AINS 22 - Segment C
Regarding group life insurance, instead of receiving individual policies, insured members receive Select one: A. A certificate of insurance. B. A copy of the Declarations page. C. No confirmation of coverage. D. A copy of the master policy.
A. A certificate of insurance.
Which one of the following is an employer-sponsored retirement plan that forces employees to completely assume the investment risk of earnings volatility? Select one: A. Defined contribution plan B. Roth IRA C. Defined benefit plan D. Defined benefit 401(k) plan
A. Defined contribution plan
A pension plan in which the contribution rate or amount is specified, but the retirement benefit is variable is a Select one: A. Defined contribution plan. B. Defined benefit plan. C. Individual retirement account. D. Profit-sharing plan.
A. Defined contribution plan.
Although the basis for the amount of insurance can differ, most group term life insurance plans provide an amount of insurance Select one: A. Equal to some multiple of the employee's annual salary. B. Based on the employee's length of service. C. Based on the employee's position. D. Equal to a flat amount for all employees.
A. Equal to some multiple of the employee's annual salary.
Which one of the following statements about disability is true according to the Social Security Administration? Select one: A. Fewer than one-half of Social Security Disability Insurance claims are approved. B. The average benefit paid by Social Security Disability Insurance is almost $3,000 per month. C. About 4 percent of Americans are disabled. D. Only about five percent of Americans entering the work force today will become disabled before they retire.
A. Fewer than one-half of Social Security Disability Insurance claims are approved.
What type of renewability provision is found in most long-term care insurance policies? Select one: A. Guaranteed renewable B. Noncancelable C. Conditionally renewable D. Optionally renewable
A. Guaranteed renewable
Which one of the following statements about the effect of inflation on retirement planning is true? Select one: A. Healthcare costs are especially sensitive to higher inflation rates. B. The effect of inflation generally needs to be considered only during the first few years of retirement. C. Inflation is of little concern to retirees whose income is fixed. D. During inflationary periods, interest rates tend to drop.
A. Healthcare costs are especially sensitive to higher inflation rates.
Annual tax-deductible contributions to a traditional individual retirement account (IRA) are Select one: A. Limited to a certain amount per year. B. Unlimited. C. A maximum of 50% of taxable compensation. D. A minimum of 50% of taxable compensation.
A. Limited to a certain amount per year.
Chris and Bill have their family insured under a plan that allows them to select their own healthcare provider without any restrictions. The plan then reimburses them for a percentage of their medical expenses after the satisfaction of a deductible. This is an example of Select one: A. A health maintenance organization plan. B. An indemnity plan. C. A point-of service plan. D. A preferred provider organization plan.
B. An indemnity plan.
Which one of the following best describes contributions made to a thrift plan? Select one: A. The employee contributes a fixed amount. The employer contributes a percentage of that amount. B. The employee contributes up to a certain percentage of his or her salary. The employer contributes a percentage of the employee's contribution. C. The employer contributes a portion of the company's profits. The employee contributes a fraction of the employer's contribution. D. The employee contributes a fixed amount. The employer matches that amount.
B. The employee contributes up to a certain percentage of his or her salary. The employer contributes a percentage of the employee's contribution.
All of the following are characteristics of universal life insurance, EXCEPT: A. It combines life insurance protection with an investment or a savings aspect. B. Three interest rates are stipulated in the policy. C. The insurance protection, savings, and expense components of the policy are unbundled. D. For most universal life policies, the insured's premium payments are flexible.
B. Three interest rates are stipulated in the policy.
Under the needs approach, the amount of life insurance needed is determined by subtracting which one of the following from total estimated needs? Select one: A. Current life insurance amount B. Total financial assets C. Estate clearance fund D. Total income needs
B. Total financial assets
According to the National Safety Council, what percentage of disabling accidents and illnesses are work-related? Select one: A. 70 percent B. 50 percent C. 10 percent D. 30 percent
C. 10 percent
Howard is a 52-year-old single father of a 16-year-old son, Ben. He has been insured by a $500,000 life insurance policy for 16 years. As policyholder, Howard has selected a fixed-amount settlement option. Howard dies suddenly of an aneurysm. How will the death proceeds be paid to Ben? Select one: A. The proceeds will be paid to Ben periodically over a fixed period of time. B. Ben will receive the interest from the death proceeds in periodic payments. C. Fixed monthly amounts will be paid to Ben until the principal and interest are exhausted. D. Ben will receive an income for life.
