EBK PFIN
6th Edition
ISBN: 8220103648844
Author: Billingsley
Publisher: CENGAGE L
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Chapter 10, Problem 1FPE
Summary Introduction
To discuss: Whether clause of 90% co-insurance is better than 80% clause and state reasons to support person X’s answers.
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Maya Ward had a homeowner's insurance policy with $140,000 of coverage on the dwelling. Would a 90% co-insurance clause be better than an 80% clause in such a policy?
Yes or No.
Support your answer.
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Assume that you have calculated: (a) premiums for life insurance policies and (b) payments to annuitants based upon an assumption that everybody dies before attaining age 101. Now you discover that a significant number of your policy owners are likely to live beyond age 101 and some will live to age 121. How will that affect your business?
Julia pays $500 for an insurance policy with anexpected value of $120. Explain why this is a rational choice for Julia
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- 2. Your dad applied for a term life insurance (provides the insured person with a coverage for a specified period of time of one, five or more years), He got a flexible policy (allows the insured person to change certain components of the insurance plan) because some payment options include a policy payout (insurance proceeds) as soon period achieved or upon contingency (death or accident). Some companies offer insurance products that can be availed only upon death. Because of this better option, your dad decided to avail of insurance A's flagship insurance product. Your dad's contribution per year is P20,000 that earns 6% compounded monthly for 20 years. How much will be paid out to your dad after 20 years by insurance A? as the targetarrow_forward9. If Diana wants a life insurance policy that will provide both a fixed death benefit and guaranteed cash value, what type of policy should she consider buying? a. annual renewable term life insurance b. universal life insurance c. whole life insurance d. variable universal life insurancearrow_forward1. Alex owns a home with a replacement value of $320,000. The homeowners policy has an 80% coinsurance clause and a face value of $240,000. Damage caused by a fire costs $125,280 to repair. What compensation will the insurance company pay? 2. Using Table 19-5 and 19-6, find the annual premium for an automobile insurance policy for Sandra who has a good credit rating. She lives in Territory 1 and buys 50/100/50 coverage for her liability protection. Sandra's vehicle is Model Class 2 and is five years old. In addition to the liability coverage, she purchased comprehensive and collision insurance with a $250 deductible on comprehensive and a $500 deductible on collision. TABLE 19-5 Annual Automobile Liability Insurance Premiums Territory 1 Territory 2 Liability Limits BAD GOOD ОСС GOOD ОСС BAD 50/100/50 385 600 846 354 552 778 100/300/100 425 682 961 391 627 884 250/500/250 460 750 1036 423 690 953 500/1000/500 530 843 1208 488 776 1111 GOOD = good credit; OCC = occasional payments past…arrow_forward
- Emilio is purchasing homeowner's insurance. His house was recently appraised at $266,000. Emilio plans on insuring the contents at 50% of the home's value. Use Table 19-4 in your text to determine the annual homeowner's insurance premium if Emilio's home has structural classification A and area rating 3. Annual homeowner's insurance premium: $arrow_forwardii. If a life insurance company insures 50 females age 25 for $40,000, 10- year term policies, how much would they expect to pay out? Solvearrow_forward2. Using Table 19-5 and 19-6, find the annual premium for an automobile insurance policy for Sandra who has a good credit rating. She lives in Territory 1 and buys 50/100/50 coverage for her liability protection. Sandra's vehicle is Model Class 2 and is five years old. In addition to the liability coverage, she purchased comprehensive and collision insurance with a $250 deductible on comprehensive and a $500 deductible on collision. TABLE 19-5 Annual Automobile Liability Insurance Premiums Territory 1 Territory 2 Liability Limits* GOOD ОСС BAD GOOD ОСС BAD 50/100/50 385 600 846 354 552 778 100/300/100 425 682 961 391 627 884 250/500/250 460 750 1036 423 690 953 500/1000/500 530 843 1208 488 776 1111 GOOD = good credit; OCC = occasional payments past 30 days; BAD = judgments, collection, bankruptcy "Bodily injury maximum for one person/Total bodily injury coverage per accident/Property damage TABLE 19-6 Annual Auto Insurance Premium Rates for Comprehensive and Collision Territory 1…arrow_forward
- Problem: Your cousin and her partner have a combined gross income of $10,111 and monthly expenses totaling $3,205. They plan to buy a house with a mortgage whose monthly PITI will be $2,000. (a) What is your cousin and her partner's combined housing expense ratio? (b) What is their total obligations ratio? (c) For what kind of mortgage can they qualify, if any? (d) If they do not qualify for an FHA mortgage, by how much should they reduce their monthly expenses in order to be eligible? (Set up an equation and solve it.)arrow_forwardBarbara has homeowner’s insurance with $100001 face amount.She recently incurred fire damage of $50000 during the policy period. If the insurer values the home to be $150000, what would her insurance benefit before the deductible? Choices: $33334 $100000 $0 $50001arrow_forwardRosie, age 30, would like to purchase a life insurance policy that will accumulate a cash value which will be paid beneficiaries in addition to the death benefit, and that will allow her to access the cash value during her lifetime withdrawals. Which of the following policies is most likely to meet her needs? O a. 20-year term with a double indemnity rider O b. Ordinary whole life. O c. Universal life option A Od. Universal life option Barrow_forward
- Which of the following statements is true regarding a Section 1035 exchange of life insurance policies? Select one 0 А. О в. If Theo enters into a 1035 exchange of his whole life policy for a variable life policy there will be no tax on the exchange and the cost basis will carry over from the old policy to the new policy. Apollo, who has surrendered his universal life policy, can accomplish a 1035 exchange by using the cash surrender value to purchase another life insurance policy within 60 days of surrender. C. Lucas can make a 1035 exchange of a policy on his life for a policy on the life of his spouse. D. Athena can exchange her annuity for a life insurance policy under a Sec. 1035 exchange.arrow_forwardProblem: Your cousin and her partner have a combined gross income of $10,111 and monthly expenses totaling $3,205. They plan to buy a house with a mortgage whose monthly PITI will be $2,000. (a) If they do not qualify for an FHA mortgage, by how much should they reduce their monthly expenses in order to be eligible? (Set up an equation and solve it.)arrow_forward7. Nancy is considering investing in an individual variable insurance contract (IVIC) and she is researching the product features of various companies. In particular, she is interested in the kinds of fees and charges that a plan might levy on the funds in which she intends to invest. She has heard about frontend load funds, back-end load funds and no-load funds. She intends to invest $25,000 as a single sum in a non-registered IVIC and keep the investment in the plan for at least 10 years. Based on her intentions, what type of fees and charges should she consider? (A) The front-end load will charge her an annual fee on her deposit of 1% to 2%. (B) The back-end load will levy a charge on any withdrawals of 5% at any time she makes her withdrawal, (C) A no-load fund will allow her investment to grow without any charges levied against it. (D) Fees or chargeN of some kind will diminish the investment returns on any of these plan types.arrow_forward
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