Kathy, age 29, is married and has a son, age 3. She owns a $100,000 ordinary life insurance policy that contains a waiver-of-premium provision, guaranteed purchase option, and accelerated benefits rider. Kathy has several financial goals and objectives for her family. For each of the following situations, identify an appropriate contractual provision or policy benefit that will enable Kathy to meet her financial goals.
Treat each situation separately.
a. If Kathy dies, she wants the policy proceeds to be paid in the form of monthly income to the family until her son attains age 18.
b. Kathy is totally disabled in an auto accident when she failed to stop at a red light. After six months, she has not recovered and remains totally disabled.
As a result, she cannot return to her former job or work in any occupation based on her previous training and experience. She finds that the premium payments for life insurance are financially burdensome.
c. When she retires, Kathy would like to have the cash value in the policy paid to her in the form of lifetime income. She wants the payments to continue for at least 10 years.
d. Kathy is terminally ill from a serious heart condition.
Kathy's physician believes she will die within one year. Kathy has no savings and health insurance, and her medical bills are soaring. She needs $50,000 to pay all medical bills and other financial obligations.
e. Three years after the policy was issued, Kathy was diagnosed with breast cancer. As a result, she is now uninsurable. She would like to purchase additional life insurance to protect her family.