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Alphonso is considering purchasing a \[tex]$200,000 life insurance policy. Alphonso is a 32-year-old single male with perfect health and no children.

Which life insurance policy is best for Alphonso?

\begin{tabular}{|c|c|c|c|c|}
\hline
& Policy A & Policy B & Policy C & Policy D \\
\hline
Term or Whole & Term & Term & Whole & Whole \\
\hline
Death Benefit & \$[/tex]200,000 & \[tex]$200,000 & \$[/tex]200,000 & \[tex]$200,000 \\
\hline
Protection Period & 15 years & 30 years & Life & Life \\
\hline
Cost per Year & \$[/tex]495 & \[tex]$500 & \$[/tex]6900 & \$7100 \\
\hline
Proceeds Paid to Beneficiaries & Yes & Yes & Yes & Yes \\
\hline
Convertible Term & No & Yes & No & Yes \\
\hline
Dividends & No & Yes & Yes & Yes \\
\hline
\end{tabular}

A. Policy C
B. Policy A
C. Policy D
D. Policy B

Sagot :

GinnyAnswer
To determine the best life insurance policy for Alphonso, we need to compare the different aspects of each option, particularly focusing on the cost-effectiveness and the protection period.

### Breakdown of Policies

Policy A:
- Type: Term
- Death Benefit: [tex]$200,000 - Protection Period: 15 years - Cost per Year: $[/tex]495

Policy B:
- Type: Term
- Death Benefit: [tex]$200,000 - Protection Period: 30 years - Cost per Year: $[/tex]500

Policy C:
- Type: Whole
- Death Benefit: [tex]$200,000 - Protection Period: Life - Cost per Year: $[/tex]6900

Policy D:
- Type: Whole
- Death Benefit: [tex]$200,000 - Protection Period: Life - Cost per Year: $[/tex]7100

### Step-by-Step Calculation and Comparison

1. Calculate the Cost Effectiveness:
- For Policy A, the cost per year of protection is calculated by dividing the annual cost by the number of years of protection:
[tex]\[ \text{Cost effectiveness of Policy A} = \frac{\$495}{15 \text{ years}} = \$33 \text{ per year of protection} \][/tex]
- For Policy B, the cost per year of protection is:
[tex]\[ \text{Cost effectiveness of Policy B} = \frac{\$500}{30 \text{ years}} = 16.\overline{6} \text{ per year of protection} \][/tex]

2. Comparing Cost-Effectiveness:
- Policy A has a cost effectiveness of [tex]$33 per year of protection. - Policy B has a cost effectiveness of approximately $[/tex]16.67 per year of protection.

Based on these calculations, Policy B is more cost-effective than Policy A.

3. Comparison with Whole Life Policies:
- Policy C and Policy D offer lifetime protection, but they cost significantly more annually ([tex]$6900 and $[/tex]7100, respectively).
- Since we are looking for minimization of cost while ensuring significant protection, Term policies offer a better balance of cost to coverage compared to Whole life policies.

4. Final Decision:
- Both Policy C and Policy D are more expensive annually compared to Policy A and Policy B.
- Between the term policies, Policy B provides a lower cost per year of protection and also offers twice the term length (30 years) compared to Policy A (15 years).

In conclusion, considering cost-effectiveness and duration of protection, Policy B is the best option for Alphonso. It has the lowest cost-per-year of protection and offers protection for a longer period of time.

So, the best life insurance policy for Alphonso is Policy B.
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