Calculate the cash surrender value for Lee Chin, age 38, who purchas stopped paying premiums. (Use Table 20.2.) Cash surrender value
Calculate the cash surrender value for Lee Chin, age 38, who purchas stopped paying premiums. (Use Table 20.2.) Cash surrender value
Chapter12: Life Insurance Planning
Section: Chapter Questions
Problem 3DTM
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Transcribed Image Text:Calculate the cash surrender value for Lee Chin, age 38, who purchased a $290,000 straight life policy. At the end of year 5, Lee
stopped paying premiums. (Use Table 20.2.)
Cash surrender value
Transcribed Image Text:TABLE 20.2
Nonforfeiture options based on $1,000 face value
Years
insurance
policy in
force
5
10
15
20
Cash
value
29
96
148
265
STRAIGHT LIFE
Amount of
paid-up
insurance
86
259
371
550
Option 1: Cash value
$200,000/$1,000 = 200 × $148 = $29,600
Option 2: Reduced paid-up insurance
$200,000/$1,000 = 200 × $371 = $74,200
EXTENDED
TERM
Years Days
91
76
165
300
9
18
20
21
Cash
value
71
186
317
475
Option 3: Extended term insurance
Bob could continue this $200,000 policy for 20 years and 165 days.
20-PAYMENT LIFE
EXTENDED
TERM
Amount of
paid-up
insurance Years Days
220
19
190
521
28
781
32
1,000
195
176
Life
20-YEAR ENDOWMENT
Cash
value
92
319
610
1,000
Amount of
paid-up
insurance
229
520
790
1,000
EXTENDED
TERM
Years Days
23
140
30
160
35
300
Life
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