Question 1

All of the following are true except

Accepted Answer

The answer of All of the following are true except
...

Question 2

Jonna purchased a $25,000 cash value policy with a guaranteed insurability option that can be exercised a maximum of four times at $25,000,each over the next 12 years.Which of the following statements is false?

Accepted Answer

The guaranteed insurability option allows Jonna to increase her coverage without proving insurability each time she exercises the option.

Question 3

Ratings of the financial strengths of insurance companies are available from

Accepted Answer

Both Standard & Poors and A.M.Best Company provide ratings of the financial strengths of insurance companies.

Question 4

If a beneficiary wants to make sure that the life insurance proceeds being paid out are not exhausted before he or she dies,the beneficiary would choose which of the following settlement options?

Accepted Answer

The beneficiary should choose the settlement option of income for life or interest income. This option ensures that the beneficiary receives regular income payments until their death, without the risk of the life insurance proceeds being exhausted before then. The lump sum option may be tempting, but it carries the risk of mismanagement or overspending, leading to the funds running out before the beneficiary's death. The options of income for a specific period or a specific amount also carry the risk of the funds running out before the beneficiary's death, whereas interest income provides a regular income stream while preserving the principal.

Question 5

The most important feature of a life insurance company is its

Accepted Answer

The most important feature of a life insurance company is its ability to pay its obligations. This means that the company must have financial stability and solvency to be able to fulfill its promise of paying out claims to beneficiaries. While service and insurance agents are important, they cannot be effective without the financial backing and ability to pay claims. Cost comparison index number is not a relevant feature in evaluating an insurance company's ability to fulfill its obligations.

Question 6

The option that one might purchase if he or she wanted to increase the amount of cash value insurance held in the future is called

Accepted Answer

Guaranteed insurability allows the policyholder to purchase additional coverage at specified intervals without showing proof of insurability. This would increase the amount of cash value within the policy over time.

Question 7

Which of the following rates of return in a cash-value life insurance policy does the agent tend to focus on and which should the purchaser focus on?

Accepted Answer

The agent tends to focus on the current rate of return, as it is the one that is most attractive and can be used as a selling point. However, the purchaser should focus on the guaranteed minimum rate of return, as this is the rate that is guaranteed to be paid regardless of market performance. It is important to understand both rates of return, but the guaranteed minimum rate provides a safety net and ensures that the policy will still have value even if the current rate of return is lower than expected.

Question 8

A living benefit clause provides

Accepted Answer

A living benefit clause provides dollar benefits to the insured prior to death if the insured is terminally ill. This benefit allows policyholders to receive a portion of their life insurance payout prior to their death in the event that they are diagnosed with a terminal illness. It can help cover medical expenses and other costs associated with end-of-life care.

Question 9

One's need for life insurance is generally the greatest during which phase of the life cycle?

Accepted Answer

During the phase of young married with children, individuals typically have dependents who rely on them for financial support. In the event of the policyholder's death, life insurance can help provide for the needs of their family, such as paying for expenses like funeral costs, outstanding debts, and ongoing living expenses. This makes it the phase of the life cycle where the need for life insurance is generally the greatest.

Question 10

If Brent is concerned about not being able to pay his life insurance premium should he become disabled,he should consider a policy with

Accepted Answer

A waiver of premium allows the policyholder to be exempt from paying their premiums if they become disabled and cannot work. This can provide financial relief for Brent and ensure that his life insurance policy remains in force. Cash dividends, a multiple indemnity clause, and a guaranteed insurability option are not directly related to Brent's concern of paying his premiums if he becomes disabled.

Question 11

If Bethany works at a job where her income fluctuates from month to month and is concerned about not being able to pay her cash-value life insurance premium some months,she should consider a policy with

Accepted Answer

An automatic premium loan provision allows the insurance company to automatically use the cash value of the policy to pay premiums if Bethany cannot, ensuring the policy remains in force during times of financial difficulty.

Question 12

The advantage of term insurance is

Accepted Answer

Term insurance provides more coverage per premium dollar compared to other types of insurance. The premiums are also usually stable throughout the term of the policy, but there is no forced savings or high rates of investment return associated with this type of insurance.

Question 13

Settlement options for life insurance proceeds include all of the following except

Accepted Answer

Additional paid-up insurance is not a settlement option for life insurance proceeds. Settlement options typically involve how the beneficiary receives the death benefit, such as in a lump sum, as interest income, or as income for a specific period, but do not include purchasing additional insurance.

Question 14

Typically,when one borrows from his or her cash value in a life insurance policy,

Accepted Answer

When one borrows from his or her cash value in a life insurance policy, interest is usually charged on the loan. However, the policyholder can still earn interest on the remaining non-borrowed portion of the cash value, but it is usually only at the guaranteed minimum rate. The proceeds paid to a beneficiary may be reduced if the loan is not paid back before the insured person's death.

Question 15

Life insurance is generally least needed on the lives of

Accepted Answer

Children typically do not have any dependents relying on their income or financial support, so there is no need for life insurance on their lives. On the other hand, singles with dependents, primary breadwinners, and secondary breadwinners may all have individuals or family members who rely on their income and financial support, making life insurance more necessary.

Question 16

Amounts stipulated in a life insurance policy that protect the cash value in the event that the policyholder chooses not to pay the required premiums are

Accepted Answer

Nonforfeiture values are the amounts stipulated in a life insurance policy that protect the cash value in the event that the policyholder chooses not to pay the required premiums. These values guarantee that the policyholder will not lose all the money they have paid into the policy if they choose to stop paying premiums.

Question 17

Which of the following policy features typically cost extra?

Accepted Answer

Both waiver of premium and guaranteed insurability typically cost extra as they provide additional benefits beyond the basic policy coverage. Nonforfeiture values, on the other hand, are typically included in the policy at no extra cost.

Question 18

The rate of return on cash-value life insurance has historically ____ what can be achieved by a diversified portfolio of stock and bond mutual funds.

Accepted Answer

Cash-value life insurance policies tend to have lower investment returns compared to a diversified portfolio of stock and bond mutual funds. This is due to higher fees, lower potential investment returns, and the added cost of insurance coverage. While there are some benefits to cash-value life insurance, such as tax deferral and a guaranteed death benefit, it is generally not considered an effective investment strategy.

Question 19

Providing for a secure income for your family can be met through adequate term life insurance when in your childrearing years that is replaced with your _________ as you enter the empty-nest years and approach retirement.

Accepted Answer

Retirement nest egg is the correct answer because it refers to the savings and assets that individuals accumulate over their working years to provide for their financial needs during retirement. This aligns with the context of transitioning from needing term life insurance for income replacement during childrearing years to relying on accumulated savings and investments as one approaches retirement and enters the empty-nest phase.

Question 20

When using the "buy term and invest the rest" strategy,the easiest way to ensure your money is actually invested is to set up

Accepted Answer

The easiest way to ensure your money is actually invested when using the "buy term and invest the rest" strategy is to set up an automatic investment program (AIP) with a mutual fund. This way, a specified amount of money is automatically invested at regular intervals, which eliminates any temptation to use the money for other purposes.

Quiz 12: Life Insurance Planning