FINN 1003 ch 8 quiz

Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.

continuous whole life

Families faced with the loss of a principal wage earner receive Social Security benefits:

from the government that are intended to provide basic, minimum support.

Employers often provide _____ life insurance as a fringe benefit for their full-time employees.

group

A(n) _____ policy is a contract between an individual and a company under which the company agrees to reimburse the individual for losses suffered by him or her according to specified terms.

insurance

Group life insurance is a(n):

insurance that provides a master policy for a group.

You want to pay premiums for 20 years and have your insurance premium obligations finished at that time. However, you feel you will need life insurance for the rest of your life. You should choose a _____ insurance.

limited payment whole life

The probability of a loss occurring can be reduced by:

loss prevention.

The settlement option chosen by most policyholders is:

lump sum.

The _____ method is the most detailed method of determining the amount of life insurance coverage needed for an individual.

needs analysis

Insurance companies make profit by:

paying out less than the sum of the premiums and the earnings on them

The basic purpose of insurance is to:

protect you and your family from economic losses.

The purchase of insurance is a common form of _____ by the insured.

risk transfer

The underwriting function of insurance companies is designed to ensure that premiums are based on:

the chance of losses.

While performing needs analysis, when determining the available resources to offset the economic needs, you would generally ignore:

the children's educational qualifications.

Underwriting refers to:

the determination of which exposures to insure.

Insurance underwriting is best described as:

the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums.

From the standpoint of a person buying insurance, the central purpose of insurance should be:

to transfer the risk of serious losses.

Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.

underwriting

The death benefit of a(n) _____ life insurance policy may go down because of poor investment returns.

variable

It is advisable to purchase life insurance from an insurance company that has been in business for at least _____ years.

25

A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:

31 days

A life insurance agent who takes his or her profession seriously is likely to have earned a professional certification like the:

Chartered Life Underwriter.

____ is a relatively expensive type of decreasing term life insurance.

Credit life

Insurance agents are legally required to disclose their commissions in an insurance policy.

False

Only one agent should be consulted for discussing personal financial needs and insurance requirements while buying life insurance.

False

Risk avoidance involves asking an insurance company to take over the risk in exchange for a small payment.

False

Underwriters can predict whether or not you will suffer a loss this year.

False

Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability

Guaranteed purchase option

____ is any activity that keeps loss from occurring.

Loss prevention

You can learn about the financial strength of an insurance company by checking _____ rating system.

Standard & Poor's

If you have a high-risk hobby, then you could be required to pay more for life insurance than others pay

True

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

True (a tax benefit of life insurance)

The preferred technique for determining how much life insurance coverage is needed for an individual is:

assessing the family's total economic needs and subtracting the financial resources available to meet those needs.