New Jersey Life Producer Practice Exam

The term "living too long" in insurance typically refers to what risk?

1. Unintentional death

2. Loss of income

3. Outliving financial resources

4. Health insurance claims

The correct answer is: Outliving financial resources

The term "living too long" in insurance refers specifically to the risk of outliving one's financial resources. This concept is particularly relevant in the context of retirement planning and life insurance. As individuals age, the likelihood of depleting their savings or income sources increases, which can lead to financial instability during their later years. Insurance products, such as annuities or certain types of life insurance, are designed to help mitigate this risk by providing a steady income stream or financial support in the event the individual outlives their initial assets. This concern directly ties into the broader topic of longevity risk, which acknowledges that with advances in healthcare and living standards, people are living longer lives, potentially increasing the duration of time they need to fund their retirement and related expenses. Therefore, managing this risk is vital for ensuring financial security in later life.