BUSI 1307 Chapter 8 Quiz
The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is: computing the Human Life Value. using the probability of death each year, prevailing interest rates and assumed inflation rates to find the discounted present value of a future income stream. assessing the family's total economic needs and subtracting the financial resources available to meet those needs. estimating the sum of money which, when paid in instalments, will produce the same income as the person would have earned, after deducting assumed amounts for taxes and personal maintenance expenses. using the multiple-of-earnings method adjusted for occupation.
assessing the family's total economic needs and subtracting the financial resources available to meet those needs.
If a term life insurance is convertible, the policy can be: transferred to the life of another person. exchanged for cash. changed to health or disability protection. converted to a comparable whole life policy. revised as needed.
converted to a comparable whole life policy.
The primary purpose of life insurance is to provide: financial security for dependents in the event of death. protection from creditors and lawsuits. tax-advantaged investments. high-yield investments. liquidity to expand business operations.
financial security for dependents in the event of death.
The basic purpose of insurance is to _____. protect your health protect yourself from economic losses supplement your income shield you from bad decisions protect yourself from non-financial losses
protect yourself from economic losses
The purchase of insurance is a common form of _____ by the insured. risk retention risk transfer risk assumption risk avoidance loss control
risk transfer
Actuarial data is used to measure: the creditworthiness of a population. the risk of loss for a population. the wealth of a population. the gross productivity of a population. the consumer price index of a population.
the risk of loss for a population.
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. term life whole life limited payment life universal life group life insurance
whole life
A grace period permits the policy holder to retain insurance even though the premium has not been paid for: 12 months. 6 months. 3 months. 50 days. 31 days.
31 days.
_____ is an activity that reduces the chance that a loss will occur. Risk avoidance Loss prevention Loss control Risk assumption Premium collection
Loss prevention
Identify a true statement about the multiple-of-earnings method. The multiple-of-earnings method divides the gross annual earnings of the insured by some arbitrary number. The multiple-of-earnings method considers the insurance coverage to be 5 to 10 times the annual income. The multiple-of-earnings method considers the insured's financial obligations to compute the insurance premium amount. The multiple-of-earnings method divides the gross annual earnings by the insurance coverage to determine the amount of annual insurance premium. The multiple-of-earnings method determines the amount of tax benefits available to the insured by availing the life insurance coverage.
The multiple-of-earnings method considers the insurance coverage to be 5 to 10 times the annual income.
Nonforfeiture rights guarantee that a policy owner will not lose his or her _____. face value death benefits for survivors cash value premium refunds premium reductions
cash value
Employers often provide _____ life insurance as a fringe benefit for their employees. group credit mortgage standard home-service
group
The probability of a loss occurring can be reduced by_____. risk observance loss prevention risk assumption risk retention insurance
loss prevention
Term life insurance is characterized by _____. level annual premiums throughout one's life premium amounts related to age its inappropriateness for most people's life insurance needs non-convertibility cash value
premium amounts related to age
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. a set of activities used to identify the risk and rewards of investing the insured's funds on marketable securities. production-related activities performed primarily by agents on the field. the process of developing pricing structures for insurance, often performed by an actuary. a function most often performed by an actuarial.
the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums.
