Jasper owns TeleVida, a successful production company with over 50 employees. He wants to expand the company by opening an office in another province. Jasper needs to take out a $500,000 20-year loan to make this expansion happen.

Jasper owns TeleVida, a successful production company with over 50 employees. He wants to expand the company by opening an office in another province. Jasper needs to take out a $500,000 20-year loan to make this expansion happen.

However, he wants to make sure that if he dies while there’s an outstanding balance on the loan, the balance will be paid in full by the insurance company.
A . 20-year decreasing term life insurance.
B . 20-year term life insurance.
C . Term-100 life insurance policy.
D . Universal life insurance policy.

View Answer

Answer: A

Explanation:

In this case, Jasper is concerned with covering a specific loan balance that will decrease over time as the loan is repaid. A 20-year decreasing term life insurance policy is typically used for situations where the coverage amount decreases over the policy term, aligning with the declining balance of a loan. This is often the most cost-effective option, as the coverage amount decreases in line with the outstanding loan balance, ensuring that the insurance will pay off any remaining loan balance if Jasper dies within the 20-year term.

Other options, such as a standard term policy with a level benefit (Option B), a Term-100 (Option C), or a Universal Life policy (Option D), provide level or flexible coverage not specifically suited to decreasing liabilities like a loan. Therefore, Option A is the best choice to meet Jasper’s needs cost-effectively.