560 Chapter 13 Insurance and Risk Management
- Suppose that the monthly mortality charge is $0.095 per thousand and that the death benefi t is $115,000. The interest
rate is 5% compounded monthly. Complete the missing values labeled with letters in the table below:
Month Premium (Less Load) Mortality Charge Fees Interest End BalanceApril $8,933.28
May $0.00 (a) $2.50 (b) (c)- Suppose that the monthly mortality charge is $0.1825 per thousand and the death benefi t is $200,000. The interest
rate is 5.36% compounded monthly. Complete the missing values in the table below:
Month Premium (Less Load) Mortality Charge Fees Interest End BalanceSeptember $7,205.65
October $0.00 (a) $2.50 (b) (c)- The surrender charges for a universal life policy are $4,000 in the fi rst year, declining by $250 per year until they reach
zero. The policy has an account value of $3,750.43 at the end of year 3. What are the surrender charges at that time?
How much would you receive if you surrendered the policy at that time? - The surrender charges for a universal life policy were $4,800 in the fi rst year, declining by $400 per year until they reach
zero. At the end of year 7 the policy had an account value of $4,141.55 and it was surrendered. How much did the
policyholder receive?
D. Grab Bag
- Which type of life insurance (term, whole life, or universal life) would you be most likely to choose if you are looking to
get the highest possible death benefi t at the lowest possible cost right now? - Which type of life insurance (term, whole life, or universal life) would you be most likely to choose if you plan to keep
the policy for a long time, but want to be able to vary your premium payments, paying more when you have extra cash
and less when you don’t?
E. Additional Exercise
- Suppose I have a $100,000 death benefi t universal life policy. The interest rate is 6% compounded monthly, and there
is a $2.50 monthly policy fee. I made no premium payments either this month or last. At the end of last month my
account value was $4,503.29. At the end of this month my account value is $4,511.38. What is the monthly mortality
cost per thousand?