FIN1100 CH.10 smartbook

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

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

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

renewable

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

assets/coverage

Term life insurance is also known as _____ life insurance.

pure

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

Conversion

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

7

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

Nonparticipating

Term life insurance provides protection for a specific ______ of time.

period

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

term/permanent

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

universal life

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

easy method

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

higher

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.

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 or loan

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

nonparticipating

Under universal life insurance, part of your premium goes into an investment account that grows and earns interest called

cash value

Households with ______ have the greatest need for life insurance.

dependents

Life expectancy in the United States has been steadily (increasing/decreasing).

increasing

True or false: Life insurance is one of a few ways to provide income and liquidity at the time of death.

T

People that live alone or with parents typically do not need _____ insurance.

life

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

best value

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

F

Life expectancy in the United States has been:

steadily increasing

Term life insurance is:

temporary insurance

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

term