Question 1

Decreasing term policy is:

Accepted Answer

D

Question 2

Whole life insurance is a life insurance designed to offer ongoing insurance coverage over the course of an insured's entire life. The noteworthy advantage of whole life insurance is:

Accepted Answer

Whole life insurance not only provides life insurance coverage but also helps to build an estate through accumulating cash value. This cash value can be borrowed against or withdrawn in the future, providing added financial security.

Question 3

If you have caused an accident, which type of automobile insurance would cover damage to your own car?

Accepted Answer

Collision insurance would cover the damage to your own car in the event that you are at fault in an accident. Liability insurance only covers damage to the other person's car and does not cover your own car. Term insurance is a type of life insurance and does not cover car damage, while comprehensive insurance covers damage from things like theft or natural disasters, but may not cover damage from a collision that you caused.

Question 4

A method of determining the amount of life insurance coverage needed by multiplying gross annual earnings by some selected number is called:

Accepted Answer

The method described is the Multiple of earnings method, which is a popular and simple way to estimate the amount of life insurance needed to protect against loss of income due to premature death. This method typically involves multiplying gross annual earnings by a certain number (such as 10 or 20) to arrive at a recommended coverage amount. However, this method may not take into account other important factors, such as outstanding debts, future expenses, and inflation, which are addressed more fully in the Need analysis method.

Question 5

Life insurance is intangible. You can't see, smell, touch or taste its benefits and those benefits mainly happen when someone is died. However, life insurance does have some important benefits that should not be ignored in the financial planning process. Which of the following is out of those benefits?

Accepted Answer

The answer of Life insurance is intangible. You can't see,...

Question 6

____________ is a hybrid form of HMO that allows members to go outside the HMO network for care and reimburses them at a specified percentage of the cost.

Accepted Answer

A point-of-service plan is a hybrid form of HMO that allows members to go outside the HMO network for care and reimburses them at a specified percentage of the cost. It combines elements of HMOs and PPOs, giving members some flexibility while still controlling costs.

Question 7

It is a term life policy written for a given number of years with coverage remaining unchanged throughout the effective period. What is it?

Accepted Answer

A straight term policy is a type of term life insurance where the coverage amount remains constant throughout the policy term.

Question 8

Need analysis method is a more detailed approach than multiple-of-earnings method. This method considers both financial obligations and financial resources of the insured and his or her dependents. Which of the following steps is/are involved in this method?

Accepted Answer

The need analysis method involves all three steps listed in the question: estimating the economic resources needed in case of the insured's death, determining all available financial resources after the insured's death (including existing life insurance and pension plan death benefits), and subtracting the available resources from the estimated amount needed to determine how much additional life insurance is required.

Question 9

__________ is the accumulated refundable value of an insurance policy; results from the investment earnings on paid-in insurance premiums.

Accepted Answer

Cash value is the accumulated refundable value of an insurance policy, which results from the investment earnings on paid-in insurance premiums.

Question 10

A form of HMO in which subscribers receive services from physicians practicing from their own offices and from community hospitals affiliated with the IPA.

Accepted Answer

An individual practice association (IPA) is a form of HMO where subscribers receive services from physicians practicing in their own offices and from community hospitals affiliated with the IPA. The physicians cooperate to provide medical services to subscribers at a discounted rate negotiated between the IPA and the HMO.

Question 11

According to multiple of earnings method, the rule of thumb used by many insurance agents is that your insurance coverage should be equal to 5 to 10 times your current income. For example, if you currently earn $70,000 a year, using the multiple of earning method then you need between:

Accepted Answer

According to the multiple of earnings method, the rule of thumb suggests that your life insurance coverage should be 5 to 10 times your current income. If your current income is $70,000, multiplying it by 5 gives you $350,000 and multiplying it by 10 gives you $700,000, so the life insurance coverage should be between $350,000 and $700,000. Therefore, option D is the best choice.

Question 12

Three major types of whole life policies are available. Which of the following is/are Not out of those?

Accepted Answer

All three types of whole life policies (Continuous Premium, Limited Premium, and Single premium) are available.

Question 13

It's a managed care plan that is similar to a plan that is similar to a PPO but reimburses members only when affiliated providers are used. What is it?

Accepted Answer

An exclusive provider organization (EPO) is a managed care plan that is similar to a PPO but only reimburses members when affiliated providers are used. This means that members cannot receive coverage for care from out-of-network providers, except in emergency situations.

Question 14

Many savings programs are protected by the federal government against loss. Which of the following is Not?

Accepted Answer

Although bonds issued by the federal government and U.S. savings bonds are protected by the government against loss, bonds issued by states are not necessarily protected. Certificate of Deposits (CDs) at the bank are also protected by the Federal Deposit Insurance Corporation (FDIC), up to a certain limit. Therefore, the correct option is A.

Question 15

Insurance that provides only death benefits, for a specified period, and does not provide accumulation of cash value is called:

Accepted Answer

Term life insurance is a type of temporary coverage that provides death benefits for a specified period, such as 10, 20, or 30 years, without accumulating cash value. Straight term policies and decreasing term policies are also types of term life insurance, but they have different features. Renewability refers to the ability to extend coverage beyond the initial term without having to reapply for insurance, which is usually an optional rider that can be added to a term life policy.

Question 16

Doug must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?

Accepted Answer

Choosing a state college over a private college does not directly affect the finance charge rate on a loan. The other options involve factors that could influence the interest rate or terms of the loan.

Question 17

If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?

Accepted Answer

Interest earned on a savings account is considered taxable income, and you may be required to pay income tax on it if your total income, including the interest, exceeds certain thresholds.

Question 18

Which of the following instruments is NOT typically associated with spending?

Accepted Answer

A certificate of deposit is a type of investment where the holder deposits money for a fixed period of time at a fixed interest rate. It is not typically used for spending.

Question 19

Group health insurance is the health insurance consisting of contracts written between a group, (employer, union, etc.) and the health care provider. Most health insurance plans fall into one of two categories. Which one of the following set represents those two categories?

Accepted Answer

Traditional indemnity and managed care plans are the two main categories of health insurance plans.

Question 20

It is a term life policy provision allowing the insured to renew the policy at the end of its term without having to show evidence of insurability

Accepted Answer

The provision described is specifically the benefit of renewability, which allows the insured to continue coverage without having to provide evidence of insurability. Therefore, choice D is the correct answer. The other choices do not address the specific provision of renewability.

Exam 2: Certified Trust and Financial Advisor