other types of life insurance pp. 381-383 11-4 section
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Other Types of Life Insurance pp. 381-38311-4SECTIONSECTION
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Copyright © Glencoe/McGraw-Hill MBA, Section 11-4, Slide 2 of 18
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whole life insurance (p. 381)
Insurance that offers financial protection throughout one’s lifetime and costs a specific amount, also known as permanent insurance.
cash value (p. 381)
Monetary value that a life insurance policy builds up, like a savings account, that can be cashed in or borrowed.
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limited payment policy (p. 381)
Life insurance that is paid up after a specified number of years, or until the insured reaches a certain age, but offers lifetime protection.
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universal life insurance (p. 381)
A combination of an insurance policy and a savings plan. It covers the insured for a lifetime, and any amount the insured pays over the minimum goes into an investment account that earns interest.
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Copyright © Glencoe/McGraw-Hill MBA, Section 11-4, Slide 5 of 18
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Annual = Number of Units × PremiumPremium Purchased per $1,000
Formula Formula
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Filly Cheeze is 25 years old. She wants to purchase a whole life policy valued at $125,000.
What is her annual premium?
Example 1Example 1
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Find the number of units purchased.
$125,000 ÷ $1,000 = 125
Example 1 Answer: Example 1 Answer: Step 1Step 1
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Find the premium per $1,000. (Refer to Figure 11.3, Annual Premiums per $1,000 of Life Insurance, on page 382 of your textbook.)
Female, age 25 = $7.50
Example 1 Answer: Example 1 Answer: Step 2Step 2
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Find the annual premium.
Number of Units Purchased × Premium per $1,000
125 × $7.50 = $937.50
Example 1 Answer: Example 1 Answer: Step 3Step 3
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Copyright © Glencoe/McGraw-Hill MBA, Section 11-4, Slide 10 of 18
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Refer to Figure 11.4 below.
Suppose Fhilly Cheeze (from Example 1) wants to pay the $937.50 annual premium monthly.
What are her monthly payments?
How much can she save in one year by paying the premium annually?
Example 2Example 2
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Figure 11.4Figure 11.4
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Find the monthly premium.
Annual Premium × 8.5%
$937.50 × 0.085 = $79.6875 or $79.69
Example 2 Answer: Example 2 Answer: Step 1Step 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 11-4, Slide 13 of 18
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Find out how much she can save.
(12 × $79.69) – $937.50
$956.28 – $937.50 = $18.78
Example 2 Answer: Example 2 Answer: Step 2Step 2
382:1-13382:1-13