C. Fixed monthly amounts will be paid to Ben until the principal and interest are exhausted.
A general type of annuity is a combination plan. Combination plans combine features of Select one: A. Deferred and immediate annuities. B. Life insurance and equity indexed annuities. C. Fixed-dollar and variable annuities. D. Flexible-premium and single-premium annuities.
C. Fixed-dollar and variable annuities.
Which one of the following types of annuities is considered a more conservative investment and has a lower rate of return? Select one: A. Equity indexed annuity (EIAs) B. Variable annuity (VA) C. Fixed-dollar annuity D. Combination plan
C. Fixed-dollar annuity
A reinstatement clause in a life insurance policy Select one: A. Continues a life insurance policy in force for 30 days after the premium due date, allowing the policyowner the opportunity to pay the overdue premium to reinstate the policy. B. Continues a life insurance policy in force for 60 days after the premium due date, allowing the beneficiaries the opportunity to pay the overdue premium to reinstate the policy. C. Gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium. D. Gives the insurer the option, but not the obligation, to reinstate policies for lapsed policyholders who wish to reactivate coverage.
C. Gives the policyowner the right to reinstate a life insurance policy that has lapsed for nonpayment of premium.
The risk associated with the purchasing power of an investment's proceeds is known as Select one: A. Market risk. B. Interest-rate risk. C. Inflation risk. D. Business risk.
C. Inflation risk.
Social Security retirement, survivors, and disability benefits are a function of a worker's primary insurance amount (PIA)? How is the PIA determined? Select one: A. It is equal to twice the federal minimum wage. B. It is determined annually by Congress. C. It is determined by a formula that considers a worker's average monthly earnings over a specified number of years. D. It is determined by a formula that considers a worker's age and number of dependents.
C. It is determined by a formula that considers a worker's average monthly earnings over a specified number of years.
Which one of the following types of life insurance is useful to someone whose current need for life insurance will diminish after a number of years? Select one: A. Variable life B. Universal life C. Term life D. Whole life
C. Term life
A cash value life insurance policy may allow a loan to be taken against the policy cash value. What happens if the insured dies before repaying the loan? Select one: A. Repayment becomes an obligation of the insured's estate. B. No insurance payment is made. C. The death benefit amount is reduced by the outstanding loan amount. D. The obligation is forgiven.
C. The death benefit amount is reduced by the outstanding loan amount
Which one of the following is true regarding a Roth IRA? Select one: A. Annual contribution limits are higher than they are for a traditional IRA. B. Annual contribution limits are lower than they are for a traditional IRA. C. There are no required distributions during the lifetime of a Roth IRA. D. The account holder is able to deduct contributions for income-tax purposes.
C. There are no required distributions during the lifetime of a Roth IRA.
Melissa and her husband Herb are in their early 40s. Each is employed and has a good income. An analysis of their financial situation shows that their current life insurance would enable the other to live adequately if one of them should die prematurely. However, there is one gap that they need to fill in case one or both of them die within the next 12 years. It is how to finance their children's college education. The children should all graduate from college within this 12-year period. Which one of the following products will best address this concern? Select one: A. A universal life insurance policy B. A Roth IRA C. An annuity D. A term life insurance policy
D. A term life insurance policy
A disability income policy has a rider that increases the monthly benefit amount by 4 percent for each of the first five years the policy is in force, if benefits have not yet begun. This is an example of which one of the following types of riders? Select one: A. Guaranteed insurability B. Future increase option C. Cost of living adjustment D. Automatic increase
D. Automatic increase
A worker covered under Social Security can earn up to four "credits" per year. What is the maximum number of credits a worker will ever have to earn to be fully insured in order to receive retirement benefits? Select one: A. Eighty B. Thirteen C. Twenty D. Forty
D. Forty
The purpose of the guaranteed insurability rider for a life insurance policy is to Select one: A. Guarantee the insured's future insurability even though he or she might allow the policy to lapse due to nonpayment of the premium. B. Allow the insurer the option of nonrenewing the policy if the insured misrepresents his or her insurability on the application. C. Allow the insurer the option of canceling the policy if the insured misrepresents his or her insurability on the application. D. Guarantee the insured's future insurability even though he or she might develop poor health.
