Sam had a $100,000 5-year, non-renewable level term life insurance policy with his wife as the beneficiary. Sam dies 8 years after the inception date of the policy. How much will be paid to Sam's wife?

Rationale

Nothing will be paid to Sam's wife.

A non-renewable level term life insurance policy provides coverage for a specified period—in this case, 5 years. Since Sam died 8 years after the policy's inception, the coverage had already expired, resulting in no payout to the beneficiary.

A ($100,000) YOUR ANSWER

This choice suggests that the full policy amount would be paid to the beneficiary. However, since the policy is non-renewable and expired after 5 years, no benefits are payable after that period, making this option incorrect.

B ($60,000) YOUR ANSWER

This option implies a partial payout, which does not align with how term life insurance works. Once the term expires, the policyholder no longer has coverage, so there would be no payout, regardless of the duration since the policy's inception.

C ($40,000) YOUR ANSWER

Similar to the previous incorrect choices, this option incorrectly assumes a partial benefit would be available. In reality, a term life insurance policy offers no benefits once it has expired, making this choice inaccurate.

D (Nothing) CORRECT

Correctly identifies that no payment will be made to Sam's wife, as the policy lapsed after 5 years and was no longer in effect at the time of his death.

Conclusion

Term life insurance policies provide coverage only for the specified term. Since Sam's policy was non-renewable and expired after 5 years, his wife will receive no payment following his death 8 years after the policy began. Understanding the nature of term life insurance is crucial for both policyholders and beneficiaries to avoid confusion regarding coverage and payouts.

Sam had a $100,000 5-year, non-renewable level term life insurance policy with his wife as the beneficiary. Sam dies 8 years after the inception date of the policy. How much will be paid to Sam's wife?

Nothing will be paid to Sam's wife.

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