Deck 13: Life Insurance

Question 1

Which of the following best explains why approximately one-third of households in the United States do not have life insurance?

A) People like to focus on more enjoyable events.
B) There is no immediate financial benefit.
C) People don't want to make the periodic payments.
D) People don't want to think about it.

Answer 1

There is no immediate financial benefit.

Question 2

Life insurance is an indication of good financial planning,since it provides a payment to the policyholder upon his or her death.

Answer 2

False

Question 3

Whole life policies are the least expensive way to meet your life insurance needs.

Answer 3

False

Question 4

Life insurance would be necessary in all of the following situations,except

A) you are single and have no dependents.
B) you are married and your spouse has no income.
C) you have three school-aged children.
D) you financially support your disabled mother.

Question 5

The problem with the cash value build up of a whole life insurance policy is that the money can only be used to pay off the policy or buy additional insurance.

Question 6

The beneficiaries of life insurance policies can only be family members or those directly affected by a person's death.

Question 7

During the time the policy is in effect,term life insurance has a good savings and investment component.

Question 8

Life insurance is critical to protect a family's financial situation in the event that a breadwinner dies.

Question 9

If no one else relies on your income,life insurance may not be necessary.

Question 10

Disadvantages of term insurance are that it increases in cost when you renew it and that it has no value when it matures or you discontinue your policy.

Question 11

Which of the following does not represent a financial goal related to life insurance?

A) Provide funds for retirement
B) Maintain financial support for your dependents
C) Provide funds to cover burial costs
D) Provide funds to support your parents

Question 12

Which of the following is a reason to buy life insurance?

A) Build your net worth.
B) Insure you against liability your entire life.
C) Provide a college fund for your children in the event of your early death.
D) Provide a college fund for your children in the event you become completely disabled.

Question 13

Life insurance may not be that important for a couple who both work full-time and who could each be self-sufficient without the other person's income.

Question 14

The only reason a person would buy life insurance is to eliminate or substantially reduce the financial consequences of that person's death by providing income to his or her dependents.

Question 15

Life insurance proceeds are not used to

A) pay off a mortgage.
B) support parents or other relatives.
C) fund the policyholder's retirement.
D) fund charities.

Question 16

Since a key purpose of life insurance is to provide for dependents in the event of a main earner's death,it is logical that the amount of insurance purchased should be

A) a significant amount of money.
B) a multiple of the insured's annual earnings.
C) $50,000.
D) as little as possible since insurance is expensive.

Question 17

Life insurance may be obtained through all of the following except

A) financial institutions.
B) private insurance companies.
C) the federal government.
D) your employer.

Question 18

Term insurance will provide most of a young family's life insurance coverage due to its affordable cost.

Question 19

Term life insurance is considered temporary insurance,since the policy is only in effect for a specified period of time.

Question 20

A person's need for life insurance varies quite a bit over his or her lifetime.

Question 21

A disadvantage of term insurance is that

A) it becomes more expensive when you renew it.
B) the cash value portion of the premium is larger than other forms.
C) you can only exchange your cash value for other insurance.
D) it is expensive early in life when you need it the most.

Question 22

Term insurance provided to a designated group of people with a common bond is called

A) decreasing term insurance.
B) group term insurance.
C) whole life insurance.
D) universal life insurance.

Question 23

Which of the following statements is false concerning term life insurance?

A) The premiums increase as you renew the policy.
B) It will expire and be of no value if not renewed.
C) It has a cash value or savings feature as long as you keep the policy active.
D) It provides the same amount of cash to a beneficiary as whole life policies.

Question 24

The least expensive form of life insurance is

A) term.
B) whole life.
C) universal life.
D) variable life.

Question 25

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

A) Whole life
B) Universal life
C) Decreasing-term
D) Variable life

Question 26

Which of the following is not a type of life insurance covered in the text?

A) Term
B) Dependent life
C) Whole life
D) Universal life

Question 27

Whole life policies can be structured to provide a higher level of death benefits to beneficiaries in the early years of the policies or for the policies to be paid off in a certain time period,for example,20 years.

Question 28

Universal life insurance does not vary from one insurance company to another and is,therefore,the most common and popular form of life insurance.

Question 29

Advantages of whole life insurance policies are that they provide long-term coverage,the rates are fixed,and they have a savings or cash value feature.

Question 30

If you wanted to provide more coverage for your family early in life when they need it the most and decrease the amount of benefits in later years,yet continue to pay the same premiums,you should buy a(n)________ policy.

