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
Explanation / Answer
Answer:1) The traditional net cost per thousand per year of David's policy over the 20-year period is $-2.64.
Answer:2) The net payment cost index per thousand per year of David's policy over the 20-year period is $15.77
Answer:3) a) Adjustable life insurance is a whole life policy with flexible premiums. Premiums can be changed at the policyowner’s discretion.
Adjustable Whole Life is marketed to meet an insured's changing needs and ability to pay premiums in an uncertain economic climate. It is the most flexible type of Whole Life insurance. The insured can adjust the premium, face amount or the length of coverage. If the insured increases the premium they pay the cash value will build faster and the face amount of coverage will increase. However, no physical exam is required unless the insured wants to increase the face amount above that which he originally purchased.
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