54. 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?
Answer: A
Nothing will be paid to Sam's wife.
Since Sam's life insurance policy was a 5-year, non-renewable level term policy, it expired after 5 years. Therefore, after 8 years, the policy was no longer in effect, and no benefits are payable to his wife.
A) Nothing
This option is correct because the 5-year term of the life insurance policy had lapsed by the time of Sam's death, which occurred 8 years after the policy began. Non-renewable policies do not provide coverage beyond their stated term, leading to no payout.
B) $40,000
This option is incorrect as it suggests a partial payout. Since the policy was a non-renewable term policy, there is no provision for any payout after its expiration, regardless of the time elapsed.
C) $60,000
This option is also incorrect. Similar to option B, it implies an amount that would not be paid out under the terms of a non-renewable policy. Once the term ended, all coverage ceased.
D) $100,000
This option is incorrect because it indicates that the full policy amount could be paid out. However, since the policy expired after 5 years and was non-renewable, no benefits can be claimed at the time of Sam's death.
Conclusion
The definitive answer is that nothing will be paid to Sam's wife due to the expiration of the life insurance policy after 5 years. All other options incorrectly assume that some form of payout is applicable despite the policy's termination. Understanding the terms of life insurance policies is crucial, particularly the distinctions between renewable and non-renewable options.