Which nonforfeiture option could Beth employ to meet these objectives? Explain your answers.

Question 1: Ann calculated the future value of the first twenty premiums she will pay under her nonparticipating whole life insurance policy. Then she subtracted the cash value after 20 years. Next, she divided this value by the future value annuity due factor for 20 years to arrive at an annual cost of insurance. Finally, she divided the annual cost by the number of thousands of dollars of life insurance purchased to arrive at the cost per thousand per year. Lynn calculated the

A) traditional net cost per thousand per year.

B) the Linton Yield.

C) the surrender cost per thousand per year.

D) the net payment cost per thousand per year.

Question 2: A client does not want her life insurance policy included in gross estate when she dies. She can remove the life insurance policy from her estate if she does which of the following more than 3 years before she dies?

A) borrow the cash value of the policy

B) make an absolute assignment of the policy to someone else

C) change the beneficiary to someone who does not have insurable interest

D) select a lump sum settlement option and name his estate the beneficiary

Briefly, outline the required process.

Question 3: Bruce’s uncle named Bruce as a beneficiary on his life policy. The uncle lied about his health history when he purchased this policy. He died 3 years after the policy was issued. Is there a life insurance policy provision that will allow Bruce to collect on the policy the life insurer even though Bruce’s uncle lied on the application? Explain your answer. Now, suppose Bruce wants to donate his pay out on the policy to a charity. Under which policy provision can Bruce transfer all ownership rights in the policy to the charity?

Question 4: Beth purchased a participating life insurance policy 10 years ago. Her life insurance needs have increased, but she has developed a medical condition that makes it impossible for her to purchase more life insurance at affordable premiums. Which dividend option makes sense for Beth to use given her medical condition? Explain your answers.

From Question 4 above, now, suppose that Beth purchased a life insurance policy back when she was 40 years old and had significant life insurance needs. Now she is 50. Her mortgage is almost paid-off and her children have left home and are financially independent. Beth no longer wants to pay premiums, but she would like to have some permanent life insurance in force. Which nonforfeiture option could Beth employ to meet these objectives? Explain your answers.


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