D. Guarantee the insured's future insurability even though he or she might develop poor health.
Kevin recently purchased a long-term disability income policy. The policy states that he can renew the coverage until age 65 as long as he is gainfully employed. However, the insurer reserves the right to raise the premium at renewal. This policy is considered Select one: A. Optionally renewable. B. Conditionally renewable. C. Noncancelable. D. Guaranteed renewable.
D. Guaranteed renewable.
An insured with an accelerated death benefits rider attached to his life insurance policy has the right to receive some or all of the available life insurance proceeds before death occurs if Select one: A. He or she becomes unemployed for a period that exceeds one year. B. He or she becomes totally disabled before a certain age. C. He or she becomes seriously injured as a result of an accident. D. He or she contracts a catastrophic or terminal illness.
D. He or she contracts a catastrophic or terminal illness.
Which one of the following statements about insurance treatment of health-related, disability, and long-term care loss exposures is true? Select one: A. Multiple forms of disability income insurance are never an appropriate purchase. B. Long-term care insurance allows an insured little or no choice among benefit options. C. Health insurance premiums are the same regardless of an insured's age. D. High costs associated with medical care, disability, and long-term care can force some individuals and families into bankruptcy.
D. High costs associated with medical care, disability, and long-term care can force some individuals and families into bankruptcy.
Which one of the following is a qualified plan that allows self-employed individuals to make tax deductible contributions to a retirement plan? Select one: A. 401(k) plan B. Thrift plan C. Simplified Employee Pension plan D. Keogh plan
D. Keogh plan
Molly is a 35-year-old single mother of a 17-year-old daughter. She is insured by a $300,000 life insurance policy for 17 years. Her daughter Nancy is the sole beneficiary of the insurance policy. Molly had the following riders on the insurance policy: Waiver of Premium Accidental Death Benefits Molly became totally and permanently disabled as a result of a car accident. What benefits can Molly and Nancy expect from the policy? Select one: A. $300,000 B. Nothing C. 2% of the policy face amount each month up to $150,000 D. Premiums will be waived while Molly is disabled
D. Premiums will be waived while Molly is disabled
For the same benefits provided, why is the cost of private health insurance significantly greater that the cost of group health insurance? Select one: A. Private health insurance is more heavily taxed. B. Private health insurance is only offered by for-profit organizations. C. Private health insurance is unregulated. D. Private health insurance lacks the economies of scale associated with group health insurance.
D. Private health insurance lacks the economies of scale associated with group health insurance.
What is the largest category engaged in group life insurance? A. Schools B. Employers C. Credit unions D. Religious affiliations
B. Employers
Greg purchased a $500,000 life insurance policy, naming his wife, Zasha, as beneficiary. When Greg died and Zasha made a claim against the policy, she was told she would not receive $500,000 but rather $2,000 a month until she dies. What settlement option has Greg likely selected for his life insurance policy? Select one: A. Fixed period option B. Life income option C. Periodic payment option D. Fixed amount option
B. Life income option
Arthur has decided to continue working full-time past his full Social Security retirement age of sixty-six. He is aware that by postponing receipt of his Social Security retirement benefit, which he does not currently need, he can receive a significantly larger benefit later. After what age will his benefits no longer increase because of such a postponement? Select one: A. Sixty-eight B. Seventy C. Seventy-two D. Seventy-five
B. Seventy
Flexibility is a fundamental characteristic of Select one: A. Term life insurance. B. Universal life insurance. C. Whole life insurance. D. Group life insurance.
B. Universal life insurance.
Under a defined contribution plan, the employer's Select one: A. Contributions vary depending on the amount needed to fund the benefit. B. Contributions do not change. C. Contribution rate is defined, and the retirement benefit is defined. D. Contribution rate is defined, but the retirement benefit is variable.
D. Contribution rate is defined, but the retirement benefit is variable.
True or False: The cash values in variable universal life insurance are guaranteed, as are a minimum interest rate.
