Deck 12: Life Insurance Planning

Question 1

Life insurance proceeds are nontaxable to the beneficiary.

Answer 1

True

Question 2

Life insurance is the best way to address the "living-too-long" problem.

Answer 2

False

Question 3

As a family matures,savings and investments may exceed potential losses from premature death and reduce or eliminate the need for life insurance.

Answer 3

True

Question 4

The cost of replacing the household labor of a stay-at-home spouse should be included in life insurance planning.

Question 5

Readjustment-period needs typically last about one month.

Question 6

Life insurance should definitely provide funds to pay off all debts if the breadwinner dies.

Question 7

Life insurance needs typically increase while assets decrease over the course of one's life.

Question 8

The purpose of life insurance is to protect the person on whose life an insurance policy is issued.

Question 9

A modest funeral can easily cost more than $10,000.

Question 10

Since homemakers do not have money income,no financial loss results from the premature death of a homemaker.

Question 11

The amount of Social Security benefits received by survivors depends on the amount of income earned during the lifetime of the deceased that was subject to Social Security taxes.

Question 12

The primary reason for buying life insurance is to obtain a high-quality investment.

Question 13

Your need for life insurance will change significantly over the course of your life cycle.

Question 14

If losses from a premature death exceed resources available,life insurance is probably needed.

Question 15

The major reason that people buy life insurance is to protect the person whose life is insured.

Question 16

Life insurance provides protection against dying too soon,and cash-value life insurance does this best.

Question 17

Life insurance is insurance that protects against financial losses resulting from death.

Question 18

Married couples should integrate their life insurance plans and combine their life insurance needs in one policy on the life of one of the spouses.

Question 19

Younger families should be wary of using retirement money for living expenses after the death of an income provider.

Question 20

The largest potential financial loss resulting from premature death is lost income.

Question 21

Credit term life insurance is generally more expensive per dollar of coverage than similar types of term insurance.

Question 22

Convertible term insurance allows one to change the policy from the life of one person to that of another person without proving insurability.

Question 23

You should rely on an insurance agent to determine how much life insurance you need.

Question 24

A young,healthy person may be able to buy term life insurance privately at lower premiums than through a group policy.

Question 25

With decreasing term insurance,often the face amount of coverage declines annually while the premiums also decline.

Question 26

The needs-based approach is not as accurate as the multiple-of-earnings approach.

Question 27

The need for life insurance is usually low during retirement.

Question 28

The premium for a term insurance policy can increase with each renewal of the contract.

Question 29

Convertible term offers the policyholder the option of exchanging a term policy for a cash-value policy without evidence of insurability.​

Question 30

The multiple-of-earnings approach consists of multiplying one's income by some factor to derive an estimate of the amount of life insurance needed.

Question 31

The premiums for a $100,000,20-year,decreasing term policy would be less than the premiums for a $100,000,20-year policy with a fixed face value,other things being equal.

Question 32

Surviving spouses under age 60 may only collect Social Security survivor's benefits if there are also surviving children under age 18.

Question 33

Term life insurance is often described as pure protection because it pays benefits only if the insured person dies within the time period of the policy.

Question 34

Social Security survivor's benefits end when the youngest child reaches age 21 or graduates from college,whichever comes first.

Question 35

Cash-value life insurance is sometimes called permanent insurance.

Question 36

The premiums on a five-year level-premium,guaranteed renewable term policy would increase annually.

Question 37

When purchasing a term life policy,it is generally best to purchase a guaranteed renewable policy.

Question 38

Term life insurance costs far more than cash-value life insurance.

Question 39

You can buy life insurance designed specifically to pay off a home mortgage should the borrower pass away.

Question 40

The needs-based approach to estimating life insurance coverage considers all of the factors that might affect the level of need.

Question 41

When the insured dies,the beneficiary receives both the face value and the cash value of a cash-value life insurance policy.

