Danyelle Meleta Selling Insurance Assignment RM 411 section 2 For this assignment, I sold life insurance to my dad.

He is 49 years old and the probability that he will die before the age of 65 is 0.1190843. He wanted a death benefit of $500,000. Since he has Social Security, I reduced this number to be $480,000, since both my sister and I are over the age of 16 and my mom will collect the $20,000 when she is 60 years old. The calculations for the annual, monthly, and gross premiums are shown below in the chart. The values are based off of the 2001 CSO table for men and the interest rates from the website given on the assignment sheet. Type of i Insurance Endowment 3.33% (x=49, n=20) Annual Premium
( )

Monthly Premium
( )

Gross Premium = $21,711.45 =$10,496.46

= 0.03871527 $480,000*0.03871527 = 18,583.33 = 0.0188344 $480,000*0.0188344 = $9,040.53 ( ) = 0.008754 $480,000*0.008754 = 4201.92

= 0.03831 ($480,000*0.03831)/12 = $1,532.40

Whole Life (x=49)

4.28%

= 0.01865 ($480,000*0.01865)/12 = $746.10

Term (x=49, n=20)

3.33%

=$7317.84

= 0.00866 ($480,000*0.00866)/12 = $346.40

Because my dad wanted to cover my mom until a little after she received the Social Security benefit and he plans to retire a few years after age 65, I chose to price for him 20 year Endowment, and 20 year term insurance along with the Whole life insurance based on his age of 49. Because n<30, the assignment sheet said to use the n-year treasury rate, and in this case 20-year treasury rate = 3.33%. For whole life I used the Aaa Corporate Bond rate which was 4.28%. I first asked my dad if he was interested in Endowment Insurance. I made sure to mention that this would be a great thing to buy if he were to choose a length of time close to when he would retire. Therefore, he would be able to collect the money when entering retirement, if he were to survive the full length of time. He seemed interested, but the price was too high for him to fully commit, so I then offered him whole life insurance. The price seemed to fit in his price range a little better and I made sure to mention that a benefit is surely to be collected by the beneficiaries when he dies, unlike term insurance if he were to die after the length of time specified. He appeared to be satisfied with this option and liked knowing that the dependents would definitely receive something when he passes, however he did ask if there was anything cheaper still.

I proceeded by explaining term insurance. I mentioned that if he were to sign off on 20 year term insurance that he might not receive a benefit. If he survives longer than 20 years, which isnt too uncommon these days for someone his age, then he will receive nothing. However, if he were to die in the next 20 years, again his dependents would receive the benefits and be covered until they could support themselves. My dad didnt like the fact that all of his money could be going to waste if he survives the 20 years, so he ultimately decided on buying the whole life insurance. For him, it was priced right in the middle and had the coverage he desired. This whole life plan for my dad does make sense given my familys financial situation. He brings in the most money and if he were to die, my family would really struggle financially. Thus, giving him whole life insurance, whenever he passes, my family will be able to be supported with the benefits until other means have time to be arranged.