Question

Calculating a Death Benefit Alexandra Cunningham of Gardner, Massachusetts, has a $100,000 participating cash-value policy written on her life. The policy has accumulated $4,300 in cash value; Alexandra has borrowed $2,200 of this value. The policy also has accumulated unpaid dividends of $1,123. Yesterday Alexandra paid her premium of $1,000 for the coming year. What is the current death benefit from this policy? $ The answer is not : 101977 or 100977 or 98923

Answer 1

Paying the premium of $1000 confirms or guarantees the surrender value of $100,000. So if the person dies now it will receive the full value of the policy. Again add-on will be the accumulated unpaid dividends which would amount to $1123. Cash Value is the accumulation of the funds or the premiums the beneficiary pays over a period of time.

So the total death benefit value will be Policy Value + Dividends accrued but not paid

$100,000+ $1123 = $101123

Note: Since $2200 had been borrowed at this point but the policy has not been surrendered so it will not be deducted from the death benefit policy or from the cash value accumulations.