Question

Life insurance premiums and comparison of types. Using the premium schedules provided in Exhibits 8.2, 8.3, and 8.5, how much in annual premiums would a 25-year-old male have to pay for $100,000 of annual renewable term, level premium term, and whole life insurance? (Assume a 10-year term or period of coverage.) How much would a 25-year-old woman have to pay for the same coverage? Consider a 40-year-old male (or female): Using annual premiums, compare the cost of 10 years of coverage under annual renewable and level premium term options and whole life insurance coverage. Relate the advantages and disadvantages of each policy type to their price differences.

Answer 1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

The annual premium for 25-year-old male for $100,000 of annual renewable term of five year term is $97 for the whole five years term as per the Exhibit 8.2.

The annual premium for 25-year-old male for $100,000 of whole life insurance of five year term is $603 to be paid for each year, so for five years it will be $3,015 as per the Exhibit 8.5.

The annual premium for 25-year-old female for $100,000 of annual renewable term of five year term is $63 for the whole five years term as per the Exhibit 8.2.

The annual premium for 25-year-old female for $100,000 of whole life insurance of five year term is $525 to be paid for each year, so for five years it will be $2,625 as per the Exhibit 8.5.

The following table shows the annual premium and the total premium of 10 years coverage of a 40 year male and female for annual renewable, level premium and whole life insurance coverage as follows:

Insurance Type		Premium for 10 years
Term Life Insurance	Male	$237
	Female	$194
Premium Term Life	Male	$122
	Female	$115

Insurance Type		Annual Premium	10 Year Premium
Whole Life Insurance	Male	$1,078	$10,780
	Female	$931	$9,310

Based upon the above tables it can be concluded that, the annual renewable term life insurance provides only life cover and no other benefits. The premium amount changes based upon the years of coverage. As the years increase the premium amount also increases.

Annual renewable term life insurance however has the disadvantage of having higher premium compared to premium term life insurance.

The premium term life insurance has the advantage of having a lower premium over the annual renewable term life insurance as it has renewal factor.

The policy is however not flexible as the insurance cover has to be fixed over the period of coverage. This policy provides only temporary coverage and renewal is a problem as there are some factors that makes difficult to qualify for insurance.

The whole life insurance policy has the highest insurance premium as it provides the insurance coverage to the entire life of the insured and also allows savings feature. The insurance company pays individuals the amount earned by them based on the premium invested.

The policy is disadvantageous for people looking for insurance coverage at lower cost.