1) David purchased a $100,000 participating whole life policy. The annual premiu
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Question
1) David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent for 20 years, the premiums would grow to $79,156. If the dividends were accumulated at 5 percent for 20 years, they would grow to be $24,400. The amount to which $1 deposited annually will accumulate in 20 years at 5 percent is $34.719. Based on this information, what is the traditional net cost per thousand per year of David's policy over the 20-year period?
2) David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent for 20 years, the premiums would grow to $79,156. If the dividends were accumulated at 5 percent for 20 years, they would grow to be $24,400. The amount to which $1 deposited annually will accumulate in 20 years at 5 percent is $34.719. Based on this information, what is the net payment cost index per thousand per year of David's policy over the 20-year period?
3)Which of the following statements about adjustable life insurance is true?
a) Adjustable life insurance is a whole life policy with flexible premiums. Premiums can be changed at the policyowner’s discretion.
b)Adjustable life insurance is a whole life policy with fixed premiums. Although premiums can be changed, such a change requires a formal adjustment agreed to by both insurer and policyowner before it can be made. The premium remains fixed and inflexible between formal adjustments.
c)Adjustable life insurance is a term life insurance with fixed premiums which can be changed upon mutual agreement between the policyowner and the insurer.-
d)Adjustable life insurance is a term life insurance with flexible premiums which can be changed at the policyowner’s discretion
a) Adjustable life insurance is a whole life policy with flexible premiums. Premiums can be changed at the policyowner’s discretion.
b)Adjustable life insurance is a whole life policy with fixed premiums. Although premiums can be changed, such a change requires a formal adjustment agreed to by both insurer and policyowner before it can be made. The premium remains fixed and inflexible between formal adjustments.
c)Adjustable life insurance is a term life insurance with fixed premiums which can be changed upon mutual agreement between the policyowner and the insurer.-
d)Adjustable life insurance is a term life insurance with flexible premiums which can be changed at the policyowner’s discretion
Explanation / Answer
1)
Under the traditional net cost method, the net cost of life insurance for a given period (e.g., 20 years) is determined by the total premiums for the period less the sum of the total dividends received during the period and the cash value at the end of the period.
2) C) $15.77
3) d) Adjustable life insurance is a term life insurance with flexible premiums which can be changed at the policyowner’s discretion
Total premium 45,600 Total dividends 15,624 Cash value 35,260 Net cost (5,284) Per year (264.20) per thousand (2.64)Related Questions
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