False
A retirement plan in which the employer contributes to an IRA established for each eligible employee, with annual contribution limits substantially higher than those allowed for traditional IRAs, describes a Select one: A. Simplified Employee Pension (SEP) plan. B. Section 403(b) plan. C. Profit-sharing plan. D. Section 401(k) plan.
A. Simplified Employee Pension (SEP) plan.
Which one of the following statements about original Medicare is true? Select one: A. Some people under age 65 may be eligible for coverage. B. Part B is financed solely by premiums paid by voluntarily enrolled persons. C. Part A provides benefits for long-term custodial care. D. It is a means-tested welfare program.
A. Some people under age 65 may be eligible for coverage.
Most long-term care policies have a provision that provides the services of a care coordinator. Which one of the following statements about this provision is true? Select one: A. The coordinator helps arrange for and monitor care. B. Care is limited to the providers who work with the coordinator. C. The care coordinator's help is usually mandatory. D. The coordinator must be a licensed physician.
A. The coordinator helps arrange for and monitor care.
Which one of the following is a major characteristic of a consumer-directed health plan? Select one: A. The use of a health savings account (HSA) or a health reimbursement arrangement (HRA) C. Little or no access to tools for making healthcare decisions D. Low premiums because of lower-quality care than under other types of healthcare plans
A. The use of a health savings account (HSA) or a health reimbursement arrangement (HRA)
Among the costs associated with premature death, probate costs would be categorized as: A. Unpaid long-term obligations B. Estate planning costs C. Outstanding debts D. Lost income
B. Estate planning costs
John used an inheritance to purchase an annuity at age 50 to provide him a fixed-annual income after he reaches age 65. This is an example of a(n) Select one: A. Flexible-premium annuity. B. Equity indexed annuity. C. Deferred annuity. D. Variable annuity.
C. Deferred annuity.
All of the following are considered taxable compensation for IRA purposes, EXCEPT: A. Salaries B. Tips C. Investment Income D. Self-employment Income
C. Investment Income
Investors who are conservatively investing to reach short-term financial goals, such as saving for a down payment on a home, are likely most concerned with which one of the following investment objectives? Select one: A. Current income B. Capital appreciation C. Preservation of capital D. Growth and income
C. Preservation of capital
A point-of-service (POS) plan is a hybrid healthcare plan that has characteristic of which two other types of healthcare plans? Select one: A. A preferred provider organization (PPO) and an exclusive provider organization (EPO) B. A major medical plan and Medicare C. An indemnity plan and a health maintenance organization (HMO) D. A health maintenance organization (HMO) and a preferred provider organization (PPO)
D. A health maintenance organization (HMO) and a preferred provider organization (PPO)
Malvern Life provides ordinary life insurance at the following premiums: Age Premium 25 $10 per $1,000 of insurance 26 $11 per $1,000 of insurance Lee purchases $110,000 of insurance for $1,100 per year, stating her age as 25 rather than her correct age of 26. How much will Malvern Life pay if Lee dies? Select one: A. $0 B. $89,000 C. $100,000 D. $110,000
C. $100,000
Patrick is preparing a worksheet to estimate the amount of life insurance he needs. He estimates his final expenses needs to be $25,000, and estimates family expenses needs to be $425,000. He estimates his special needs to be $200,000. Patrick's total financial assets are $450,000, including $250,000 of life insurance and $100,000 in a Section 401(k) plan. Using the needs approach, how much additional life insurance does Patrick need? Select one: A. $0 B. $175,000 C. $200,000 D. $400,000
C. $200,000
When determining the amount of life insurance to own using the needs approach, the amount needed to allow for monthly income after a parent's death until children are financially independent is categorized as Select one: A. A financial asset. B. A special need. C. A family living expense need. D. A cash need.
C. A family living expense need.
Qualification for Social Security disability income benefits requires objective medical evidence that a worker's impairment meet which one of the following requirements with respect to duration? Select one: A. Be expected to last at least 24 consecutive months B. Be expected to eventually result in death C. Be expected to last at least 12 consecutive months or to result in death D. Be expected to last until the earlier of death or the worker's eligibility for Social Security retirement benefits
C. Be expected to last at least 12 consecutive months or to result in death
In which one of the following family structures is the risk of incurring child-care costs over a prolonged period a unique consideration in establishing life insurance needs? Select one: A. Sandwiched family B. Traditional family C. Blended family D. Single-parent family
C. Blended family
Which one of the following is typically a party to a group life insurance contract? Select one: A. Broker B. Beneficiary C. Employer D. Employee
C. Employer
Regarding insuring the premature death loss exposure, which one of the following statements is true? Select one: A. In two-income families without children, life insurance is generally not needed. B. In single-parent families, the need for life insurance is not great since there is no surviving spouse. C. In a traditional family structure, the need for life insurance on the spouse that stays at home can be as important as the need for life insurance on the spouse in the labor force. D. In two-income families with children, life insurance is generally needed only on the spouse with the higher income.
