LOANS AND CASH VALUE

All insurance policies have a cash or loan value.

False

Some life insurance policies have cash value and loan value benefits.

True

Susan Williams purchased $80,000 of whole life. What will the cash value of her policy be at the following anniversary dates? 1. 5 year 2. 20 year

1. Work: First identify the cash value per unit. 5 years= 30 dollars per unit. Next take the face value of the policy divided by 1000, to find how many units the person has. 80,000 divided by 1000 is 80. Now take the # of units time the cash value it has. 80 times 30 is $2,400 Answer: $2,400 2. Work: First identify the cash value per unit. 20 years= 232 dollars per unit. Next take the face value of the policy divided by 1000, to find how many units the person has. 80,000 divided by 1000 is 80. Now take the # of units time the cash value it has. 80 times 232 is $18,560 Answer: $18,560

Wilma Worker has a $90,000 insurance policy for which she pays $1,200 a year. To compare the cash value of the policy to investing the same amount of money at 6%, she performs the following calculations: a. Wilma multiplies $1,200 × 1.26 b. Wilma multiplies $1,200 × 1.19 c. Wilma multiplies $1,200 × 1.12 d. Wilma multiplies $1,200 × 1.06 e. Wilma sums the a-d and adds $1,200 f. Wilma calculates the cash value of a $90,000 policy after 5 years

A. $1,512 B. $1,428 C. $1,344 D. $1,272 E. $6,756 F. $2,700

Larry Rauzer purchased $60,000 of whole life. What will the cash value of his policy be at the following anniversary dates? 1. 10year 2. 15 year 3. 25 year

1. Work: First identify the cash value per unit. 10 years= 89 dollars per unit. Next take the face value of the policy divided by 1000, to find how many units the person has. 60,000 divided by 1000 is 60. Now take the # of units time the cash value it has. 60 times 89 is $5,340 Answer: $5,340 2. Work: First identify the cash value per unit. 15 years= 160 dollars per unit. Next take the face value of the policy divided by 1000, to find how many units the person has. 60,000 divided by 1000 is 60. Now take the # of units time the cash value it has. 60 times 160 is $9,600. Answer:$9,600 3. Work: First identify the cash value per unit. 25 years= 340 dollars per unit. Next take the face value of the policy divided by 1000, to find how many units the person has. 60,000 divided by 1000 is 60. Now take the # of units time the cash value it has. 60 times 340 is $20,400 Answer: $20,400

The cash value of an insurance policy is a function of the face value of the policy and the length of time the policy is in force.

True