Insuring your life Test 2

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The underwriting function is designed to be sure that premiums are based on

Adverse selection

Underwriting helps protect life insurance companies from which of the following:

Adverse selection

The basic purpose of insurance is to

Protect you from losses

Through insurance, society is able to

Reduce financial risks and share losses.

The basic purpose of insurance is to protect you from the results of accidental losses.

True

The needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits.

True

The primary purpose of life insurance is to protect family members financially after one's death.

True

Transferring risk means asking an insurance company to take over the risk for a small payment (the premium).

True

Insurance is a tool that can lessen ________ risk.

Economic

Having a fire extinguisher in your home is an example of loss prevention.

False

Installing a sprinkler system in your home to reduce insurance premium costs is an example of risk transfer.

False

The life insurance needs of beneficiaries are secondary since most proceeds are paid to living policyholders.

False

Variable life insurance if most often the best plan for most people's primary insurance needs.

False

The probability of a loss occurring can be reduced by

Loss Prevention

The purchase of insurance is a common form of which risk management technique:

Risk transfer

Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits?

Term life

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

To transfer risks of serious losses

Annual term insurance premiums increase as you get older while whole life insurance premiums remain constant.

True

Life insurance needs change dramatically over one's lifetime.

True

Risk is uncertainty regarding economic loss.

True

Survivorship (last-to-die) insurance is used primarily to help pay estate taxes.

True


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