A client of yours would like your assistance in selecting a Universal Life policy to meet current insurance needs of family protection in the event of an untimely death. Client Profile 

• Female, age 35, non-smoker 

• Initial Face Amount: $100,000

• Amount she is willing to contribute: $1200 paid at the beginning of each policy year 

• A conservative investor who believes that an annual investment return of 3% per is reasonable over the long term. Source of Information You have accessed the illustration software from BMO Insurance Company and secured illustrations of three versions of a Universal Life policy you intend to present to her in your next meeting. These versions are 1. Level Death Benefit, Yearly Renewable cost of insurance, 3% annual investment return 2. Level death benefit plus Account Value, Yearly Renewable cost of insurance, 3% annual investment return. 3. Level Death Benefit plus Account Value, Level cost of insurance, 3% annual investment return The illustrations summarizing the values of these three versions are presented in Appendix ‘A’. You should print these out (3 pages) and refer to them when answering the questions. The Assignment The purpose of the assignment is to test your understanding of how the different choices the client makes on death benefit options and the mortality charges can impact the policy values. You will be asked 10 multiple choice questions about differences in the plans as they relate to death benefit amounts and account values.

1. Print out the three Universal Life illustrations so you will be able to refer to them in your preparation and while answering the test questions. Each illustration is attached and is just one page in length. 

2. Be sure you understand how Universal life works and its key components (death benefit options, cost of insurance options, NAAR, fund values /account values, cash surrender values) 

3. Select two or three ages (for example ages 50, 65, 85) and compare the values in all three illustrations. Be able to explain why some are higher or lower. 

4. Review the trends in the changes in the Fund Values (Account Values) and Death Benefits for the entire duration of the various plans and be able to explain the reasons for the differences. 

5. Be prepared to recommend the most appropriate option for your client based on her objectives and priorities.

 

Transcribed Image Text:

VERSION I LEVEL DEATH BENEFIT, YRT COI, 3% RETURN BMO Insurance Life Dimensions Premiums: Minimum: $275.51 First Year Maximum: $2,688.00 Year 12345 6 7 8 10 HDD 25228 228 2 11 12 13 14 15 16 17 18 19 20 25 30 35 50 65 **A #999 99998 **** 8 3 38 41 42 43 44 45 46 47 48 49 50 51 52 53 55 60 65 2 70 85 100 Policy and Investment Information Projection based on an assumed rates of return that are not guaranteed Performance depends on actual rates credited This illustration is for information purposes only Investment Allocation: BMO GDN Select Class Balanced Portfolio Advisor 100% Total Planned Premium $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 Total Death Benefit $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $104,906 $120,467 $164,163 $352,374 Fund Value $950 $1,925 52,926 $3,954 $5,008 TRANSP Prepared by: Phone: *Registered trademark of Bank of Montreal, used under licence, $6,174 $7,389 $8,654 $9,972 $11,352 $12,795 $14,306 $15,888 $17,543 $19,274 $21,085 $22,974 $24,942 $27,060 $29,275 $41,913 $57,581 $76,745 $164,163 $352,374 A Universal Life Plan Total Cash Surrender Value 50 $547 $1,411 $2,301 $3,355 E. & O.E. $4,797 $6,287 $7,827 $9,421 $11,352 $12,795 $14,306 $15,888 $17,543 $19,274 $21,085 $22,974 $24,942 $27,060 $29,275 $41,913 $57,381 $76,745 $164,163 $352,374 Projected Net Rate of Return (%) 3.00 3.00 3.00 3.00 3.00 4.50 4.50 4.50* 4.50* 4.50 4.50* 4.50* 4.50* 4.50* 4.50* 4.50* 4.50 4.50 4.75 4.75 4.75 4.75 4.75 *Includes Cumulative Fund Bonus Includes Guaranteed Investment Bonus. This is an illustration only and is not a contract. Therefore, this illustration is merely a projection of future results, based on a set of assumptions that will change over time. Actual results are not guaranteed and will vary. If there is any discrepancy between an illustration provided to you and your policy contract, your contract govems. This illustration is not complete without all pages Insurer: BMO Life Assurance Company 4.75 4.75 Life Dimensions Version V21.0/10-11 November 15, 2011 Page 6 of 11 VERSION I LEVEL DEATH BENEFIT, YRT COI, 3% RETURN BMO Insurance Life Dimensions Premiums: Minimum: $275.51 First Year Maximum: $2,688.00 Year 12345 6 7 8 10 HDD 25228 228 2 11 12 13 14 15 16 17 18 19 20 25 30 35 50 65 **A #999 99998 **** 8 3 38 41 42 43 44 45 46 47 48 49 50 51 52 53 55 60 65 2 70 85 100 Policy and Investment Information Projection based on an assumed rates of return that are not guaranteed Performance depends on actual rates credited This illustration is for information purposes only Investment Allocation: BMO GDN Select Class Balanced Portfolio Advisor 100% Total Planned Premium $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 $1,200.00 Total Death Benefit $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $104,906 $120,467 $164,163 $352,374 Fund Value $950 $1,925 52,926 $3,954 $5,008 TRANSP Prepared by: Phone: *Registered trademark of Bank of Montreal, used under licence, $6,174 $7,389 $8,654 $9,972 $11,352 $12,795 $14,306 $15,888 $17,543 $19,274 $21,085 $22,974 $24,942 $27,060 $29,275 $41,913 $57,581 $76,745 $164,163 $352,374 A Universal Life Plan Total Cash Surrender Value 50 $547 $1,411 $2,301 $3,355 E. & O.E. $4,797 $6,287 $7,827 $9,421 $11,352 $12,795 $14,306 $15,888 $17,543 $19,274 $21,085 $22,974 $24,942 $27,060 $29,275 $41,913 $57,381 $76,745 $164,163 $352,374 Projected Net Rate of Return (%) 3.00 3.00 3.00 3.00 3.00 4.50 4.50 4.50* 4.50* 4.50 4.50* 4.50* 4.50* 4.50* 4.50* 4.50* 4.50 4.50 4.75 4.75 4.75 4.75 4.75 *Includes Cumulative Fund Bonus Includes Guaranteed Investment Bonus. This is an illustration only and is not a contract. Therefore, this illustration is merely a projection of future results, based on a set of assumptions that will change over time. Actual results are not guaranteed and will vary. If there is any discrepancy between an illustration provided to you and your policy contract, your contract govems. This illustration is not complete without all pages Insurer: BMO Life Assurance Company 4.75 4.75 Life Dimensions Version V21.0/10-11 November 15, 2011 Page 6 of 11

Answer rating: 100% (QA)

To compare the values among the three Universal Life insurance policy illustrations provided and explain the differences lets look at the specified ages of 50 65 and 85 These ages will give us insight... View the full answer