A client of yours would like your assistance in selecting a Universal Life policy to meet current
Question:
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.
Taxation for Decision Makers 2017
ISBN: 9781119373735
7th edition
Authors: Shirley Dennis-Escoffier, Karen Fortin