ECONOMICS
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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one-fifth of the $20, 000 face value.
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$20, 000 less the premiums paid
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a calculated amount of money which includes the premiums paid as well as the interest on that money
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a calculated amount of money that must be converted to a term life insurance policy
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Detailed explanation-1: -Term life is designed to cover you for a specified period (say 10, 15 or 20 years) and then end. Because the number of years it covers are limited, it generally costs less than whole life policies. But term life policies typically don’t build cash value. So, you can’t cash out term life insurance.
Detailed explanation-2: -To calculate the cash surrender value of life insurance, add up all the payments applied to the policy. Then, subtract the surrender fees and outstanding balances against the cash value. To calculate the surrender fees, you’ll have to review your life insurance contract.
Detailed explanation-3: -Cash surrender value is money an insurance company pays to a policyholder or an annuity contract owner if their policy is voluntarily terminated before maturity or an insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies.
Detailed explanation-4: -Upon the death of the policyholder, the insurance company pays the full death benefit of $25, 000. Money collected into the cash value is now the property of the insurer. Because the cash value is $5, 000, the real liability cost to the life insurance company is $20, 000 ($25, 000 – $5, 000).