Complete question is;
Mr. Kurris is 50 years old. In 4 years, his house will be paid off and his daughter will be finished with college. He wants to take out a 5-year level-term life insurance policy with a face value $750,000. The monthly premium is $61,
a. What will be his total cost for this policy over the 5-year period?
b. If he dies after paying for the policy for 16 months, how much will the insurance company pay his beneficiaries?
c. If he does not die during the 5 years, how much does the insurance company make on this policy?
d. If he dies after paying for the policy for 13 months, how much will the insurance company lose on this policy?
Answer:
A) $3660
B) $750000
C) $3660
D) $749,207
Step-by-step explanation:
A) Since he wants to take out a five-year level-term life insurance policy, then number of payments for 5 years is;
12 months × 5 = 60 payments.
Since monthly premium is $61, then total cost = 61 × 60 = $3660
B) This is a level-term life insurance policy and so he will be paid the same amount over the entire period of the insurance policy.
Thus If he dies after paying for the policy for 16 months, his beneficiaries will still be paid same $750000
C) if he does not die during the 5 years, the amount the insurance company will make is same as the amount he is due for his premium which is $3660.
D) If he dies after paying for the policy for 13 months, amount that the insurance company will lose is;
>> 750000 - 13(61) = $749,207
