Arizona Life and Health Practice Exam

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

1. Cash Value Accumulation Index

2. Surrender Value Cost Index

3. Net Payment Cost Index

4. Projected Benefit Index

The correct answer is: Net Payment Cost Index

When assessing life insurance policies with a focus on the death benefit, the appropriate metric to consider is the Net Payment Cost Index. This index specifically evaluates the cost of the policy in relation to the death benefit provided, thereby allowing potential policyholders to make informed comparisons between different policies based on what will ultimately be paid out to beneficiaries upon death. The Net Payment Cost Index helps Wyatt understand how the premiums he pays will translate into death benefits over the life of the policy, giving him a clear picture of the financial implications of choosing one policy over another. It's particularly useful for comparing the value received in terms of the death benefit against the costs incurred throughout the policy's lifespan. In contrast, the Cash Value Accumulation Index focuses on the cash value accumulation of the policy, which is not Wyatt’s primary concern. The Surrender Value Cost Index pertains to the costs associated with surrendering a policy before the death benefit is paid, which may not be relevant to someone primarily focused on the death benefit. Lastly, the Projected Benefit Index is not a standard measure in evaluating the cost in relation to death benefits, which further supports why the Net Payment Cost Index is the most suitable choice in this scenario.