Deck 12: Life Insurance

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Nearly all mutual companies issue only nonparticipating policies.

Question 5

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

Question 6

Life insurance proceeds may provide a retirement income.

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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 18

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

Question 19

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

Question 20

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

Question 21

Stock life insurance companies are owned by their policyholders.

Question 22

Decreasing term life insurance is no longer available.

Question 23

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

Question 24

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

Question 25

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 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

Term life insurance premiums decrease as you get older.

Question 33

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

Question 34

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

Question 35

Most life insurance companies are mutuals.

Question 36

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 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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 47

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

Question 48

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

Question 49

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 50

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

Question 51

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 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

When you buy an annuity,the interest on the principal,as well as the interest compounded on that interest,builds up free of current income tax.

Question 62

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

Question 63

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

Question 64

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

Question 65

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

Question 66

A fixed annuity is a plan under which the monthly payments vary.

Question 67

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

Question 68

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

Question 69

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

Question 70

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 the items listed.

Question 71

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

Question 72

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 73

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 74

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 75

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

Question 76

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

Question 77

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

Question 78

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

Question 79

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 80

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