Today’s Lecture - #16Sample Whole Life Insurance Policy

Insured John Doe

Age 35

Face Amout $100,000

Policy Date August 1, 1995

Type Whole Life Paid Up at 90

Participating

Premium $1533/year for 55 years

Policy Terms(Page 737)

Owner John Doe

Beneficiary Jane Doe

Table of Guaranteed Values(page 738)

End of $100,000

Policy August Cash Paid-Up Extended Term

Year 1 Value Insurance Insurance To

10 2005 11,411 37,400 Oct 13, 2023

15 2010 19,629 51,900 Jun 19, 2031

Life Insurance – Example 1

John Doe terminates the policy on August 1, 2005.

He selects the extended term option.

John dies on December 12, 2023.

How much does Jane receive?

A) 0

B) $11,411

C) $37,400

D) $100,000

E) None of the above

Life Insurance – Example 2What if John Doe had selected the Paid-Up

insurance option instead? How much does Jane receive?

A 0

B $11,411

C $37,400

D $100,000

E None of the above

Statement of Policy Costs and Benefit Information (Page 739)

Dividend Choices

Reduce Premium

Paid-Up Additions

Life Insurance Cost Indices 10 20

Surrender Cost Index 3.58 .69

Net Payment Cost Index 12.22 9.18

Equivalent Dividend Index 3.11 6.15

Section 1 - The Contract(Page 740)

Life Insurance Benefit

Entire Contract; Changes

Incontestability

Suicide

Misstatement of Age or Sex

Life Insurance – Example 3John Doe commits suicide on August 2, 1995, the day after the policy was issued? How much does Jane receive?

A 0

B $1533

C $50,000

D $100,000

E None of the above

Section 2 - Ownership(Page 740)

The Owner

Transfer of Ownership

Collateral Assignment

Section 3 - Premiums and Reinstatement (Page 741)

Premium Payment

Payment

Frequency (Assume annual)

Grace Period - 31 days

Premium Refund at Death (Ignore for assignment)

Reinstatement

Section 4 - Dividends(Page 741)

Annual dividends

Use of dividends

Paid-up additions

Dividend accumulations

Premium payments

Dividend at death (Ignore for assigment)

Section 5 - Cash Values, Extended Term and Paid-Up Insurance

Cash Value

Extended Term Insurance

Paid-Up Insurance

Cash Surrender

Table of Guaranteed Values

Life Insurance – Example 4John keeps the policy in force for 15 years and then surrenders it for the cash value. During that time he has paid a total of $22,995 in premiums (15 x $1533) and received a total of $7,995 in dividends. How much of the policy proceeds are taxable income?

A) 0

B) $4,629

C) $36,900

D) $85,000

E) None of the above

Section 6 - Loans(Page 743)

Loans

Policy Loan

Premium Loan

Loan Value

Policy Debt

Loan Interest

Specified Rate (8%)

Variable Rate