If $100,000 is the pure protection amount, the amount at risk is $100,000
and the mortality charge is $0.25 per $1,000 but the total death benefit is
$140,000.
If $100,000 is the total death benefit, the amount at risk is $60,000 and
the mortality charge is $0.42 per $1,000.
The CAS gave credit for both answers.
> ----------
> From: Sherman_Power@ars.aon.com[SMTP:Sherman_Power@ars.aon.com]
> Sent: Wednesday, October 27, 1999 5:18 PM
> To: studygroup4A@lists.casact.org
> Subject: Exam spring 98 #4
>
> I'd be happy for any insights on this one:
>
> [You are given the following info about a "Type 2" universal life
> insurance
> policy:
>
> Death Benefit: $100,000
> Cash Value: $40,000
> Monthly mortality charge: $25
>
> Using the procedure described by H&H, determine the monthly mortality rate
> per
> $1,000 coverage.]
>
> the answer is given as B : "At least $0.20, but less than $0.30:
>
> Presumably the answer is derived by dividing the mortality charge by the
> "Death
> benefit (000)" = 25/100 =.25
>
> My problem with this is that H&H seems clear that even for a type 2 policy
> the
> "death benefit" is composed of two components: the cash value and the pure
> protection (or amount at risk). So for this type 2 policy the amount at
> risk is
> always $60K which implies an aswer of .42
>
>
>