Question

Eva is 29 years old and has 2 children, ages 3 and 5. She makes $48,500 a year. Eva decides to buy a $400,000 10-year term policy and then renew the policy for another ten years afterwards. To renew the policy the insurance company charges an extra 40% to her premium rate. Given the options below, assess whether Eva made a wise decision.

a.Eva would have been better off selecting the 20-year term policy.
b.Even with the extra charge for renewal, Eva’s plan is the least expensive.
c.Given that Eva plans to renew, she should have selected the whole life policy.
d.Eva ends up paying the same amount for each policy.

Answer 1

B, Even with the extra charge for renewal, Eva’s plan is the least expensive.

Explanation:

Answer 2

The answer is: b.Even with the extra charge for renewal, Eva’s plan is the least expensive.

Explanation:

Multiplying the respective amounts by months and years, the result is that even and charging 40% in the renewal of 10 more years of the insurance contract, Eva has made the right decision as far as economic is concerned.

The answer is: b.Even with the extra charge for renewal, Eva’s plan is the least expensive.