Question

25 esther has been a pediatrician at a childrens hospital for the past several years. she lives with her spouse and they do not have any children. her spouse is a professor and they have saved sufficiently for retirement to maintain their current lifestyle for life. esther wishes to donate $200,000 to the childrens hospital upon her death. however, she does not want to be spending too much on premiums. which of the following is a suitable universal life insurance option for esther that is least expensive?
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a. indexed death benefit, adjustable premium rates
b. level death benefit, level cost of insurance
c. indexed death benefit plus account value, level cost of insurance
d. level death benefit plus cumulative premiums, yearly renewable term insurance

Explanation:

To determine the least expensive life insurance for Esther, we analyze each option:

• Option a (Indexed death benefit, adjustable premium rates): Universal life insurance with indexed benefits and adjustable premiums can have fluctuating costs, often higher over time.
• Option b (Level death benefit, level cost of insurance): Level cost of insurance in some policies (e.g., term or certain whole life) keeps premiums stable, but “level cost” alone doesn’t clarify if it’s the cheapest.
• Option c (Indexed death benefit plus account value, level cost of insurance): Combines indexed benefits and account value, which typically adds complexity and cost (e.g., variable/universal life with investment components).
• Option d (Level death benefit, cumulative premiums, yearly renewable term insurance): Yearly renewable term insurance (YRT) has increasing premiums as age rises, making cumulative costs expensive over time.

Wait, correction: The cheapest long - term option for “least expensive” (considering Esther wants to maintain lifestyle and not overspend on premiums) is often level term insurance or a policy with level premiums. But among the options, the key is that yearly renewable term (YRT) has premiums that go up every year, so cumulative cost is high. The “level death benefit, level cost of insurance” (Option b) likely refers to a policy with level premiums (e.g., level term or whole life with level premiums), which is cheaper than YRT (Option d) over time, and cheaper than indexed (a, c) which has investment - related costs.

Wait, re - evaluating: Yearly renewable term (YRT) starts cheap but gets more expensive each year. A level premium term policy (or whole life with level premiums) has fixed premiums, so over time, it’s cheaper than YRT. So the “level death benefit, level cost of insurance” (Option b) is the least expensive because it avoids the increasing premiums of YRT (Option d) and the extra costs of indexed benefits (a, c).

Answer:

b. Level death benefit, level cost of insurance