28. Sam has a $100,000 5-year, non-renewable level term life insurance with the wife as the beneficiary. Sam died 8 years after 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, it only provided coverage for the duration of that term. As Sam passed away 8 years after the policy was issued, the policy had expired, resulting in no payout to the beneficiary.
A) Nothing.
This option is correct. The non-renewable term life insurance policy expired after 5 years, which means that once the term ended, the coverage ceased to exist. Since Sam died 8 years after the policy was taken, there is no benefit payable to his wife.
B) $40,000.00
This option is incorrect. There is no provision in a non-renewable term life insurance policy for partial payouts based on the time elapsed after the term. The policy either pays out the full coverage amount during the term or nothing if the insured passes away after the term has ended.
C) $10,000.00
This option is incorrect. Similar to Option B, there are no provisions in a non-renewable term life insurance policy to issue a partial payout, and thus, it cannot be assumed that a fraction of the coverage would be available after the term has expired.
D) $100,000.00
This option is incorrect. While this amount reflects the original face value of the policy, it is not payable because the policy expired after 5 years. Since Sam died 8 years after taking out the policy, no payout is available.
Conclusion
The correct answer is that nothing will be paid to Sam's wife because the life insurance policy had expired prior to his death. All other options fail to recognize the nature of non-renewable term life insurance, which only provides coverage for a specified period. As such, once that period lapses without renewal, there is no benefit payable.