C. In a traditional family structure, the need for life insurance on the spouse that stays at home can be as important as the need for life insurance on the spouse in the labor force.
The assignment clause of a life insurance policy provides which one of the following? Select one: A. Dividends are assigned in accordance with the option selected. B. If the policyowner and the insured are not the same person, policy rights are assigned to the insured. C. Ownership rights in the policy can be transferred to another party. D. The order of beneficiaries is assigned by a formula.
C. Ownership rights in the policy can be transferred to another party.
Section 403(b) plans are tax-deferred retirement plans for Select one: A. Self-employed individuals. B. Employers who employ 100 or fewer eligible employees. C. Tax-exempt organizations. D. Banks, insurance companies, and other financial institutions.
C. Tax-exempt organizations.
Which one of the following best describes "double indemnity" regarding a life insurance policy? Select one: A. Death as the result of suicide will pay no more than half the face value. B. If two policies are issued on the same life, only one policy must pay in the event of death. C. The death benefit doubles if death is the result of an accident. D. The death benefit is doubled if death occurs in the first two years.
C. The death benefit doubles if death is the result of an accident.
Which one of the following statements about annuities is true? Select one: A. The premium for individual annuity plans is paid with pre-tax dollars. B. The investment income that accumulates under individual annuity plans is taxable in the year it is earned. C. The fundamental purpose of an individual annuity is to provide periodic income for a fixed period or over an individual's lifetime. D. With annuity plans, the purchaser must begin receiving payments one month from the purchase date.
C. The fundamental purpose of an individual annuity is to provide periodic income for a fixed period or over an individual's lifetime.
A common coverage trigger in a long-term care insurance policy is Select one: A. Being over the age 70 and having had the policy for at least 10 years. B. Having a family member certify that nursing home care is needed. C. The inability to perform a certain number of activities of daily living. D. Eligibility for Medicare.
C. The inability to perform a certain number of activities of daily living.
Preservation of capital is Select one: A. The ability to quickly convert an investment into cash with a minimal loss of principal. B. Managing investments to reduce the variability of investment outcomes. C. The objective of selecting assets that have a low risk of losing value. D. An increase in the value of investments.
C. The objective of selecting assets that have a low risk of losing value.
Which one of the following statements about Medicare Advantage (Part C) plans is true? Select one: A. They eliminate the need for a beneficiary to pay the Medicare Part B premium. B. They usually provide a lower level of benefits than does original Medicare. C. They can take several forms, including managed care and fee-for-service plans. D. They are sold by a government agency administered by the Social Security Administration.
C. They can take several forms, including managed care and fee-for-service plans.
One of the costs associated with premature death that can be addressed with life insurance is Select one: A. Loss of Social Security retirement benefits if the deceased was less than 55 years old at the time of death. B. Missing potential benefits to society that might have been derived from the deceased's future efforts. C. Loss of companionship experienced by the extended family members. D. A family's reduction in the standard of living because of insufficient replacement income.
D. A family's reduction in the standard of living because of insufficient replacement income.
Under the needs approach as used to identify an adequate amount of life insurance, monetary gifts to family members is considered a Select one: A. Retirement income need. B. Final expenses need. C. Family living expense need. D. Special need.
D. Special need.
All the following factors will affect the retirement payout from a defined contribution plan, EXCEPT: Select one: A. The retirement age B. The investment returns earned C. How long the plan is funded D. The projected Social Security benefits
D. The projected Social Security benefits
The waiver of premium rider that can be added to a life insurance policy Select one: A. Reduces or waives premium payments for a whole life policy when the insured reaches a maximum age threshold. B. Reduces or waives premium payments for a whole life policy if interest rates exceed an established percentage. C. Eliminates premium payments during a period of unemployment if the duration of the unemployment is one year or more. D. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age.
