Your Money and Credit Chapter 8 (betsy)

Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy proceeds be distributed?

$200,000 to Jack

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

Which of the following represents a disadvantage of a whole life insurance policy?

A whole life insurance policy often provides lower yields than other investment vehicles.

Which of the following is true of a good insurance agent?

The agent is recommended by professionals like bankers and attorneys.

Group life insurance is most likely to be for ______

a term.

Group life insurance is:

an insurance that provides a master policy for a group.

Nonforfeiture rights guarantee that a policy owner will not lose his or her policy's _____.

cash value

While using the needs analysis approach, we ________.

deduct an individual's available resources from his or her family's total economic needs to calculate how much life insurance he or she requires

Insurance is a tool that can reduce one's _____ risk.

economic

Insurance agents always disclose their commissions in an insurance policy. (t/f)

false

The primary purpose of life insurance is to provide:

financial security for dependents in the event of death.

The settlement option chosen by most policyholders is:

lump sum.

It is not possible to avoid ________.

most risks in your life.

A(n) _____ is a common provision in many term policies.

renewable clause

______ is the choice to accept and bear the risk of loss.

risk assumption

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

risk transfer

The insurance portion of a universal life policy is most analogous to:

term insurance

Insurance companies use actuarial data to measure:

the risk of loss for a given population.

Guaranteed renewable term insurance allows you to renew a policy for another term without qualifying medically. (t/f)

true

The availability of group coverage through employee benefit programs should be considered when developing a life insurance program. (t/f)

true

By _______ , insurance companies decide who will be insured by them.

underwriting

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

underwriting

Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.

whole life insurance

The life insurance needs of beneficiaries are secondary since most proceeds are paid to policyholders. (t/f)

false

Employers often provide _____ life insurance as a fringe benefit for their 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

_____ is an activity that reduces the chance that a loss will occur.

loss prevention

The most accurate way to determine how much life insurance you need is to use the _____ method.

needs analysis

Which of the following leads to the payment of a higher insurance premium by the potential insured?

obesity of the potential insured

The underwriting function of insurance companies is designed to ensure that premiums are based on_____.

the chance of losses

Avoiding alcoholic beverages while driving is an example of loss prevention. (t/f)

true

Social Security survivor's benefits are intended to provide basic, minimum support to families faced with the loss of the principal wage earner. (t/f)

true

The primary purpose of life insurance is to protect family members of the insured from financial loss in the event of his or her untimely death. (t/f)

true

The policy owner assumes the investment risk with a _______ insurance policy.

variable life

Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death. What is the amount of insurance, as per the needs analysis method, that Jonathan should purchase if he has current financial resources worth $1,000,000?

$1,000,000

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

Standard & Poor's