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This refers to uncertainty regarding a potential economic-loss. This is a life insurance policy designed to pay off a mortgage in the event of borrower's death. This type of life insurance is usually sold in conjunction with an installment loan. This is the statistical information used by an insurance company's underwriters to estimate the risk of loss faced by the company's population of insured policyholders. This is a hypothetical representation of an insurance policy's performance that reflects the most important assumptions that the insurance company uses when presenting the policy to a prospective client. raflects the most boligy to a prospective 3. How much life insurance do you need? Calculating resources- Part 2 Bob and Cho Chen have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected lifestyle of Cho (age 38) and their two children (ages 8 and 10 ) in the event of Bob's (the primary earner's) death. The Chens also have certain financial resources available after Bob's death, however, so their life insurance needs are lower than this amount. If Bob dies, Cho will be eligible to recelve Social Security survivors' benefits-approximately $3,800 a month ( $45,600 a year) until the youngest child graduates from high school in 10 years. Ater the children leave home, Cho will be able to work full-time and eam an estimated $38,000 a year (atter taxes) until she retires at age 65 . After Cho turns 65 , she II receive approximately $3,200 a month ( $38,400 a year) from her own Social 5 ecurity and retirement benefits. The life expectancy for a woman within Cho's demographic is 87 . The couple has also saved $60,000 in a mutual fund, and Bobs employer provides him a $100,000 life insurance policy. Using this information, complete Sten 2 of the needs anaiysis worksheet to estimate their fotal financial resources available after death. (Note: If the value of a certain entry is zero, be sure to enter "0" to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) e. Number of years in time period f. Total period income (1d 1 1e) $456,000 9. Total income 2. Savings and investments 3. Other life insurance 4. Other resources Universal life insurance combines elements from term life insurance and whole life insurance. Term policies provide a death benefit savings component, whole lde policies provide a death benefit provide a death benefit savings component, To understand how universal premiums are allocated, consider the following example. Aex is - 37-year-old lawyer who has taken out a universal life insurance policy to protect his two children (ages 8 and 8 ) in the event of death. Each yeac, Aex chooses how much would like to contribute to the policy, as shewn by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit (the portion of the policy) then puts the remainder into the cash value for I portion of the policy. This money earms interest at a information, calculate the amount that is added to the cash value portion of the policy in each of the first three years. The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with insurance policies. Suppose that in the 14th year of his policy, his cost of death benefit has risen substantially, At the same time, he is helping to pay his mother's medical expenses after a major surgery and cutrently cannot afford to pay his life insurance premium. Thue or False: Under the terms of a standard universal policy, if Alex stops paying his premiums, then his policy will be cancelled and the value of the cash portion will be paid out to him immediately. True False Match the terms assoclated with managing your use of life insurance with the descriptions of the terms. (Note: These are not necessarily complete definitions, but there is only one correct description for each term.)

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