Question 42

Modified life insurance is a form of life insurance for which the insurance company charges reduced premiums in the early years and higher premiums thereafter.​

Question 43

Limited-pay whole life insurance is whole life insurance that allows premium payments to cease before you reach the age of 100.

Question 44

Limited-pay whole life insurance is whole-life insurance that allows premium payments to cease before you reach the age of 65.

Question 45

The annual premiums for limited-pay policies are lower than those for whole-life policies,other factors being equal.

Question 46

The premiums for newly purchased cash-value policies are always higher than those for term policies providing the same amount of coverage.

Question 47

Cash-value insurance is more expensive than term life insurance because of the savings element included in the cash-value policy.

Question 48

Modified life insurance is primarily designed for people whose life insurance needs are high but who cannot yet afford the high cost of cash-value life insurance.​

Question 49

The policyholder may increase or decrease the amount of premium paid with a variable life insurance policy.

Question 50

The rate at which cash value accumulates depends on the rate of return earned.

Question 51

Universal life insurance provides both the pure protection of term insurance and the cash-value buildup of whole life insurance.

Question 52

With cash-value life insurance the actual amount of insurance goes down over time while the amount of investment value goes up with the two components adding up to the face amount of the policy.

Question 53

Some variable return life policies pay both the face amount and the accumulated cash value on the death of the insured party.

Question 54

Young parents should focus on cash-value life insurance to meet their life insurance needs.

Question 55

The type of cash-value life insurance that allows you to increase the face value amount without buying a new policy is called modified life insurance.

Question 56

Adjustable life insurance policies allow changes with no added proof of insurability.

Question 57

Whole life insurance is a form of cash-value life insurance that provides lifetime insurance protection and expects you to pay premiums for life.

Question 58

With a universal life policy,the current rate of return is paid on total premiums paid into the policy.

Question 59

A single-premium life insurance policy is an extreme form of a limited-pay life policy.

Question 60

Buying cash-value life insurance is a method of forced savings.​

Question 61

A return-of-premium rider is an attractive way to invest via life insurance.

Question 62

Endorsements are amendments and additions to the basic insurance policy.​

Question 63

Variable life insurance is also called flexible-premium variable life insurance.

Question 64

Whenever the cause of death for an insured person is suicide the company will simply refund the collected premium.

Question 65

The basic information about who is covered,the time period of coverage and the policy limits are contained in the insuring agreements section of a life insurance policy.

Question 66

A life insurance policy which has been terminated for failure to pay the premium is said to have expired

Question 67

The application for life insurance becomes an actual part of the life insurance policy/contract.

Question 68

If you borrow the cash value of your life insurance policy,any amount owed will be subtracted from the face amount of the policy should you die.

Question 69

When a life insurance policy has both a beneficiary and a contingent beneficiary,these two persons will divide the proceeds of the policy equally after the death of the insured person.

Question 70

The principal borrowed from a cash-value life insurance policy can remain outstanding until the insured dies.

Question 71

A survivorship joint life policy pays when the first insured dies.

Question 72

The insured person retains all rights and privileges granted by a life insurance policy,including the right to amend the policy and the right to designate who receives the proceeds.

Question 73

A survivorship joint life policy pays when the last person covered dies.

Question 74

A disadvantage of first-to-die life insurance policies is that the survivor will have no coverage after the death of the first person.

Question 75

Once a life insurance policy has been in effect for two years,the company cannot deny a claim because of errors in the application.

Question 76

The cash value of a variable life insurance policy can fluctuate up and down.

Question 77

The beneficiary retains all rights and privileges granted by a life insurance policy,including the right to amend the policy and the right to designate who receives the proceeds.

Question 78

Variable-universal life insurance policies have more flexibility than either universal or variable life insurance.​

Question 79

Variable life insurance is also called flexible-premium variable life insurance.

Question 80

Once a life insurance policy is issued,the insurance company cannot refuse to pay a death benefit.