D. Waives premium payments during a period of disability as defined in the policy if the disability occurs before a stipulated age.
Universal life insurance is Select one: A. A life insurance policy that separately states the protection, savings, and expense components. B. A savings account that provides for life insurance payments from the interest on the savings. C. A type of term life insurance without cash values. D. An insurance and savings account that requires disciplined adherence to monthly payments.
A. A life insurance policy that separately states the protection, savings, and expense components.
Which one of the following is a certificate of debt that includes the seller's promise to pay investors a fixed amount on a fixed maturity date? Select one: A. Bond B. Mutual fund C. Annuity D. Stock
A. Bond
The risk associated with the nature of the industry in which the issuer of an investment operates and the management of the issuer itself is known as Select one: A. Business risk. B. Financial risk. C. Liquidity risk. D. Market risk.
A. Business risk.
Most term life insurance policies Select one: A. Carry some guarantee of renewability. B. Are available to meet financial obligations that continue for a lifetime. C. Are not convertible. D. Are hybrid combinations of life insurance and investment vehicles.
A. Carry some guarantee of renewability.
When determining the amount of life insurance to own using the needs approach, final expenses needs include Select one: A. Cash needed immediately for funeral expenses, uninsured medical bills, estate taxes and probate. B. Cash needed immediately for distribution to heirs. C. A long term fund needed to pay for long term secured and unsecured debts. D. A long term fund needed to establish retirement income for a surviving spouse and an education fund for dependent children.
A. Cash needed immediately for funeral expenses, uninsured medical bills, estate taxes and probate.
Which one of the following statements about Social Security survivors benefits is true? Select one: A. Dependent parents age sixty-two or older can receive benefits. B. A surviving spouse receives benefits only if he or she is at least age sixty-five. C. Children are eligible for benefits up to age twenty-two if they are in college. D. Survivors benefit are exempt from the family maximum that applies to other Social Security benefits.
A. Dependent parents age sixty-two or older can receive benefits.
As opposed to other sources of life insurance, the cost of individual life insurance Select one: A. Does not include a group or volume discount. B. Does not vary based on age or gender. C. Does not vary based on health and habits. D. Is tethered to the insured's employment status.
A. Does not include a group or volume discount.
Which one of the following statements about Medicare Supplement Insurance (Medigap) is true? Select one: A. It fills gaps in the Original Medicare program (Part A and Part B). B. It must be purchased through the Medicare program. C. It includes benefits for the cost of Medicare Prescription Drug Coverage (Part D). D. It is most appropriate for a person who also has coverage under a Medicare Advantage (Part C) plan.
A. It fills gaps in the Original Medicare program (Part A and Part B).
Which one of the following statements about the elimination period in a long-term care insurance policy is true? Select one: A. It functions as a time deductible before benefits are payable. B. It allows the insurer to pay reduced benefits if the insured needs long-term care before a policy has been in force for a specified period. C. It is the period the insurer has to terminate the policy if the insured is unacceptable from an underwriting standpoint. D. It is the period an insurer will pay home health care benefits before an insured qualifies for institutional benefits.
A. It functions as a time deductible before benefits are payable.
Which one of the following statements about long-term care insurance is true? Select one: A. Most individual policies have a guaranteed renewability provision. B. The majority of policies sold today cover care only if it is provided in a nursing home. C. To prevent adverse selection, most individual policies have preset benefits and offer little choice to consumers. D. A nonforfeiture option provides cost-of-living increases.
A. Most individual policies have a guaranteed renewability provision.
Ed purchased an individual disability income policy several years ago and continued to pay the annual premium with after-tax dollars. He recently was severely disabled and is not expected to ever return to work. His monthly benefit is $4,000, which represents 60 percent of his predisability earnings. The present value of his expected benefits is $240,000, and the aggregate premiums he has paid for the policy are $60,000. How much of each monthly benefit is subject to income taxation? Select one: A. Nothing B. $2,000 C. $2,400 D. $4,000
A. Nothing
Which one of the following statements about IRAs is true? Select one: A. The tax penalty for early withdrawal may be waived if the owner becomes disabled. B. Contribution limits increase as an owner's income increases. C. Distributions must start before an owner reaches age 67. D. Eligibility to invest in them is limited to persons under age 55.
