9-4LIFE INSURANCE

9-4LIFE INSURANCE

Compute the cost of different types of life insurance.

Understand advantages and disadvantages of different types of life

insurance.

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OBJECTIVES

beneficiarypremiummortality tableface valueterm life insurancegroup term life

insurancelevel term insurance

decreasing term insurance

increasing term insurance

permanent life insurance

whole life insurancecash valueuniversal life

insurancevariable life insurance

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Key Terms

What are the advantages of purchasing financial protection for your loved ones?

Why do people buy life insurance?Why might term life insurance appeal to

parents of young children?Why is buying an insurance policy often less

expensive for young people?

Slide 3

Example 1

Jack is 40 years old. In ten years, his house will be paid off and his daughter will have completed college. He wants to take out a 10-year level term insurance policy with a face value of $750,000. The monthly premium is $76. What will be Jack’s total cost over the 10-year period?

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Example 2

Logan purchased a whole life policy with a face value of $100,000 when he was 28 years old. The annual premium was c dollars. He wanted to increase the face value to $250,000, so he had to apply for a new policy. Since his current age was higher, and he had some health issues, the premium increased to x dollars. Express the percent increase algebraically.

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Gabriella’s whole life premium increased from $123 to $166 per month when she increased the policy’s face value. Find the percent increase to the nearest percent.

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CHECK YOUR UNDERSTANDING

EXAMPLE 3 Mario has a universal life insurance policy with

a face value of $250,000. The current cash value of the policy is $8,260. If the premium is $97 per month, for how many months can the cash value be used to pay the premium?

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EXAMPLE 4 Joe is an insurance agent. Zach, a 45-year-old man,

inquires about a life insurance policy. How can Joe assess the risk his company is taking on when they offer a life insurance policy to Zach?

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The mortality rate for a certain female elderly age category is 0.043. A company insures 7,000 people in this category. About how many of them will die before their next birthday?

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CHECK YOUR UNDERSTANDING

EXAMPLE 5

The Umbrella State Insurance Company sells a five-year term insurance policy with face value of $150,000 to a 41-year-old man for an annual premium of $648. What is the profit the company receives from selling this policy for each age of death?

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EXAMPLE 6 In Example 5, you witnessed how the company takes on a

great risk when they sell a policy. The mortality rates and amount of profit are shown in the table. If the company sold 10,000 of the same policies, what would their expected profit be for the 10,000 policies?

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