Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 18

Find the annual premium for the following. (See Examples.)
Finding the Life Insurance Premium
Martha Spencer became the primary source of income for her family at age 35 after her divorce. At that time, she decided that she needed $250,000 in life insurance to pay off the mortgage on her home, to repay some loans at her business, and to provide for her children. Find her annual premium for (a) a 10-year level premium term policy, (b) a whole life policy, (c) a universal life policy, and (d) a 20-pay life plan.
CASE IN POINT
SOLUTION
First, divide the desired amount of life insurance by $1000 to find the number of thousands.
$250,000 ÷+ $1000 = 250 thousands
Quick TIP
Use the actual age of a man when using the table of premiums. However, subtract 5 from the age of a woman before using the table.
Since Spencer is a woman, subtract 5 from her actual age before using the table (35 - 5 = 30). Look in the table at age 30 for the rates for each type of insurance.
Spencer wanted to buy universal life because of the savings feature, which would help her save for retirement. However, she purchased the level premium term instead, since her income was limited and the level term policy was much cheaper.
Using a Premium Factor
The annual insurance premium on a $200,000 10-year level premium term life policy for Jane Rodriguez is $378. Use the premium factors table to find the amount of premium and the total annual cost if she pays (a) semiannually, (b) quarterly, or (c) monthly.
SOLUTION
Pricing Life Insurance

Shauna Jones has decided to buy $100,000 in life insurance to make sure that her kids will have funds if something happens to her. Jones is 28 and in good health. Find the monthly premium for (a) 10-year level premium term and (b) universal life.
SOLUTION
(a) 10-year level premium term:

(b) Universal life: