Question

In: Operations Management

Andrew, age 34, makes $60,000 annually as a manager and his wife earns $40,000 as a...

Andrew, age 34, makes $60,000 annually as a manager and his wife earns $40,000 as a secretary. They have a 2-year-old son. Andres would like to purchase a policy that will protect his son should he die prematurely and will also allow him to accumulate funds for his son’s future education. He would like to have the flexibility to alter his premiums and has no knowledge of investing. Which life insurance policy would you recommend?

A. Variable Universal life insurance.

B. Ten-year term insurance policy.

C. Universal life insurance.

D. Ordinary life insurance.

Solutions

Expert Solution

Answer: Universal life insurance: The universal life insurance is a permanent type of life insurance policy that provides an option of investment savings and also provides low and flexible premiums options for the customers. This type of insurance policies has cash value that grows as per the current interest rates that the insurer sets unlike the variable universal life insurance in which there are insurance options that work like mutual funds. Hence there is very little need for having knowledge of investment. Thus the option of Universal life Insurance is most suitable as per the situation for Andrew.


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