Question

Jim has a life policy with a face value of $250,000 and a total of $25,000 in loans and interest outstanding on the policy. He is killed in a skiing accident. With his double indemnity rider, how much in benefits will the policy pay?

Answer 1

The policy will pay $450,000 in benefits with the double indemnity rider.

Step-by-step explanation:

To calculate the benefits that Jim's policy will pay with his double indemnity rider, we need to first determine the net amount at risk. This is calculated by subtracting the outstanding loans and interest from the face value of the policy. In this case, the net amount at risk is $250,000 - $25,000 = $225,000.

The double indemnity rider doubles the net amount at risk, so the benefits paid by the policy will be $225,000 x 2 = $450,000.