Human Capital

CFA Level III Portfolio Management
#1

The demand for life insurance will increase

  1. if Human capital is bond-like and decrease if human capital is equity-like.

  2. if Human Capital increases relative to the Financial Capital

  3. if Human Capital volatility decreases

  4. If investor’s aversion to risk increases

  5. 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!

#2

Seems all are okay

#3

Looks good to me, and I can’t think of any circumstances to add.

#4

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.

#5

Thanks all!!

krokodilizm, added now :slight_smile:

#6

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).

#7

are there any practice problems for this reading? i read the electronic version and i didnt see any at the end.

#8

11 questions for the Kaplan book