9.1b

Question 1

Due to the complexities of whole life insurance products, each state mandates the disclosure of cost comparisons to consumers as a safeguard against misrepresentation and to ______.

Answer 1

better educate consumers on the products in which they invest their money

Question 2

Two methods used when comparing whole life policies include the ‘traditional’ cost comparison method and the ______ cost comparison method. Both methods are used to determine the ‘cost index’ number of the policy.

Answer 2

‘interest-adjusted’

Question 3

The Traditional Cost Comparison Method accounts for the various cost factors of a whole life policy except for the ______, making the comparison less accurate since it does not account for the ‘time value of money.’

Answer 3

interest earned over the life of the policy

Question 4

To understand the Time Value of Money, it is important to realize that receiving a dollar today is more valuable than receiving the same one dollar in the future. This is because, if invested today, the invested dollar will ______, as opposed to receiving the same dollar in the future with no earned interest.

Answer 4

earn interest and increase in value over time

Question 5

Essentially, time adds value in that interest builds over time, thus providing a larger return for money invested now. Using compounding interest, time ______, thus the more time money has to reinvest and grow, the larger its value will be in the future.

Answer 5

increases the value of money exponentially