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Business Math17th EditionMary Hansen 3,734 solutions Business Math17th EditionMary Hansen 3,734 solutions Under a fixed period settlement option, the death benefit is paid in equal installments over a period of time selected by the beneficiary or policyowner. Payments consist partly of death benefit proceeds and partly of interest earned on the undistributed funds remaining with the insurer. The amount of each payment is calculated so that the principal plus the interest earned reaches zero at the end of the selected period. Payments can be made monthly, quarterly, semiannually, or annually. For example, a five-year payout period for a $100,000 death benefit would produce monthly payments of $1,667 ($100,000 ÷ 60 months = $1,667) plus interest. The payee's mortality does not affect the amount or duration of payments under this option. If the payee dies before the selected period ends, payments continue to the contingent beneficiary until the end of the period. The contingent payee can choose to receive a lump sum equal to the present value of the final payments. (Present value is the value today of a future sum of money—either a lump sum or a stream of payments—discounted at an interest rate.) The straight life income option is the least complicated of the life income settlement options. Under this option, the policy's proceeds are converted into an income stream that lasts the beneficiary's entire life. Payments cease at the beneficiary's death. For example, assume that Lydia is the beneficiary of her husband's $150,000 life insurance policy. At his death, if she were to elect a straight life income settlement option, she would receive payments of about $800 a month, or $9,600 a year. Those payments will continue as long as Lydia lives, whether she lives past her life expectancy or dies before it. No payment is made to any contingent payees at the primary payee's death. Of all the various types of life income options, the straight life option generally provides the largest payment amount to the payee. That is because payments cease when the payee dies, no matter how soon that may be after payments have begun. The absence of payment guarantees translates into a higher payment than would be the case if there were a payment guarantee. Beneficiaries who are concerned by this usually elect a life income option that includes some form of payout guarantee. These options are discussed next. Another popular settlement option is a joint and survivor (J&S) life income payout. Under the J&S option, monthly payments are made until the second payee (survivor) dies. At that point, income payments stop, unless a period certain also applies (though this is uncommon under the J&S option). Joint and survivor options can be set up to provide the survivor with a specified percentage of the payment both were receiving. The smaller the survivor's percentage, the larger the payment will be initially paid to the joint payees. The most common joint and survivor options are joint and 100 percent survivor, in which the payment continues unreduced upon the first payee's death; joint and 100 percent survivor: $1,000 per month to joint payees and $1,000 per month to surviving payee In which policy death benefit is paid only if the insured?Term life insurance guarantees payment of a stated death benefit to the insured's beneficiaries if the insured person dies during a specified term. Term life premiums are based on a person's age, health, and life expectancy.
At what point does whole life insurance pay the death benefit quizlet?Whole Life insurance assumes that the insured will pay the premiums until death or until age 120, whichever comes first. If the insured is still alive at age 120, the policy will reach maturity and pay the insured the face amount or cash value, whichever is more.
Which of the following is the insurance that pays out a sum of money?A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.
What whole life insurance policy premium is paid in one lump sum at the inception of the policy?What is single premium life insurance (SPL)? Single premium life insurance is a form of life insurance that's paid with one upfront lump-sum premium. Once you've purchased a single premium policy, you would receive a permanent death benefit that extends until you die.
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