Copyright © 2008, The McGraw-Hill Companies, Inc.
Topic Key Ideas, Formulas, and Techniques Example(s)
Employee Contributions,
p. 544- To determine the employee’s portion of group
health insurance premiums, follow the formula
that the company uses to determine this.
Suppose that the cost of
a single health insurance
contract is $300 and a family
contract is $750 per month.
How much would you pay
per month if your employer’s
contribution toward a family
contract is the cost of a
single contract, plus half of
the difference between single
and family costs?
(Example 13.2.10)Te rm and Whole Life
Insurance Rates, p. 551- Obtain the rate per thousand for the insured’s
age/sex/underwriting classifi cation from a table. - Multiply by the number of thousands of death
benefi t. - Multiply by any rate adjustments, such as
discounts or substandard ratings. - Add the policy fee, if any.
- Multiply by the factor for the payment frequency
(annual, semiannual, quarterly, monthly).
Amy is a 38-year-old smoker
who has applied for a
$180,000 annually renewable
term policy with Trustworthy
Mutual. Because of her high
cholesterol, the company’s
underwriter has rated her
at Table B. What would the
quarterly premium be for this
policy?
(Example 13.3.3)Nonforfeiture Options, p. 553 • If a whole life policy is surrendered, the
policyholder receives the cash value.- The policyholder may instead choose to take
a reduced paid up policy or extended term
insurance. - The values for reduced paid up of extended term
are obtained from a table.
Suppose that the
nonforfeiture table shown
above is for a $150,000
death benefi t policy. If the
policyowner decides to
surrender the policy at the
end of the 8th contract year,
what would he receive if he
chose to surrender the policy
for (a) cash, (b) RPU, or
(c) extended term?
(Example 13.3.4)Universal Life Insurance,
p. 554- To fi nd the account value for a universal life
policy, fi rst calculate the net amount at risk by
subtracting the current account value from the
death benefi t. - Divide by 1000 and multiply by the mortality
charge per $1,000. - Calculate interest on the current account
balance. - Add the interest to and subtract the mortality and
administrative fees from the account value.
Calculate the account value
at the end of the third month
for the universal life insurance
policy shown above.
(Example 13.3.5)Surrender Charges, p. 555 • If a universal life policy is surrendered, the
policyholder receives the account value less any
surrender charges.- The surrender charges decrease over time
according to a schedule determined when the
policy is issued.
A universal life insurance
policy has a the surrender
charge of $5,000 in the fi rst
year, declining by $500 per
year until it reaches $0. If the
policy’s balance has grown to
$4843.25 after 4 years, how
much would the policyholder
receive if he surrendered at
that point?
(Example 13.3.6)Chapter 13 Summary 563