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Term policies provide a O death benefit and a savings component. O death benefit only. O savings vehicle only. Whole ife policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only.

Term policies provide a O death benefit and a savings component. O death benefit only. O savings vehicle only. Whole ife policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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7. Understanding universal life insurance Universal life insurance combines elements from term and whole life insurance. Term policies provide a: death benefit and a savings component. death benefit only. savings vehicle only. Whole life policies provide a: savings vehicle only. O death benefit and a savings component with variable rate features. death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only. To understand how universal premiums are allocated, consider the following example. Dina is a 37-year-old lawyer who just bought a universal life insurance policy to protect her two children (ages 8 and 9) in the event of her death. Each year, Dina chooses how much she would like to contribute to the policy, as shown in the first row of the following table. An administrative fee along with the cost of the death benefit (the portion of the policy) is the payment. The resulting amount goes into the cash-value (or ) portion of the policy. This money earms interest at a - rate of return. Based on the given information, calculate the amount that added to the cash-value portion of the policy in each of the first three years. Year 1 Year 2 Year 3 Premium (Annual Contribution) $2,900 $2,100 $1,800 Administrative Fee 90 90 90 Cost of Death Benefit 80 80 80 Amount Added to Cash Value The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with life insurance policies. Suppose that in the 14th year of her policy, Dina's cost of death benefit has risen substantially. At the same time, she is paying to have major repairs done on her home and currently cannot afford to pay her life insurance premium. True or False: Under the terms of a standard universal policy, if Dina stops paying her premiums, then Dina's policy will be put on hold until she resumes payment (plus pays back all missed premium payments). O False O True
Transcribed Image Text:7. Understanding universal life insurance Universal life insurance combines elements from term and whole life insurance. Term policies provide a: death benefit and a savings component. death benefit only. savings vehicle only. Whole life policies provide a: savings vehicle only. O death benefit and a savings component with variable rate features. death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only. To understand how universal premiums are allocated, consider the following example. Dina is a 37-year-old lawyer who just bought a universal life insurance policy to protect her two children (ages 8 and 9) in the event of her death. Each year, Dina chooses how much she would like to contribute to the policy, as shown in the first row of the following table. An administrative fee along with the cost of the death benefit (the portion of the policy) is the payment. The resulting amount goes into the cash-value (or ) portion of the policy. This money earms interest at a - rate of return. Based on the given information, calculate the amount that added to the cash-value portion of the policy in each of the first three years. Year 1 Year 2 Year 3 Premium (Annual Contribution) $2,900 $2,100 $1,800 Administrative Fee 90 90 90 Cost of Death Benefit 80 80 80 Amount Added to Cash Value The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with life insurance policies. Suppose that in the 14th year of her policy, Dina's cost of death benefit has risen substantially. At the same time, she is paying to have major repairs done on her home and currently cannot afford to pay her life insurance premium. True or False: Under the terms of a standard universal policy, if Dina stops paying her premiums, then Dina's policy will be put on hold until she resumes payment (plus pays back all missed premium payments). O False O True
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