Deck 12: Life Insurance

Question 1

If your death would cause financial stress for your dependents, you should consider purchasing life insurance.

Answer 1

True

Question 2

Life insurance is one of the most important purchases you may ever make.

Answer 2

True

Question 3

Most American families face substantial loss when one spouse dies unexpectedly.

Answer 3

True

Question 4

Consumer awareness of life insurance has changed little over the years.

Question 5

Life insurance proceeds may provide a retirement income.

Question 6

Households with small children most often have the greatest need for life insurance.

Question 7

A term insurance policy pays a benefit only if you die during the period that the policy covers.

Question 8

Nearly all mutual companies issue only nonparticipating policies.

Question 9

Single persons living alone have little or no need for life insurance.

Question 10

Most insurance companies can determine how long a particular person will live.

Question 11

The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of a wage-earner's salary for seven years.

Question 12

Life insurance proceeds may be used to provide an education or income for children.

Question 13

Most people buy life insurance to protect someone who depends on them from financial losses caused by their death.

Question 14

The "family need" method of determining life insurance need provides a thorough estimation of life insurance needs.

Question 15

The first step in buying insurance is to determine whether you really need life insurance.

Question 16

Although it is impossible to put a price on the life of an insured person, most adults probably are covered by some life insurance.

Question 17

The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.

Question 18

Two-earner couples may have a moderate need for life insurance, especially if they have a mortgage or other large debts.

Question 19

How much insurance one should carry is an important question for anyone who owns or intends to buy life insurance.

Question 20

If you have no dependents and your spouse earns as much as you do, you have very simple insurance needs.

Question 21

The premium that is refunded to holders of a participating policy is called the policy dividend.

Question 22

Two basic types of life insurance are temporary and permanent insurance.

Question 23

Term insurance is protection for a specified period of time, usually 1, 5, 10, or 20 years.

Question 24

Term life insurance premiums decrease as you get older.

Question 25

The premium for the whole life policy increases with your age.

Question 26

Universal life, variable life, and adjustable life are types of term life insurance.

Question 27

The premium for a whole life policy remains constant for as long as an insured lives.

Question 28

Decreasing term life insurance is no longer available.

Question 29

Term insurance continues for the entire term even if you stop paying the premiums.

Question 30

Term insurance is a basic, "no frills" form of life insurance and is the best value for most customers.

Question 31

In a participating policy, a part of the premium is refunded to the policyholder annually.

Question 32

The most common type of permanent life insurance is the whole life policy.

Question 33

Permanent insurance can be limited payment, variable, adjustable, or universal life insurance.

Question 34

Most life insurance companies are mutuals.

Question 35

The amount of your life insurance premium for each $1,000 of coverage depends primarily on the age at which you purchase the insurance.

Question 36

The coverage of term insurance ends at the conclusion of the term, but you can continue it if you have a renewability option.

Question 37

Stock life insurance companies are owned by their policyholders.

Question 38

If you have convertible term insurance, you can exchange it for a whole life policy without a medical examination and at a higher premium.

Question 39

Group life and credit life insurance are generally permanent forms of insurance.

Question 40

You can purchase life insurance from two types of insurance companies.

Question 41

Usually, there is no time limit on reinstatement of a lapsed life insurance policy.

Question 42

One important feature of a whole life policy is the nonforfeiture clause.

Question 43

Cash value policies may make sense for people who intend to keep the policies for only a couple of years.

Question 44

When you purchase a variable life policy, the insurance company assumes the risk of poor investment performance.

Question 45

One important feature of a term life policy is its cash value.

Question 46

The cash values of a variable life insurance policy increase at a constant rate over time.

Question 47

An important provision in every life insurance policy is the right to name your beneficiary.

Question 48

A beneficiary is a person designated to receive something such as life insurance proceeds, from the insured.

Question 49

Universal life is a whole life policy that combines term insurance and investment elements.

Question 50

Because the premium payment period for a limited payment policy is shorter than that of a whole life policy, the annual premium is higher.

Question 51

Industrial life insurance is the most popular form of insurance today.

Question 52

Even though it is expensive, you should add the accidental death benefit to any life insurance policy you purchase.

Question 53

A rider is any document attached to the policy that modifies its coverage by adding or excluding specified conditions or altering its benefits.

Question 54

Under the waiver of premium disability benefit provision, the company waives any premiums that are due after the onset of total and permanent disability.

Question 55

A special form of the limited payment plan is the single-premium policy. In this type of contract, you make only one very large premium payment.

Question 56

The incontestability clause stipulates that the insurance company can dispute the validity of the policy anytime during the insured's lifetime.

Question 57

Credit life insurance policies for auto loans and home mortgages are usually the best buys for the protection they offer.

Question 58

The policy loan provision permits you to borrow any amount up to the cash value of the policy.

Question 59

Credit life insurance is used to repay a personal debt should the borrower die before doing so.

Question 60

When your life insurance objectives change, you should review the provisions in your policy before making any decisions regarding the policy.

Question 61

Life insurance is available from a wide range of private and public sources.

Question 62

A chartered life underwriter (CLU) is a life insurance agent who has passed a series of college-level examinations on insurance and related subjects.

Question 63

If life insurance proceeds are left with the company, the company acts as trustee and pays the interest to the beneficiary.

Question 64

The guaranteed insurability option is desirable if you anticipate the need for additional life insurance in the future.

Question 65

Typical examples of uses of life insurance proceeds include:

A) paying off a home mortgage.
B) funding an endowment.
C) making charitable bequests.
D) paying estate taxes.
E) All of these.

Question 66

Accelerated benefits are life insurance policy proceeds paid to the policyholder who is terminally ill before he or she dies.

Question 67

An interest-adjusted index is a method of evaluating the cost of life insurance by taking into account the time value of money.

Question 68

Life insurance premiums are determined basically by the:

A) forces of supply and demand.
B) insurance division of the federal government.
C) forces of competition.
D) use of mortality tables.
E) guesswork of insurance executives.

Question 69

Under the life income option, payments are made to the beneficiary for as long as he or she lives.

Question 70

Individuals and families purchase life insurance primarily to:

A) pay liability claims resulting from accidents.
B) fill financial needs created by the loss of the breadwinner.
C) fund lavish retirement vacations.
D) keep up with people with a similar financial situation.
E) make early retirement possible.

Question 71

An annuity is a financial contract written by an insurance company to provide you with a regular income.

Question 72

The financial strength of an insurance company may be a major factor in holding down premium costs for consumers.

Question 73

Which is a correct statement about life insurance?

A) People are less apt to actively seek life insurance than health insurance.
B) Private sources are the only available sources for life insurance.
C) Life insurance is extremely important if you are single and living alone.
D) There is only one type of life insurance.
E) Consumer awareness of life insurance has changed considerably over the years.

Question 74

It has been shown that there is a link between an individual's education level and their life expectancy.

Question 75

The 2001 CSO Table separates the mortality experience by:

A) age.
B) income level.
C) occupation.
D) domicile.
E) sex.

Question 76

A primary reason for buying an annuity is to give you retirement income for the rest of your life.

Question 77

The second-to-die option is paid when the first spouse dies.

Question 78

The cost-of-living protection rider is designed to help prevent inflation from eroding the purchasing power of the protection your policy provides.

Question 79

The lump-sum payment settlement option is the least used option.

Question 80

When buying life insurance, as a rule, you should deal with companies rated superior or excellent by the big rating agencies.