Question

In: Finance

A participating ordinary life policy in the amount of $10,000 is sold to an individual, age...

A participating ordinary life policy in the amount of $10,000 is sold to an individual, age 35. The following cost data are given:

Annual premium $230

Total dividends for 20 years $1,613

Cash value at end of 20 years $3620

Accumulated value of the annual

premiums at 5 percent for 20 years $7,985

Accumulated value of dividends at

5% for 20 years $2,352

Amount to which $1 deposited annually

at the beginning of each year will

accumulate in 20 years at 5% $34.719

A Based on this information, compute the annual net cost per $1,000 of life insurance at the end of 20 years using the traditional nest cost method.

B compute the annual surrender cost index per $1,000 of life insurance at the end of 20 years

C compute the annual net payment cost index per $1,000 of life insurance at the end of 20 years.

Expert Solution

jeff jeffy answered 2 years ago

Richard, age 35, owns an ordinary life insurance policy in the amount of $250,000. The policy...

Richard, age 35, owns an ordinary life insurance policy in the amount of $250,000. The policy is a participating policy that pays dividends. Richard has a number of financial goals and objectives. For each of the following situations, identify a dividend option that could be used to meet Richard's goals. Treat each situation separately. a. Richard finds the premium payments are financially burdensome. He wants to reduce his annual premium outlay. b. Richard has leukemia and is uninsurable. He needs...

Richard age 35 owns an ordinary life insurance policy in the amount of $250,000.

Richard age 35 owns an ordinary life insurance policy in the amount of $250,000. The policy is a participating policy that pays dividends. Richard has a number of financial goals and objectives. For each of the following situations, identify a dividend option that could be used to meet Richard's goal. Treat each situation separately.*Richard finds the premium payments are financially burdensome. He wants to reduce his annual premium outlay.*Richard has leukemia and is uninsurable. He needs additional life insurance protection.*Richard...

Generally, dividends paid on participating life insurance policies decrease as the age of the policy increases...

Generally, dividends paid on participating life insurance policies decrease as the age of the policy increases are the same, regardless of the age of the policy increase as the age of the policy increases increase as the age of the policy decreases

Opal, age 75, has a $60,000 ordinary life insurance policy that has a cash value of...

Opal, age 75, has a $60,000 ordinary life insurance policy that has a cash value of $35,000. Opal is concerned about the cost of long-term care in a nursing home. A new agent of a national life insurer persuaded her to transfer the $35,000 into a deferred annuity. The agent told Opal that the annuity pays lifetime income benefits and also allows her to withdraw the $35,000 without penalty if she should enter a nursing home. After the policy was...

Briefly explain the basic characteristics of ordinary life policies. Why does an ordinary life insurance policy...

Briefly explain the basic characteristics of ordinary life policies. Why does an ordinary life insurance policy develop a legal reserve? Explain the situations that justify the purchase of ordinary life insurance. What is the major limitation of ordinary life insurance?

An insurance policy has an ordinary deductible of 100 and a maximum covered loss of 10,000....

An insurance policy has an ordinary deductible of 100 and a maximum covered loss of 10,000. You observe the following six payments: 100 200 500 600 1000 5000 In addition, there are three payments at the limit. You ﬁt a single parameter Pareto distribution with θ = 50 to the ground up distribution using maximum likelihood. Determine the estimated parameterα.

Michael Glock was the policyowner-insured of a $50,000 participating whole life insurance policy with a $50,000...

Michael Glock was the policyowner-insured of a $50,000 participating whole life insurance policy with a $50,000 accidental death benefit (ADB) rider. Mr. Glock’s $750 annual premium was due on March 13, 2015. On March 24, Mr. Glock was killed in an automobile accident. At the time of his death he had not yet paid his overdue premium. Also at the time of his death, his policy had $3,400 in accumulated policy dividends, including interest, left on deposit with the insurer,...

Which of the following is not an underwriting factor for an individual life insurance policy? Medical...

Which of the following is not an underwriting factor for an individual life insurance policy? Medical history of applicant Age and sex of the applicant Nationality of applicant Occupation and hobbies of applicant

What is the tax significance of the face amount of a life insurance policy? A. The...

What is the tax significance of the face amount of a life insurance policy? A. The face amount of life insurance is excluded from the gross income of a beneficiary if the amount is paid upon the death of the insured and the beneficiary is any corporation. B. The face amount of life insurance is included in the gross income of a beneficiary if the amount is paid prior to death of the insured. If the amount paid exceeds the...

Pat contracts with an Ajax Insurance Company agent for a $50,000 ordinary life insurance policy.

Fact Pattern #1:Pat contracts with an Ajax Insurance Company agent for a $50,000 ordinary life insurance policy. The application form is filled in to show Pat's age as 32. In addition, the application form asks whether Pat has ever had any heart ailments or problems. Pat answers no, forgetting that as a young child he was diagnosed as having a slight heart murmur. A policy is issued. Three years later, Pat becomes seriously ill and dies. A review of the...