The demand for life insurance will increase
if Human capital is bond-like and decrease if human capital is equity-like.
if Human Capital increases relative to the Financial Capital
if Human Capital volatility decreases
If investor’s aversion to risk increases
If the demand for a bequest increases
Please let me know if the statements above are correct or anything else you think are important that related to the demand of life insurance. Thank you!
Looks good to me, and I can’t think of any circumstances to add.
You can add that life insurance demand increases when demand for a bequest increases. If I don’t want to leave anything in this world I wouldn’t bother getting a life insurance.
Krokodilizm is not wrong, however remember that the main purpose of a life insurance policy is to replace lost human capital. That being said Kroko is right, it can be used as an estate/probate planning tool, as life insurance proceeds are tax exempt in most countries, and a trust can be setup as a beneficiary (which can be a thrift or discretionary trust for the kiddies, haha).
are there any practice problems for this reading? i read the electronic version and i didnt see any at the end.
11 questions for the Kaplan book