Chapter 20, Problem 1ECP

To determine

The annual premium by using table 20.1 and the given data.

Answer to Problem 1ECP

The annual premium is $\underset{\_}{\$1,184}$.

Explanation of Solution

Given:

Amount of coverage (face value of policy) is $\$100,000$, age and sex of insured person is $39\text{ and F}$ respectively, and type of insurance policy is $\text{strainght life}$.

Calculation:

The straight life insurance provides permanent protection. The insured person pays the same premium each year or until death.

Its premium is higher when compared to that of the term insurance because it provides both protection and a built-in cash savings feature.

Since the insured person is female, subtract 3 years from the age.

That is, $39-3=36$.

Obtain the life insurance rate for a 36-year-old female from the life insurance rates table 20.1.

The life insurance rate value $\$11.84$ is intersected at the age of 36 and the straight-life column in the table.

The formula for calculating the annual premium is as follows:

$\text{Annual premium}=\frac{\text{ Amount of coverage}}{\$1,000}\times \text{ Insurance rate}$

Substitute $\$100,000$ for amount of coverage and $\$11.84$ for insurance rate.

$\begin{array}{c}\text{Annual premium}=\frac{\text{ 100,000}}{\$1,000}\times \text{ 11}\text{.84}\\ =1,184\end{array}$

Hence, the annual premium is $\underset{\_}{\$1,184}$.