Question 1

In determining available resources to offset economic needs,you would generally not consider

Accepted Answer

When determining available resources to offset economic needs, the earning potential of financially independent children is generally not considered because it is not a reliable or consistent source of income. Children may not always be able or willing to provide financial assistance and their earning potential may also fluctuate over time.

Question 2

The settlement option chosen by most beneficiaries is

Accepted Answer

The answer of The settlement option chosen by most beneficiaries...

Question 3

____ is a common provision in many term policies.

Accepted Answer

A renewable clause is a common provision in many term policies. This provision allows the policyholder to renew their policy at the end of its term without having to undergo additional underwriting. This means that the policyholder can continue to have coverage, even if their health or other circumstances have changed during the term of the policy.

Question 4

Which of the following companies does NOT rate the financial strength of life insurance companies?

Accepted Answer

Welch's is not a reputable company that rates the financial strength of life insurance companies. The other options, A.M. Best, Moody's, Duff & Phelps, and Weiss are all widely recognized rating agencies in the insurance industry.

Question 5

The best way to handle risk is to

Accepted Answer

The best way to handle risk is to use some combination of techniques such as avoiding risk when possible, assuming only necessary risk, preventing losses through risk mitigation strategies, and transferring some of the risk to an insurance company through purchasing an insurance policy. No single technique is a silver bullet and combining them can provide the most comprehensive risk management approach.

Question 6

The probability of a loss occurring can be reduced by

Accepted Answer

Loss prevention involves taking measures to reduce the likelihood of a loss occurring. This can include implementing safety protocols, conducting regular inspections, and investing in security measures. By reducing the chance of a loss, the overall risk to the organization is decreased.

Question 7

Decreasing term insurance usually has a decreasing face value and

Accepted Answer

Decreasing term insurance typically has a level premium, meaning that the premium remains the same throughout the course of the policy despite the decreasing face value.

Question 8

Underwriting helps protect life insurance companies from which of the following:

Accepted Answer

Underwriting helps protect life insurance companies from adverse selection, which is the risk that only those who are at higher risk of dying will buy the insurance policy, leading to an imbalance in the risk pool and potentially higher payouts for the company. Underwriting helps mitigate this risk by evaluating applicants' health and lifestyle factors and determining appropriate premiums based on their risk level. It does not directly protect against the other options listed.

Question 9

The most valuable single technique in personal risk management to assist an individual in determining how much life insurance is needed is:

Accepted Answer

Assessing the family's total economic needs and subtracting financial resources available to meet those needs is the most valuable technique in personal risk management to determine how much life insurance is needed. This approach takes into account the specific needs and resources of the family, rather than relying on generalized calculations such as Human Life Value or a multiple of earnings.

Question 10

Through insurance,society is able to

Accepted Answer

Insurance allows society to reduce financial risks and share losses. By pooling resources, individuals and businesses can protect themselves against unexpected events and receive financial assistance when losses occur. This helps to ensure that no one person or business is solely responsible for bearing the entire cost of a catastrophic event. Additionally, because insurance companies are able to spread the cost of claims across a large pool of policyholders, they are often able to offer coverage at a lower cost than it would be for an individual to self-insure.

Question 11

Using the ____ approach is the most accurate method to determine life insurance needs.

Accepted Answer

The answer of Using the ____ approach is the most...

Question 12

The needs approach to determining the amount of life insurance considers

Accepted Answer

The needs approach to determining the amount of life insurance considers all of these factors - family income, paying off debts, special financial needs, and liquidity. This approach helps ensure that the policyholder's beneficiaries are protected financially in the event of their death.

Question 13

Joe died at age 45 leaving a wife (age 36)and two sons (ages 10 and 12).His wife,Maria,is not gainfully employed.Which of the following is true regarding their Social Security benefits assuming Joe was covered by Social Security?

Accepted Answer

- The sons will be eligible for Social Security benefits until they are age 18, unless they are still in high school, in which case benefits can continue until they graduate or until two months after they turn 19, whichever comes first. 
- Maria can receive benefits when she is 60, but she may also be eligible for benefits earlier if she has a disability or if she is caring for a child under age 16 or a disabled child. 
Therefore, all of the options listed in the answer choices are true.

Question 14

If a life insurance policy pays dividends,it is called:

Accepted Answer

If a life insurance policy pays dividends, it is called a participating policy. The dividends are a share of the insurance company's profits and are paid out to policyholders. Participating policies are typically more expensive than non-participating policies, but they offer the potential to earn additional income through the dividend payments.

Question 15

____ is not a type of term insurance.

Accepted Answer

The answer of ____ is not a type of term...

Question 16

The underwriting function is designed to be sure that premiums are based on

Accepted Answer

The underwriting function is designed to assess the risk and probability of losses for an insurance policy. This helps the insurer to determine the appropriate premium that should be charged to cover the potential losses. Therefore, the underwriting process aims to evaluate the chance of loss, not income levels, value of the gain, or expense levels, in setting premiums.

Question 17

The primary purpose of life insurance is to provide

Accepted Answer

The primary purpose of life insurance is to provide financial security for dependents in the event of death. While life insurance policies may have some tax advantages or serve as investment vehicles, their primary function is to provide a death benefit to beneficiaries in the event of the policyholder's death.

Question 18

Underwriting is

Accepted Answer

Underwriting is the process of evaluating and determining which risks or exposures to insure, based on an individual or entity's potential to cause a loss or file a claim. It involves analyzing information about the applicant, such as their age, health, occupation, and past insurance history, to determine the appropriate premium to charge and the level of insurance coverage to provide. Underwriting is an essential part of the insurance process as it helps to ensure that the insurance company remains financially stable and able to pay claims.

Question 19

If life insurance is convertible,the policy can be

Accepted Answer

If a life insurance policy is convertible, it means that the policyholder has the option to convert the policy into another type of life insurance policy, such as a term policy into a whole life policy. This option allows policyholders to adapt their coverage to their changing needs over time.

Question 20

Term life insurance is characterized by

Accepted Answer

Term life insurance premiums are typically related to age, meaning that the older you are, the higher your premium will be. This is because the likelihood of death increases as you age, and the insurance company needs to adjust the premium to reflect this increased risk. The other options listed do not apply to term life insurance: A is more typical of whole life insurance, C is subjective and depends on an individual's specific needs, D is not always true as some term policies can be converted to permanent policies, and E also applies to whole life insurance and not term life insurance.

Quiz 8: Insuring Your Life