A) whole life
B) decreasing-term
C) universal life
D) variable life

Question 31

Whole life insurance has a ________ premium and has ________ cash value build up over the life of the policy.

A) fixed; no
B) variable; a
C) fixed; a
D) variable; no

Question 32

________ life insurance can only by used to pay off a home in the event of the policyholder's death.

A) Mortgage
B) Decreasing-term
C) Universal life
D) Homeowner

Question 33

Universal life insurance is similar to whole life,but allows the policyholder more choices of how the savings portion of the premiums is invested.

Question 34

A limited payment option on a whole life policy pays a smaller share of the policy face value to beneficiaries during the first five years of the policy.

Question 35

Rather than purchasing mortgage life insurance,individuals can achieve the same goal and possibly save money by purchasing sufficient ________ to pay off the mortgage.

A) whole life insurance
B) universal life insurance
C) term insurance
D) the type of insurance depends on the age of the house.

Question 36

If you want to borrow money from the cash value of your whole life policy,the interest rates are relatively high and the terms of the loan are quite strict.

Question 37

________ insurance is life insurance that is provided over a specified time period and does not build cash value.

A) Term
B) Whole life
C) Universal life
D) Variable life

Question 38

Term life insurance is

A) often available in group policies through employers.
B) less expensive when you renew it.
C) pure insurance with no savings feature.
D) Both A and C are correct

Question 39

A disadvantage of variable life policies is that the cash value may actually decrease in value if stocks or other investments decline.

Question 40

The best substitute for mortgage insurance would be ________ insurance.

A) decreasing-term
B) whole life
C) universal life
D) variable life

Question 41

The best time to buy a whole life insurance policy in terms of expense is

A) as a child.
B) when you are in college.
C) when you have dependents.
D) in your retirement.

Question 42

A disadvantage of whole life policies is that

A) the premiums are not predictable.
B) they are much more expensive than term policies.
C) the face value of the policy can change over time.
D) the cash value is frozen and not available to policyholders.

Question 43

If your life follows the pattern of college-marriage-kids-retirement,your need for life insurance will

A) steadily increase.
B) steadily decrease.
C) stay the same.
D) peak and then decline.

Question 44

Which of the following factors does not affect your life insurance premiums?

A) Your gender
B) Your health
C) The cash value of the policy
D) Your level of education

Question 45

Which type of life insurance allows policyholders to make their own investment decisions?

A) Whole life
B) Group life
C) Variable life
D) Deferred term life

Question 46

Which of the following insurance type is strictly intended to provide only insurance in the event of death?

A) Whole life
B) Term
C) Universal life
D) Variable life

Question 47

A universal life policy gives policyholders the right to select their ________ which is a right that whole life policyholders do not have.

A) term
B) investments
C) savings
D) amount

Question 48

If a policyholder with a universal life insurance policy skips a payment,then the insurance company

A) terminates the policy.
B) refunds the amount paid and terminates the policy.
C) uses an amount from savings to pay the premium.
D) increases the premium.

Question 49

Your need for life insurance will last for 20 years.You also wish to save some money over that same time period.What kind of life insurance would fill these requirements?

A) Term
B) Decreasing term
C) Universal life
D) Deferred life insurance

Question 50

Which of the following is not an option as a way to use the cash value of your whole life policy?

A) Borrow money from the policy at a low rate of interest
B) Cancel the policy and use the proceeds to buy term insurance in the same value as your whole life policy
C) Have the insurance company invest your cash value in stocks or mutual funds of your choosing
D) Cancel the policy and get your cash value returned to you

Question 51

One advantage of whole life insurance over term life insurance is

A) premiums are not affected by age.
B) whole life insurance forces people to save money.
C) whole life insurance is less expensive than term life.
D) whole life does not build cash value while term life does.

Question 52

Life insurance premiums are based on all of the following except

A) the amount of coverage you desire.
B) your age when you take out the policy.
C) your health habits.
D) the age of your children when the policy is taken out.

Question 53

Life insurance that provides insurance over a specified term and allows policyholders to invest residual funds in various types of investments is known as

A) whole life insurance.
B) term life insurance.
C) universal life insurance.
D) variable life insurance.

Question 54

Which of the following types of insurance is intended to provide a limited choice of investments and an insurance component in the event of death?

A) Whole life
B) Universal life
C) Term insurance
D) Mortgage life

Question 55

Which of the following policies will not give you a cash settlement if you terminate the policy?

