Homework
Chapter 11 - Life Insurance
Case Application a-e
A:
o
5 year renewable and convertible because of the small premium and conversion
potential
B:
o
Ordinary because it is more affordable and she can surrender it for cash when he
reaches college age.
C:
o
Universal life insurance, permits her to take cash out and she can pay a reduced
premium
D:
o
Cash value insurance is more expensive, and may not meet all her needs
E:
o
Probably can be converted to a life/universal policy
Review Question 1
A:
o
The death of a family head with outstanding unfulfilled financial obligations, or the
death of a person that creates negative business consequences.
B:
o
Loss of income, leftover debts or expenses, can't continue to maintain standard of living,
plus the usual grief from inconsolable loss.
C:
o
If people depend on your income to survive, you need life insurance to replace that loss
of income if the worst were to happen.
Application Questions 2, 7
2:
o
A:
1: as it rises, the value of life insurance will fall, meaning the present value will
drop.
2: Since present value is going up, the amount to own will also increase
3: Opposite of the one above, if income is lower then amount of insurance
needed will decrease
o
B: Doesn't account for the non-financial cost of a life, Doesn't take personal
circumstances into consideration, doesn't take short term needs into account, doesn't
consider inflation
