You have the opportunity to purchase a $150,000 Term life insurance policy for $145 per year for the next four years. Your bank has offered you credit life insurance in conjuction with a $12,000 four-year (48-month) loan you are applying for. The credit life insurance premium would be a one-time-up-front fee of $325. What is the annual cost per $1,000 of insurance for the term life insurance and the credit life insurance?

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letmeanswer letmeanswer · Answer 1 · 2020-03-23T12:18:02+01:00

Solution:

Term life policy:

Annual premium for $150,000

term life policy for $145 per year

Premium per thousand for term life insurance = [tex]\frac{145}{150000}\times100=\$0.97[/tex]

Credit life insurance:

Sum assured = $12,000

Premium for 4 years (i.e 48 months) = 3.25

Premium per thousand for credit life insurance = [tex]\frac{325}{\frac{4}{12000}}\times1000 = \$6.77[/tex]

Therefore, the term life insurance is $0.97 and credit life insurance is $6.77.