A) Whole life
B) Universal life
C) Decreasing term life
D) Variable life

Question 56

Of the following statements dealing with premiums on life insurance,which is not true?

A) Some factors that affect premiums are decided at birth.
B) Premiums will be higher if you buy insurance when you are older.
C) The kind of policy you buy will determine your premiums.
D) There are very few things you can do to reduce your life insurance premiums.

Question 57

If the premium on a term insurance policy is not paid by the due date,which of the following is true?

A) The policy is immediately terminated.
B) The death benefit of the policy is reduced by the amount of the premium owed.
C) The premium will be deducted from the cash value of the policy.
D) The policyholder is given a grace period to pay after which the policy will be terminated if the premium is not paid.

Question 58

Whole life insurance is also referred to as

A) endowment life insurance.
B) universal life insurance.
C) group life insurance.
D) permanent insurance.

Question 59

A life insurance premium is ________ related to your age.

A) somewhat
B) occasionally
C) directly
D) inversely

Question 60

Which of the following will not affect the premiums on a term life insurance policy?

A) Age of the policyholder
B) Percentage earned on savings portion of premium
C) Gender of the policyholder
D) Family medical history of the policyholder

Question 61

The income method of determining how much life insurance coverage you need is

A) based on future family expenses.
B) based on the age of your children.
C) based on the amount of your 401(k) retirement plan.
D) a good starting point.

Question 62

Use the following two columns of items to answer the matching questions below:
universal life insurance

A)cash value and benefits to the beneficiary
B)combination of term insurance and a savings plan
C)premiums constant with reduced benefits
D)term insurance with a variable investment portion

Question 63

The cheapest form of life insurance that provides coverage for a specified time period is ________.

Question 64

Low cost life insurance,often available without a physical exam,is generally offered by

A) Internet insurance companies.
B) mutual insurance companies.
C) employer-sponsored group insurance plans.
D) independent insurance agents.

Question 65

The income method,used to calculate your life insurance coverage,multiplies your current annual income by

A) your expenses per month.
B) the number of your dependents.
C) some arbitrary number, such as 10.
D) your life expectancy.

Question 66

If your financial plan objective is to provide your family with the most insurance benefit in the event of your untimely death,you should purchase

A) decreasing-term insurance.
B) term insurance.
C) universal life insurance.
D) whole life insurance.

Question 67

The easiest method of estimating your life insurance needs is the

A) life cycle approach.
B) budget approach.
C) financial approach.
D) income approach.

Question 68

All of the following are true of the income method of determining life insurance needs except it

A) is easy to use.
B) does not consider your age.
C) factors in the number of children in your family.
D) doesn't figure in savings or investments.

Question 69

Use the following two columns of items to answer the matching questions below:
whole life insurance

A)cash value and benefits to the beneficiary
B)combination of term insurance and a savings plan
C)premiums constant with reduced benefits
D)term insurance with a variable investment portion

Question 70

Which type of life insurance is typically provided by an employer as part of the employee benefits package?

A) Variable life insurance
B) Decreasing-term life insurance
C) Term insurance
D) Dependant life insurance

Question 71

Use the following two columns of items to answer the matching questions below:
variable life insurance

A)cash value and benefits to the beneficiary
B)combination of term insurance and a savings plan
C)premiums constant with reduced benefits
D)term insurance with a variable investment portion

Question 72

What are the three most popular types of life insurance?

Question 73

Using the budget method of determining life insurance needs,a family's future expected expenses are considered.

Question 74

In using the Internet to price insurance,which of the following is not true?

A) It is fast and convenient.
B) It is usually more expensive.
C) There is less pressure.
D) You can compare rates among several companies at once.

Question 75

Life insurance that provides insurance coverage for a specified term and also includes a savings option is called ________ insurance.

Question 76

The more savings a household has accumulated,the less life insurance they will need.

Question 77

The income method,basing life insurance needs on multiples of current income,is the easiest and most accurate method of determining how much life insurance a person should buy.

Question 78

The premiums charged on life insurance will be higher if the individual is more likely to ________ in the near future.

Question 79

In the ________ method,life insurance is determined as a multiple of your annual income.

A) income
B) asset
C) balance sheet
D) budget

Question 80

Use the following two columns of items to answer the matching questions below:
decreasing-term insurance

A)cash value and benefits to the beneficiary
B)combination of term insurance and a savings plan
C)premiums constant with reduced benefits
D)term insurance with a variable investment portion