Deck 12: Life Insurance

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

Before you buy life insurance,you should determine whether you really need life insurance.

Question 6

Life insurance proceeds may be used to provide a retirement income.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Nearly all mutual companies issue only nonparticipating policies.

Question 13

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

Question 14

A life insurance policy puts a price on the life of the insured person.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

The DINK method of determining life insurance needs assumes that your spouse will continue to work after your death.

Question 21

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 22

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 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

Stock life insurance companies are owned by their policyholders.

Question 28

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

Question 29

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

Question 30

Most life insurance companies are mutuals.

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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 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

Term life insurance premiums decrease as you get older.

Question 38

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

Question 39

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

Question 40

Decreasing term life insurance is no longer available.

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

One important feature of a whole life policy is the nonforfeiture clause,which prevents the forfeiture of accrued benefits if you choose to drop the policy.

Question 46

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 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

When your life insurance objectives change,you should review the policy carefully and discuss its provisions with your agent.

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

Even though it is expensive,you should add the accidental death benefit to your life insurance policy,because your chances of dying in the exact manner stated in the policy are very high.

Question 61

What should you consider before you buy life insurance?

A)Your past sources of income
B)Your cost of health insurance
C)Your vacation benefits
D)Your accumulated sick leave
E)Your savings

Question 62

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

Question 63

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

Question 64

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

Question 65

Many people choose to supplement their retirement income by withdrawing some of the investment portion as an annuity to provide regular income.

Question 66

The life expectancy of a female at the age of 30 is 52.0 years.It means that:

A)a 30-year-old female has the highest probability of dying.
B)a 30-year-old female has the highest probability of living.
C)females alive at 30 years of age are expected to live an additional 52 years on average.
D)52.0 is the average age at which all females, age 30, will die.
E)very few 30-year-old females will live past the age of 82.

Question 67

Which of the following are common uses of life insurance proceeds?

A)provide an education for children
B)set up an estate plan
C)establish a regular income for survivors
D)accumulate savings
E)All of these are common uses.

Question 68

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

Question 69

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

Question 70

Which is a correct statement about life insurance?

A)Life insurance provides liquidity at the time of death.
B)Life insurance is still more often bought than sold.
C)Life insurance is one of the least expensive purchases you may ever make.
D)Choosing the right policy takes only a few minutes.
E)Consumer awareness of life insurance has changed considerably over the years.

Question 71

Individuals and families purchase life insurance primarily to:

A)pay liability claims resulting from accidents.
B)protect someone who depends on them from financial losses caused by their death.
C)fund lavish retirement vacations.
D)keep up with people with a similar financial situation.
E)make early retirement possible.

Question 72

You probably have little or no need for life insurance if you are:

A)a single person living with your parents.
B)divorced and have two children.
C)married and your spouse works.
D)gainfully employed.
E)a two-earner household with a mortgage.

Question 73

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

Question 74

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

Question 75

Life insurance proceeds may be used to:

A)pay off a home mortgage.
B)fund an endowment.
C)make charitable bequests.
D)pay estate taxes.
E)All of these.

Question 76

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

Question 77

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

Question 78

The 2001 CSO Table separates the mortality experience by:

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

Question 79

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

Question 80

In the 1950s,the life insurance industry developed:

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