life insurance - premature death clause

1. PREMATURE DEATH
BY:GROUP 1
Komal Sengar
Priyanka Banerjee
Sukesh
P M Kalender Masthaan
Ayush Kumar
Yashita kashyap
GUIDED BY:
PROF. MONIKA MITTAL

2. DEFINITION
It can be defined as the death of a family head with
outstanding unfulfilled financial obligations, such as
dependents to support, children to educate, and a
mortgage to pay off.
It can cause serious financial problems for family
members because their share of the deceased family
head's future earning is lost forever.

3. COSTS OF PREMATURE DEATH
Certain costs are associated with premature death.
The family's share of deceased breadwinner's future
earnings is lost forever.
Additional expenses are incurred because of funeral
expenses, medical bills, child care expenses etc.
Because of insufficient income some families will
experience a substantial reduction in their standard
of living.
And at last the noneconomic costs like grief, loss of
parental role model and counseling and guidance for
children.

4. DECLINING PROBLEM OF PREMATURE DEATH
The economic problem that is caused due to
premature death has effectively reduced due to an
increase of life expectancy from early 70s to 77 due
to
scientific medical breakthroughs
Rise in income
Economic growth
Improvement in Public Health

5. Causes for Increase in Premature Death
1.Obesity: 1/3rd of U.S populations is obese. It leads to
diseases like hypertension, diabetes, heart diseases, cancer,
etc.
2.Lifestyle: A sedentary lifestyle with poor eating and exercising
habits
3.Lack of Health Insurance : Can’t receive the medical care
needed due to lack of monetary efforts
4.Minority groups with shorter life span: This included African
Americans and Asian populations which pulls down the average
5.High infant mortality rates

7. ECONOMIC JUSTIFICATION FOR LIFE
INSURANCE
Safety measure for family.
Helps to restore family share
Overcome Financial outstanding

8. FINANCIAL IMPACT OF PREMATURE DEATH ON
DIFFERENT TYPES OF FAMILIES
Single People
Single Parent families
Two income earners with children
Traditional families
Blended families
Sandwiched Families

9. Single People
Funeral Expenses
Uninsured medical bills
Child support obligations

10. Single Parent Families
Single parent family are families with children under age 18 headed by a parent who
is widowed or divorced or by a parent who has never married.
What is the need for Life Insurance ?
 Financial dependency of child on single parent is high.
 Incase of premature death of the single parent can cause great economic insecurity for th
surviving children.
 A large amount of life Insurance on family head is needed.

11. Two Income earners
 Two income family are families in which both spouses work to earn income.
 Two Income earners with Children
 Premature death of one earner can cause some economic insecurity for the
other surviving family members.
 To maintain the family’s standard of living both income earners need substantial
amounts of Life Insurance.
 Two Income earners without Children
 Premature death of one member does not cause economic insecurity
 for surviving spouse.
 Need Life Insurance is less.

12. Traditional Families
Families in which only one parent is in the labor force, the other
parent stays at home to take care of dependent children.
The working parent in the labor force needs substantial amounts
of life insurance.
If the working spouse dies with an insufficient amount of life
insurance –
Family may have to adjust its standard of living downwards
The non employed spouse also needs life insurance.

13. Blended Families
Families in which a divorced spouse with children remarries,
and the new spouse also has children. (additional children
maybe born after the marriage)
The need for life insurance on both family heads is great.
Both spouses are in the labor force at the time of
remarriage.
Death of one spouse results in reduction in the family’s
standard of living since the share of that income is lost.

14. Sandwiched families
It is one in which a son or a daughter with children provides
financial support or other services to one or both parents. Thus
the son or daughter is "sandwiched" between younger and older
generations.
A working spouse in this type of family needs a substantial
amount of life insurance as premature death of this person can
result in financial support to both the generations mentioned
above.

15. In the family types discussed above, minor children are
typically present who require financial support as
parents support them.
But buying large amounts of life insurance on children
is not recommended as major disadvantage can be
that the head maybe inadequately insured.