ABC Life Insurance Company is offering a new product. The product is a two-year term insurance policy funded by a single premium at the start of the first year. Death claims are paid at the end of the year in which death occurs.
A portion of the appropriate mortality table is shown below. The first number is age, the second is the number alive at the start of the year, and the last number is the number dying during the year.
39 9,693,539 14,928
40 9,678,611 15,970
Using a 5.5 percent interest rate, the present value of 1 one year from today is .9479, and the present value of 1 two years from today is .8985. Assuming a 5.5 percent interest rate, what is the net single premium for a 1,000 two-year term policy issued at age 39?
A) 1.49
B) 2.94
C) 5.67
D) 12.83
Question 2
The National Association of Insurance Commissioners (NAIC) has drafted a Life Insurance Policy Illustration model law that most states have adopted. Which of the following statements concerning this model law is (are) true?
I. The policy illustration must include a narrative summary describing the basic characteristics of the policy.
II. The policy illustration must include a numeric summary showing the premium outlay, the value of the accumulation account, the cash surrender value, and the death benefit.
A) I only
B) II only
C) both I and II
D) neither I nor II
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