Question 1

Term life insurance is

Accepted Answer

Term life insurance is a type of insurance that provides coverage for a specific period of time (term) and pays a death benefit to the beneficiary if the insured person dies during the term. The premiums for term life insurance are typically lower for women than for men because women have a longer life expectancy. Term life insurance does not combine insurance with investments, include a savings feature or list permanent insurance as an asset.

Question 2

What kind of life insurance can be used to pay off a home in the event of the policyholder's death?

Accepted Answer

The answer of What kind of life insurance can be...

Question 3

In comparison to an equivalent amount of term insurance, mortgage life insurance

Accepted Answer

Mortgage life insurance typically costs more than an equivalent amount of term life insurance because the premiums remain the same while the coverage decreases as the mortgage balance is paid off. Term life insurance, on the other hand, maintains a consistent coverage amount throughout the policy term. Additionally, mortgage life insurance typically only covers the outstanding mortgage balance, whereas term life insurance can provide coverage for a broader range of needs.

Question 4

What would be the out-of-pocket cost to an individual whose long-term care policy includes a 20 percent coinsurance clause. A current long-term illness has resulted in total expenses of $250 000.

Accepted Answer

With a 20 percent coinsurance clause, the individual is responsible for paying 20 percent of the total expenses. Therefore, the out-of-pocket cost would be $50,000 (20% of $250,000).

Question 5

You are putting $100 per month into a passbook savings account to pay for your child's post-secondary education. You worry that if you die before you get enough saved, your child will not be able to get a good education. Which of the following types of life insurance would best fit your needs at the lowest cost?

Accepted Answer

Term life insurance would be the best choice for this situation because it provides coverage for a specific period of time (e.g. the length of time you are saving for your child's education) at a lower cost than whole or universal life insurance. It will provide a death benefit to your child in case you pass away before the savings goal is reached, ensuring that they can still afford a good education.

Question 6

Tom purchased disability insurance that will provide $1400 per month in benefits. His employer carries a disability policy on Tom that will provide an additional $600 per month in benefits. If Tom's monthly budget is $2500 and Tom is anticipating no additional disability benefits from any other source, what is Tom estimating as his work-related monthly expenditures?

Accepted Answer

Tom's total disability benefits are $1400 + $600 = $2000. Since his budget is $2500, the difference of $500 is likely his work-related expenses.

Question 7

Long-term care insurance should be considered by individuals

Accepted Answer

Long-term care insurance is designed to cover the costs associated with extended care and support for individuals who are unable to perform basic activities of daily living on their own. As such, it is most appropriate for individuals who have not yet met their financial goals to fund their retirement or those who want to protect their assets from being depleted by long-term care costs. Individuals who have already been diagnosed with a life-threatening illness may have difficulty obtaining coverage, and those who are already covered by their group insurance policy may not need additional coverage. Long-term care insurance is not typically recommended for individuals who have limited income, as the premiums may be too high.

Question 8

Long-term care insurance needs

Accepted Answer

Long-term care insurance is particularly important for retired individuals as they are more likely to need assistance with daily living activities due to age-related health issues.

Question 9

Veejay was injured in a car accident and has disability coverage of 60 percent of his gross income and a 90-day waiting period. If he is off work for one full year and earns $5000 per month, what will he collect for the entire year?

Accepted Answer

The answer of Veejay was injured in a car accident...

Question 10

A disadvantage of term insurance is that

Accepted Answer

Term insurance becomes more expensive upon renewal because the premiums are based on the age and health status of the insured at the time of renewal.

Question 11

The similarity between disability income and long-term care insurance is

Accepted Answer

Both disability income and long-term care insurance policies typically have a waiting period before the benefits are paid out. This waiting period could range from a few days to several months, depending on the policy terms. While both types of insurance can provide financial protection during periods of disability or long-term care needs, disability income insurance is designed to replace lost income due to a disability, while long-term care insurance is specifically intended to cover the cost of long-term care services, such as a nursing home or assisted living facility. Neither of these policies typically offer a death benefit, and while some long-term care insurance policies may extend benefits beyond age 65, this is not a common feature of all policies.

