over a set period of time starting when the insured dies. This type of policy is designed to provide financial support to the insured’s family or beneficiaries during a specified duration following the insured’s death.

The other options either offer immediate income (Family Income Policy) or lack specificity (Survivor Policy and Family Survivor Policy) in terms of the income stream over a set period.

• The combination of Whole Life and _____________ Term insurance is referred to as a Family Income Policy.