Chapter 3 part 1
Mary should purchase $1.5 million ($75,000 x 20 working years remaining = $1,500,000).
Agent Sam is using the human life value approach to assess Mary's life insurance needs. How much life insurance should Sam advise Mary to purchase if her annual income is $75,000 and she intends to work for another 20 years?
Friends and coworkers
All of the following are categories of insurable interest in life insurance, EXCEPT:
Viatical settlements are a type of life insurance contract.
All of the following are true regarding viatical settlements, EXCEPT:
Unlimited
Ben applies for a life insurance policy on himself. How much insurable interest does Ben have in his own life?
key person insurance
Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy?
Viatical settlement provider "Viatical settlement providers purchase chronically or terminally ill insureds' life insurance policies."
The third party that purchases a life insurance policy death benefit from a terminally ill insured is termed:
a. An employee benefit b. A funding tool c. Business interruption insurance D. All of the above
What is business life insurance used for?
Cousin "A person has insurable interest in their own life, and the lives of individuals related by blood and marriage. Insurable interest excludes cousins, in-laws and other distant kinships."
An applicant for life insurance has insurable interest in all of the following, EXCEPT:
Family dependency period "The family dependency period demands the most income because children are financially dependent on their parents."
Which term describes the period when young children are dependent on their parents for financial support?
The person purchasing life insurance for charity must have insurable interest in the lives of the charity's members.
All of the following are true regarding purchase of personal life insurance for charity, EXCEPT
The key employee is the policyowner and pays the premiums; the company is the beneficiary.
All of the following statements regarding key person insurance are true, EXCEPT:
The amount of money the insured is expected to earn over their lifetime " There are four pieces of information in the needs approach that are used to determine the proper amount of insurance: expenses, maintenance income, debts/mortgages, and dependent children's education."
In the needs approach, all of the following information is used to establish how much insurance needs to be purchased, EXCEPT:
Preretirement period "is the period of time before retirement when children are no longer dependent on their parents for financial support."
What is the period when children are no longer dependent on their parents for financial support?
Viatical brokers work for and represent viatical settlement providers, whereas viatical producers work for and represent insureds. "Viatical producers and brokers sell viatical settlements. Viatical producers work for and represent viatical settlement providers, whereas viatical brokers work for and represent insureds."
Which of the following statements is false regarding viatical settlements?
Key person insurance
Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy?
Family dependency period "The family dependency period demands the most income because children are financially dependent on their parents."
The time period during which children are young and financially dependent upon their parents is termed the:
When the youngest child reaches age 16 "A surviving spouse is ineligible for Social Security survivor's benefits once the youngest child reaches the age of 16. At this point, the child receives Social Security benefits until the age of 18 or 19, if the child is attending high school full-time."
When does the Social Security blackout period begin?
Human life value "The human life value approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual."
The ___________ approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual.
Needs " The needs approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities."
The ____________ approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities.
Upon policy application "Insurable interest for life insurance policies must be shown at the time of application."
When must insurable interest be shown for a life insurance policy?
Human life value approach "Sam is using the human life value approach to assess Joyce's life insurance needs. The human life value approach focuses on replacement of the insured's income."
Insurance agent Sam is helping Joyce determine the proper amount of life insurance for her needs. Sam uses Joyce's age, net annual salary, number of working years remaining prior to retirement, expenses and the rate at which the value of the dollar is depreciating. Which of the following methods is Sam using?