A. The tax penalty for early withdrawal may be waived if the owner becomes disabled.
Which one of the following statements about health-related loss exposures is true? Select one: A. Young, healthy individuals often do not recognize the financial benefits that health insurance can provide. B. The lack of availability is the only major reason why many lower-income persons fail to have health insurance. C. Under private health insurance, people generally select more benefits or lower copayments than under group insurance plans of large employers. D. Individuals who have health insurance tend to have shorter life expectancies because they are unhealthy.
A. Young, healthy individuals often do not recognize the financial benefits that health insurance can provide.
Anna is a single mother of two small children and earns an annual salary of $65,000. She has been advised to evaluate the amount of life insurance she currently owns to see if it is adequate. She estimates her final expenses needs at $35,000, and estimates family living expenses needs to be $300,000. She also estimates special needs of $200,000 for her children's education fund and any unexpected events. Anna's total financial assets are $350,000, including $200,000 of life insurance. Using the needs approach, how much additional life insurance does Anna need? Select one: A. $150,000 B. $185,000 C. $300,000 D. $335,000
B. $185,000
A traditional individual retirement account (IRA) is designed for retirement income. If IRA funds are withdrawn before age 59 1/2 for purposes of financing an automobile purchase, Select one: A. No tax applies to the distribution. B. A penalty tax must be paid on the amount of the distribution. C. No tax applies as long as the account has been held for at least five years. D. The withdrawals are taxed as capital gains.
B. A penalty tax must be paid on the amount of the distribution.
The risk associated with the nature of the industry in which the issuer of an investment operates and with how the issuer is managed is known as: A. Investment manager risk B. Business risk C. Maturity risk D. Market risk
B. Business risk
Which one of the following is a combination of a defined benefit plan and a defined contribution plan? Select one: A. Combination defined contribution plan B. Defined benefit 401(k) plan C. Define contribution Keogh plan D. Annuity
B. Defined benefit 401(k) plan
A pension plan in which the retirement benefit is specified and the employer's contributions vary depending on the amount needed to fund the benefit is a Select one: A. Defined contribution plan. B. Defined benefit plan. C. Individual retirement account. D. Profit sharing plan.
B. Defined benefit plan.
Part B of original Medicare (medical insurance) provides benefits for which one of the following? Select one: A. Outpatient prescription drug coverage B. Doctors' services C. Hospice care D. Inpatient hospital care
B. Doctors' services
Consumers of individual life insurance bear its entire cost unlike some other sources of life insurance. Which one of the following is a reason for increased costs associated with individual life insurance? Select one: A. The costs are typically subsidized by their employers. B. Each application must be evaluated by the insurer. C. Coverage is subject to many changes. D. Coverage options are broader.
B. Each application must be evaluated by the insurer.
All of the following are costs associated with premature death, EXCEPT: Select one: A. Loss of deceased's income B. Financial assets of the deceased C. Additional costs for child-care expenses D. Uninsured medical bills of the deceased
B. Financial assets of the deceased
Payment of benefits under the Social Security disability income program requires a waiting period of what length? Select one: A. Two months B. Five months C. Nine months D. Twelve months
B. Five months
Which one of the following statements about whole life insurance is true? Select one: A. It is a form of term insurance that is convertible to universal life insurance. B. It develops a cash value that, with some limitations, is available to the insured during the life of the policy. C. It provides protection for a fixed period of time. D. It has an annual premium that is usually less than the premium for a comparable amount of term insurance.
B. It develops a cash value that, with some limitations, is available to the insured during the life of the policy.
Which one of the following statements about the basic provisions of the Affordable Health Care Act of 2010 is true? Select one: A. It allows adult children to remain on a parent's healthcare plan indefinitely. B. It requires insurers to spend set percentages of premiums received on direct medical care or improvements in the quality of care provided. C. It allows insurers to deny coverage to children with preexisting conditions under certain circumstances. D. It requires insurers to set lifetime limits on benefits as a way to encourage wiser choices about medical care by consumers.
B. It requires insurers to spend set percentages of premiums received on direct medical care or improvements in the quality of care provided.
