Final answer:
The student's question pertains to the amount an employer will contribute annually in a split-dollar life insurance policy agreement. The exact amount of the employer's contribution depends on the specific agreement and could be tied to the policy's cash value increase or a fixed portion of the premium.
Step-by-step explanation:
The student is asking about the contribution amount regarding a split-dollar life insurance policy agreement between an employer and an employee. In a split-dollar life insurance arrangement, the premium payment is shared by two parties, which could be an employee and an employer. Specifically, the question asks what amount the employer will contribute to the policy each year.
In many split-dollar arrangements, the employer's contribution could be tied to the increase in the policy's cash value or a predetermined portion of the premium. However, without more context regarding the specific details of their agreement, it's challenging to provide a definitive answer. In some cases, the employer might contribute a fixed amount like half or two-thirds of the premium, or they may cover the amount equal to the annual dividend or the increase in cash value. Each split-dollar policy is tailored to the agreement between the parties involved.
Understanding the dynamics of life insurance and its actuarial aspects is crucial in these arrangements. Actuarial fairness takes into account the probability of an insured event occurring and the expected payout to come up with a fair premium. These principles not only apply to life insurance but to split-dollar arrangements as well.