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Search this co Ch 08: Assignment - Insuring Your Life Universal life insurance combines elements from term life insurance and whole life insurance Term policies provide a death benefit and no savings component, whole life policies provide a death benefit bundled with a savings component, and universal policies provide a death benefit and a separate savings component. To understand how universal premiums are allocated, consider the following example Nick is a 44-year-old lawyer who has taken out a universal life insurance policy to protect his two children (ages 15 and 18) in the event of death Each year, Nick chooses how much would like to contribute to the policy, as shown by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit (the pure insurance portion of the policy) then puts the remainder into the cash value (or savings portion of the policy. This money earns interest at a market-based rate of return Based on the given information, calculate the amount that is added to the cash value portion of the policy in each of the first three years. Year 3 $1828 Year 1 $2.669 590 $130 Premium (annual contribution) Administrative fee Cost of death benefit Amount added to cash value Year 2 12,115 590 5130 990 $130 $ The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with term life Insurance policies. Suppose that in the 7th year of his policy, his cost of death benefit has risen substantially. At the same time, he is paying college tuition and currently cannot afford to pay his life insurance premium True or False Under the terms of a standard universal policy, Nick stops paying his premiums, then his policy will be put on hold until he resumes payment (and pays back all missed premium payments). True False Search this co Ch 08: Assignment - Insuring Your Life Universal life insurance combines elements from term life insurance and whole life insurance Term policies provide a death benefit and no savings component, whole life policies provide a death benefit bundled with a savings component, and universal policies provide a death benefit and a separate savings component. To understand how universal premiums are allocated, consider the following example Nick is a 44-year-old lawyer who has taken out a universal life insurance policy to protect his two children (ages 15 and 18) in the event of death Each year, Nick chooses how much would like to contribute to the policy, as shown by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit (the pure insurance portion of the policy) then puts the remainder into the cash value (or savings portion of the policy. This money earns interest at a market-based rate of return Based on the given information, calculate the amount that is added to the cash value portion of the policy in each of the first three years. Year 3 $1828 Year 1 $2.669 590 $130 Premium (annual contribution) Administrative fee Cost of death benefit Amount added to cash value Year 2 12,115 590 5130 990 $130 $ The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with term life Insurance policies. Suppose that in the 7th year of his policy, his cost of death benefit has risen substantially. At the same time, he is paying college tuition and currently cannot afford to pay his life insurance premium True or False Under the terms of a standard universal policy, Nick stops paying his premiums, then his policy will be put on hold until he resumes payment (and pays back all missed premium payments). True False