Exam 13: Buying Life Insurance

Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent interest, is $13.207. If the premiums were invested at 5 percent interest for 10 years, the premiums would grow to $16,878.55. Assuming 5 percent interest, what is the net payment cost of this policy, per thousand per year, over the first 10 years the policy is in force?

The average annual rate of return on a cash-value policy if it is held a specified number of years is called the policy's

Which of the following statements describes how the net payment cost index differs from the surrender cost index?

Charles, age 65, owns a paid-up $250,000 whole life policy on his own life. Charles is doing some estate planning and would not like this policy to be included in his gross estate for federal estate tax purposes. Which of the following statements is (are) true regarding the tax treatment of this policy? I.Charles can avoid having the policy proceeds included in his gross estate by naming his estate the beneficiary. II.If Charles makes an absolute assignment of the policy and dies more than three years later, the policy is not counted as part of his gross estate.

Each of the following helps to reduce federal estate taxes EXCEPT

Life insurance policy reserves

The policy reserve at the end of any given policy year is called the

The gross premium is defined as