A Quick Response will be appreciated 7. Understanding universal life insuranceUniversal life insurance combines elements from term and whole life insurance.Term policies provide a:death benefit and a savings component.death benefit only.savings vehicle only.Whole life policies provide a:savings vehicle only.O death benefit and a savings component with variable rate features.death benefit and a savings component with fixed rate features.Universal policies provide a:O savings vehicle only.O death benefit and a savings component with variable rate features.O death benefit only.To understand how universal premiums are allocated, consider the following example.Dina is a 37-year-old lawyer who just bought a universal life insurance policy to protect her two children (ages 8 and 9) in the event of her death.Each year, Dina chooses how much she would like to contribute to the policy, as shown in the first row of the following table. An administrative feealong with the cost of the death benefit (theportion of the policy) isthe payment. The resulting amountgoes into the cash-value (or) portion of the policy. This money earms interest at a- rate of return. Based onthe given information, calculate the amount thatadded to the cash-value portion of the policy in each of the first three years.Year 1Year 2Year 3Premium (Annual Contribution)$2,900$2,100$1,800Administrative Fee909090Cost of Death Benefit808080Amount Added to Cash ValueThe cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case withlifeinsurance policies. Suppose that in the 14th year of her policy, Dina's cost of death benefit has risen substantially. At the same time, she is paying tohave major repairs done on her home and currently cannot afford to pay her life insurance premium.True or False: Under the terms of a standard universal policy, if Dina stops paying her premiums, then Dina's policy will be put on hold until sheresumes payment (plus pays back all missed premium payments).O FalseO True

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Term policies provide a O death benefit and a savings component. O death benefit only. O savings vehicle only. Whole ife policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only.

Term policies provide a O death benefit and a savings component. O death benefit only. O savings vehicle only. Whole ife policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit and a savings component with fixed rate features. Universal policies provide a: O savings vehicle only. O death benefit and a savings component with variable rate features. O death benefit only.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter11: Planning For Health Care Expenses

Section: Chapter Questions

Problem 4LTAI

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