The risk associated with fluctuations in prices of financial securities, such as stocks and bonds, is known as Select one: A. Inflation risk. B. Market risk. C. Financial risk. D. Business risk.
B. Market risk.
The objective of the human life value approach for determining the amount of life insurance to own is to determine life insurance amounts Select one: A. As a multiple of gross income. B. On the total amount of income that is lost when a person dies. C. By using insurance company mortality tables. D. On the needs of survivors.
B. On the total amount of income that is lost when a person dies.
Retirees and other people facing high nursing home costs are subject to special Medicaid eligibility standards that attempt to do which one of the following? Select one: A. Force them to get such coverage under Medicare B. Prevent them from disposing of substantial assets before applying for Medicaid C. Require them to use home healthcare rather than institutional care D. Encourage them to live with children
B. Prevent them from disposing of substantial assets before applying for Medicaid
A tax-deferred plan that pays part of the firm's profits to participating employees and employer's annual contributions are discretionary defines a Select one: A. Thrift plan. B. Profit-sharing plan. C. SIMPLE plan. D. Keogh plan.
B. Profit-sharing plan.
The purpose of the suicide clause in a life insurance policy is to Select one: A. Provide payment of death proceeds anytime during the policy period as a public service to the family members. B. Provide the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide. C. Exclude all death benefits that result from suicide to discourage policyholders who might contemplate ending their lives. D. Enable the insurer to retain paid premiums if an insured commits suicide and the insurer denies the claim.
B. Provide the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide.
Social Security retirement benefits are reduced if taken before a worker's full retirement age. This age is gradually being increased. For persons born in 1960 or later, this age will be Select one: A. Seventy. B. Sixty-seven. C. Seventy-two. D. Sixty-nine.
B. Sixty-seven.
Which one of the following is true regarding the differences between traditional and Roth IRAs? Select one: A. Eligibility for Roth IRAs apply only to those under 70 1/2 years old while there are no age restrictions for traditional IRAs. B. The funds in a Roth IRAs accrue on a tax-free basis, while the funds in a traditional IRA accrue on a tax-deferred basis. C. Withdrawals from Roth IRAs are subject to a penalty they start after the owner is 70 1/2 years old while no such penalty applies to traditional IRAs. D. A $5,000 annual contribution limit applies to all owners of Roth IRAs while the annual contribution limit for traditional IRAs varies based on age.
B. The funds in a Roth IRAs accrue on a tax-free basis, while the funds in a traditional IRA accrue on a tax-deferred basis.
Which one of the following most accurately describes the needs approach to determining a family's life insurance requirements? A. The needs approach does not take into account Social Security benefits or other available benefits. B. The needs approach subtracts existing assets and life insurance from identified financial needs to determine the amount of additional life insurance required. C. The needs approach focuses on immediate financial needs rather than the family's long-term needs.
B. The needs approach subtracts existing assets and life insurance from identified financial needs to determine the amount of additional life insurance required.
Which one of the following statements about Blue Cross and Blue Shield plans is true? Select one: A. Their biggest limitation is that they offer only basic medical expense coverage. B. They are often administered by for-profit organizations. C. They are usually considered commercial insurers and regulated by the same laws. D. They typically reimburse insureds for medical expenses incurred, and then the insureds pay providers.
B. They are often administered by for-profit organizations.
Which one of the following statements about most group long-term disability income insurance plans is true? Select one: A. They have a waiting period of at least two years. B. They have a coordination-of-benefits provision that defines how disability income benefits from programs such as Social Security will affect benefits under the group plan. C. They use an "any occupation" definition of disability for an initial period, and then change to an "own occupation" definition of disability. D. They replace 100 percent of lost income.
B. They have a coordination-of-benefits provision that defines how disability income benefits from programs such as Social Security will affect benefits under the group plan.
Martha recently determined that she should buy an additional $150,000 of life insurance to protect her family if she should die prematurely. Martha does not have a large emergency fund, and she is concerned about paying the life insurance premium if she is unable to work because of a disabling condition. Which one of the following riders to or provisions in her new life insurance policy would best address this concern? Select one: A. Accelerated death benefit provision B. Waiver of premium rider C. Extended term insurance nonforfeiture option D. Assignment clause
B. Waiver of premium rider