Which statement is not true regarding a straight life policy
A) It has the lowest annual premium of the three types of Whole Life policies.
B) Its premium steadily decreases over time, in response to its growing cash value.
C) The face value of the policy is paid to the insured at age 100.
D) It usually develops cash value by the end of the third policy year
The Correct Answer for the given question is option B) Its premium steadily decreases over time, in response to its growing cash value.
The premium of a straight life policy does not decrease over time, in response to its growing cash value. This is because the death benefit of the policy remains level, and the cash value is used to offset the cost of insurance. As the cash value grows, the policyholder’s net worth also increases. This type of policy is typically more expensive than term life insurance, but it offers more security for policyholders and their families.
Straight Life Policy
A straight life insurance policy provides lifelong insurance coverage with a set level of premiums. The cash value account of a straight life insurance policy, also known as whole life insurance, grows as you make contributions. The cost of straight life insurance policies makes them unsuitable for short-term life insurance policies.
It is possible to use a straight life insurance policy for long-term financial planning. Holding onto the plan for a longer period of time will enable you to maximize the cash value since the plan is designed to last your entire life. Cash value accounts are not well suited for short-term needs since you will be waiting decades to see a reasonable return on the investments.
| Advantages of Straight Life Policy | Disadvantages of Straight Life Policy |
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Similarly,
A straight life policy has what type of premium
A. a decreasing annual premium for the life of the insured
B. a variable annual premium for the life of the insured
C. a level annual premium for the life of the insured
D. an increasing annual premium for the life of the insured
The Correct Answer for the given question is option C. a level annual premium for the life of the insured.
Which of these characteristics is consistent with a straight life policy?
a) Owner can adjust both premium and death benefit
b) Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract
c) Owner has the option of converting to term insurance
d) Premiums are payable for as long as there is insurance coverage in force
The Correct Answer for the given question is option d) Premiums are payable for as long as there is insurance coverage in force
How much is the life insurance premium for a 30 year old male, $320,000 straight life policy?
a) $4073.6
b) $5073.6
c) $6073.6
d) $7073.6
The Correct Answer for the given question is option c) $6073.6
Explanation:
Given:
- Age of male = 30 years
- Amount = $320,000
From the data given above, we get
The straight life policy given by $18.98 per $1,000
As the amount is $320,000 the life insurance is
= 320,000 × 18.98/1,000
= 320 × 18.98
= $6073.6
Therefore, the life insurance premium for a 30-year-old male is $6073.6