FIN 3660

Assignment Chapters 5-6 Name:

1. Briefly discuss the three most important characteristics of term life insurance

a.

b.

c.

2. Please define each of the followingand provide one scenario in which each plan or type of coverage would be appropriate.

(a) Estate plan:

(b) A key person insurance plan:

(c) Credit life insurance:

(d) A business continuation insurance plan:

(e) A buy-sell agreement:

3. Please describe the key features of each of the following types of policies:

(a) An endowment insurance policy:

(b) Variable life policy:

(c) Universal life policy:

4. Describe the differences between a last survivor life insurance policy and a joint whole life insurance policy.

5. Rebecca Dee is the policy owner-insured of a life insurance policy that names her 27-year-old son, Eli, as the beneficiary. If Ms. Dee dies while the policy is in force and while Eli is still alive, then the death benefit of the policy

a. Will be payable to whom? ¬¬¬¬¬¬_______

b. Will or will not (mark the correct answer) be taxable income to the recipient.

On the remaining questions, please indicate the CORRECT statement and explain why the other three statements are not correct:

6. Emmanuel Lawson purchased a new home and obtained a 30-year mortgage from the
MTSU Mortgage Company. The terms of the mortgage loan contract required Mr. Lawson to purchase mortgage life insurance and to name MTSU as the beneficiary of the mortgage life insurance policy. Mr. Lawson purchased mortgage life insurance from the Southside Insurance Company. Which of the following statements are correct?

(1) MTSU Mortgage Company is a party to the mortgage life insurance contract that Mr. Lawson purchased.

(2) Southside Insurance is a party to the mortgage loan contract that Mr. Richards obtained.

(3) The amount of the renewal premium Mr. Lawson will pay for his mortgage life insurance policy is likely to decrease throughout the 30-year term of his mortgage loan.

(4) The amount of the policy benefit payable at any given time under Mr. Lawson's mortgage life insurance policy generally equals the amount Mr. Lawson owes on themortgage loan.

7. The following statements are about family income coverage and credit life insurance. Which statement is correct?

(1) Family income coverage is a plan of increasing term life insurance.

(2) Family income coverage provides a stated monthly income benefit amount to the
beneficiary-typically the insured's surviving spouse-if the insured dies during the term of coverage.

(3) The amount of benefit payable under a credit life insurance policy usually remains level over the duration of the loan.

(4) The policy benefit of a credit life insurance policy may be paid to a beneficiary other than the lender, or creditor, if the insured borrower dies during the policy's term.

8. Lisa Churchill purchased a $100,000 15-year renewable term insurance policy on her life. At the end of the 15-year term, the renewal provision in Ms. Churchill's policy most likely gives her the right, within specified limits, to renew her insurance coverage

(1) Without having to submit evidence of her insurability

(2) For a one-year term, but not for another 15-year term

(3) After first undergoing a required medical examination

(4) At the same premium rate she was charged for the original 15-year term policy

9. Alexis Richardson, age 35, purchased a $250,000 30-year return of premium (ROP) term insurance policy from the Parsons Insurance Company. Ms. Richardson paid annual premiums of $700. Ms. Richardson paid all required premiums and was alive at the end of the 30-year term when the policy expired. This information indicates that

(1) Ms. Richardson' policy expired without Parsons Insurance Company making any payment to anyone

(2) Parsons Insurance Company paid $21,000 to Ms. Richardson

(3) Parsons Insurance Company paid $250,000 to the beneficiary of Ms. Richardson's policy

(4) Parsons Insurance Company paid $250,000 to Ms. Richardson's attorney

10. The difference between an endowment insurance policy and a cash value life insurance policy is that only the endowment insurance policy

(1) Pays a fixed benefit whether the insured survives to the policy's maturity date or dies before that maturity date

(2) Has premiums that are level throughout the term of the policy

(3) Steadily builds a cash value

(4) Receives favorable federal income tax treatment in the United States

Attachment:- chapter_6_cash_value_and_endowment.zip