Question 12

One of the concerns about term life insurance is

Accepted Answer

Unlike permanent life insurance policies such as whole life, term life insurance policies expire and provide no value if they are not renewed. This can be a concern for those who may not be able to renew their policy due to health or financial issues.

Question 13

The most liberal definition of disability is "own occupation," which allows

Accepted Answer

The "own occupation" definition of disability allows benefits to continue even if you find other work. This means that you can still receive benefits even if you are able to work in a different occupation that does not match your previous job or education. This is the most liberal definition of disability because it provides the broadest coverage for individuals who are unable to perform the duties of their own occupation due to a disability.

Question 14

Based on the following information, how much individual disability insurance coverage per month would be required? ∙ Mortgage payment: $1600/month
∙ Household insurance: $100/month
∙ Car insurance: $200/month
∙ Gas and oil: $90/month ($30 commuting to and from work)
∙ Food: $200/month ($70 represents lunch at work, which would be reduced by half if the meals were prepared at home)
Employer disability insurance would provide $500/month and it is doubtful that anything would be received from either CPP or workers' compensation.

Accepted Answer

To calculate the amount of individual disability insurance coverage required, we need to add up the monthly expenses that would need to be covered. Mortgage payment + Household insurance + Car insurance + Gas and oil + Food = $1600 + $100 + $200 + $90 + $200 - $35 (reduction due to lunch at home) = $2155. Since the employer disability insurance provides $500/month, the remaining amount that needs to be covered by individual disability insurance is $2155 - $500 = $1655. Rounded to the nearest $25, this equals $1625 per month in individual disability insurance coverage. Therefore, the answer is D) $1625.

Question 15

Which of the following types of life insurance has a cash value component?

Accepted Answer

Whole life insurance has a cash value component, which allows for the accumulation of savings over the life of the policy. Term life insurance does not have a cash value component, and dependant life and group life insurance policies may or may not have cash value options depending on the specific plan.

Question 16

What type of insurance is provided over a specified time period and does not build cash value?

Accepted Answer

Term insurance provides coverage for a specific time period, typically between one and thirty years. It does not accumulate cash value like whole life, universal life, or variable life insurance, making it a more affordable option for those seeking protection for a limited amount of time.

Question 17

The main reason for purchasing critical illness insurance is

Accepted Answer

Critical illness insurance allows you to choose how you will deal with health care needs. It provides a lump sum payment upon diagnosis of a covered illness, giving you the flexibility to manage your medical expenses as you see fit. It is not intended to cover funeral costs or serve as a disability insurance policy, although it can be complementary to these types of coverage. The primary reason for purchasing it is to be financially prepared for the expenses associated with a serious illness.

Question 18

Critical illness insurance

Accepted Answer

Option C provides the highest benefit, up to $1 million if a policyholder survives a specified serious illness for 30 days. This can help cover expenses related to medical treatments and recovery, and can provide financial support during a difficult time. Option A does not provide a lump sum payment and only pays a monthly income after a waiting period of 90 days. Option B is limited to specific treatments and does not cover other expenses that may arise from a serious illness. Option D only pays a lump sum upon death and is therefore not as beneficial for those who survive a serious illness.

Question 19

Which of the following is the most important consideration in deciding on creditor insurance versus personally owned life insurance?

Accepted Answer

Who the owner is is the most important consideration in deciding on creditor insurance versus personally owned life insurance. If the creditor is the owner of the policy, then the proceeds of the policy will go to the creditor to pay off the debt. If the debtor is the owner of the policy, then the proceeds of the policy will go to the debtor's beneficiaries.

Question 20

Which type of life insurance requires the lowest cash flow ?

Accepted Answer

Term life insurance generally requires the lowest cash flow because it is the simplest form of life insurance and provides temporary coverage for a specified period of time. It typically has the lowest premium payments since it only provides coverage for a limited period, and it does not have any cash value accumulation or investment features.

Quiz 10: Protecting Your Wealth - Health and Life Insurance