Case 1: Edwin is an investment banker and is aged 40 year-old. He is not yet married
Question:
Case 1:
Edwin is an investment banker and is aged 40 year-old. He is not yet married and does not have anyone he is currently supporting. He knows much about shares and other long term securities like bonds. He has little knowledge about life insurance product. He recently had an opportunity to talk to life insurance representatives or agents. The first one determined his human life value and was of the opinion that Jacob should buy a P900 000.00 life insurance policy. The other agent applied the needs approach and was of the opinion that Jacob buy a P100 000.00 life insurance policy. Jacob was not satisfied and could not reconcile the information provided by these agents.
Required:
Explain to Edwin the reasons, with justifications, of having two different values using the two methods to ascertain the correct amount of life insurance
Case 2:
Mike is aged 25, and he intends to buy life insurance. At some point he met with an agent who gave him a schedule with premiums. He noted that the premiums per thousand Pula of coverage rose slightly every year. After having second thoughts, Mike felt that he is better off with permanent lifetime cover. The agent gave a different schedule altogether which has premiums that remained the same throughout the years. But to his surprise the premiums for the second schedule are higher than the first one. He now thinks the agent is cheating him, by selling the product at a higher premium than before, since he is not knowledgeable of life insurance issues.
Required:
Explain, to Mike, what is happening by reconciling the figures from these two schedules.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill