12) Todd, age 28, would like to save money for a comfortable retirement. He is considering purchasing a cash-value life insurance policy that has the following characteristics:
â– The premiums are invested in separate investment accounts selected by the policyholder.
â– Interest income and capital gains are not currently taxable to the policyholder .
â– The frequency and amount of premium payments can be changed as financial circumstances change.
â– A mortality and expense (M&E) charge is periodically deducted from the cash value account.
Based on the above characteristics, what type of life insurance is Todd considering purchasing? Explain your answer.
13) Jeff currently earns $3000 per month. He has an individual disability-income policy that will pay
$2000 monthly if he is totally disabled. Disability is defined in terms of the worker’s own occupation.
The policy has a 30-day elimination period and also provides residual disability benefits. Benefits are
payable until age 65.
- If Jeff is severely injured in an auto accident and cannot work for four months, how much will he
collect under his policy?
- Assume Jeff returns to work but can only work part-time until he recovers completely. If he earns
$1500 monthly, what is the amount, if any, that Jeff can collect under his policy? Explain your answer.
14) Whirlwind Mowers manufactures and sells power lawn mowers to the public and distributes the products through its own dealers. Andrew is a homeowner who has purchased a power mower from an authorized dealer on the basis of the dealer’s recommendation that “the mower is the best one available to do the job.” Andrew was cutting his lawn when the mower blade flew off and seriously injured his leg.
- Andrew sues Whirlwind Mowers and asks for damages based on negligence in producing the power mower. Is Whirlwind Mowers guilty of negligence? Explain your answer.
- The doctrine of res ipsa loquitur can often be applied to cases of this type. Show how this doctrine can be applied to this case. Your answer must include a definition of res ipsa loquitur .
- Explain the various types of damages that Andrew might receive if Whirlwind Mowers is found guilty of negligence.
15) Karen is the named insured under a PAP that provides coverage for bodily injury and property damage liability, medical payments, and uninsured motorists coverage. For each of the following situations, briefly explain whether the claim is covered by Karen’s PAP.
- Karen ran into a telephone pole and submitted a medical expense claim for Jason, a passenger in
Karen’s car at the time of the accident.
- Karen allowed Scott to use her car. While operating Karen’s car, Scott damaged Gray’s car in an accident caused by Scott’s negligence. Karen is sued by Gray for damages.
- Karen’s husband ran over a bicycle while driving a friend’s car. The owner of the bicycle demands that Karen’s husband pay for the damage.
- In a fit of anger, Karen deliberately ran over the wagon of a neighbor’s child that had been left in
Karen’s driveway after repeated requests that the wagon be left elsewhere. The child’s parents seek
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