Chapter 10 Smartbook

What characteristics should you consider in an insurance company?

- financial stability - professionally qualified representatives

Life insurance proceeds can be used wisely to:

- provide education or income for children - pay off home mortgage or debts - establish regular income for survivors

When determining your need for life insurance, you should consider your:

- type of household - stage in the life cycle

Cash-value policies are good for people who:

- want a more structured way to save - plan to keep the policy long term

The easy method is based on the assumption that it will take ___ years to adjust to financial consequences of death.

7

Which option allows you to change your term policy into a whole life policy without an additional medical examination?

Conversion

(Participating/Nonparticipating) policies do not provide policy dividends.

Nonparticipating

Which of the following is NOT true?

Surrender charges on an annuity usually run for 25 years

Which of the insurance ratings system uses grades that look most similar to school grades (i.e., A+, A, A-, B+ -)?

Weiss research

The nonforfeiture clause is a provision that prevents the forfeiture of ___ benefits if you choose to drop your insurance policy.

accrued

Premiums for whole life insurance policies are determined based upon the health and the ___ of the insured when it is purchased.

age

A contract that provides a regular income for as long as a person lives is called a(n):

annuity

For most consumers, term life insurance is considered to be the:

best value

If suicide occurs during the first ___ years the policy is in force, only the amount of ___ paid are paid to the beneficiary.

blank 1: 2 blank 2: premiums

If you opt for a term insurance policy, as your children become independent and your ___ increase, you can reduce your ___

blank 1: assets blank 2: coverage

As a rule, you should deal with insurance companies with a(n) ___ or ___ rating. (use words and not letter grades for the ratings)

blank 1: superior blank 2: excellent

A conversion option allows you to change a(n) ___ policy to a(n) ___ coverage life policy.

blank 1: term blank 2: whole

The amount received after giving up a whole life type of insurance policy is called the:

cash value

Under universal life insurance, part of your premium goes into an investment account that earns interest; this accumulates is referred to as ___ ___

cash value

Betty has named Jill as her primary beneficiary, but two days before Betty's death, Jill passes away. Luckily for Betty she has named additional people as:

contingent beneficiaries

Jane has named her husband Bob as the beneficiary in her life insurance policy. She also indicated that their daughter Jennifer should receive the funds if Bob is already deceased. Jennifer is known as a _____ _____.

contingent beneficiary

A policy that pays the beneficiary less as time passes is a:

decreasing term insurance policy.

Households with ___ have the greatest need for life insurance.

dependents

A benefit under which the company pays twice the face value of the policy if the insured's death results from an accident is called a:

double indemnity

An incontestability clause states that the insurer cannot ___ the policy if it is in force for a specified period.

drop

Which method uses an equation of 70 percent of your salary for seven years?

easy method

A term life insurance policy is one in which policyholders pay the same premium each year as long as they live.

false

The sooner a person is likely to die, the lower the premiums she will have to pay.

false

One of the main factors when determining which companies to buy policies from is whether or not the company is ___ stable

financially

Match a company's financial strength with its premiums.

financially strong company = lower rates financially weak company = higher rates

Which of the following is NOT a charge you pay when buying a variable annuity?

front-end load

(Higher/Lower) premiums are charged on life insurance policies for those likely to die sooner.

higher

A provision stating that the insurer cannot cancel a policy after a specific period,often two years, is called a(n)

incontestability clause

Life expectancy in the United States has been steadily

increasing

___ income earned on annuities is tax free during accumulation.

interest

If you wish to continue your existing term life insurance coverage, the easiest method is if your policy:

is renewable

Decreasing term insurance policy pays the beneficiary ___ as time passes

less

Cash-value policies are good for people who must be forced to save and for those who plan to keep the policy for a(n) ___ period of time

long

A document attached to a policy that ___ its coverage is called a rider.

modifies

One of the many common uses of life insurance proceeds is to pay off a home ___ and other debts at the time of death.

mortgage

If you choose to drop a policy, a provision that allows the insured not to forfeit all accrued benefits is called a(n):

nonforfeiture clause

Life insurance that does not provide policy dividends is also called a nonpar, or ______ policy.

nonparticipating

An annuity is a contract that provides regular ___ for as long as a person lives. (Enter only one word per blank.)

payments

Term life insurance provides protection for a specific ___ of time

period

The primary factor for determining premiums for whole life insurance policies is the:

person's age when the policy is purchased

Life insurance is when a person joins a risk-sharing group known as an insurance company and purchases a contract also called an insurance

policy

Term life insurance is also known as ___ life insurance.

pure

With a(n) ___ term option, you can continue your existing term insurance coverage for another term.

renewable

The main reason to purchase an annuity is to give you ___ income for the rest of your life.

retirement

The primary reason to buy an annuity is to give you:

retirement income for life

A document attached to a policy that modifies its coverage is called a(n):

rider

Cash-value policies provide a death benefit and a(n) ___ account

savings

Life expectancy in the United States has been:

steadily increasing

Interest earned on annuities is:

tax free

Term life insurance is:

temporary insurance

Life insurance protection for a specified period of time is called:

term

Many times the company that is the most financially secure is the one with:

the ability to provide the lowest premiums

If a policyholder dies by suicide three years after purchasing the policy, the beneficiary will receive:

the proceeds of the policy

Multiyear level term insurance, rather than annual renewable term insurance, is advantageous because it allows you to pay:

the same premium for the life of the policy

A cash-value life insurance policy provides both insurance and a savings account.

true

Multiyear level term insurance is also called straight term insurance.

true

Double indemnity is a benefit under which the company pays ___ the face value of a policy if the insured's death results from an accident.

twice

___ life insurance is essentially a term policy with a cash value.

universal

A whole life policy that combines term insurance and investment elements is called:

universal life

A plan where the policyholder pays the same premium for as long as they live is called a(n):

whole life policy

When you buy life insurance, you agree to pay a monthly premium to an insurance company, in return for a sum of money paid to:

your beneficiary.