HW5 CH 12
John signed a 15-year return-of-premium policy. He pays $14,345 into the policy over the next 15 years. He is still alive 15 years after signing the contract. How much will John receive from the insurance company?
$14,345
If current income is $50,000, then what is the amount of life insurance coverage needed using the easy method?
$245,000 Reason: Amount of coverage=$50,000*7 years*70%=$245,000
Total debts equal $80,000, and funeral costs equal $5,000. Using the DINK method, what is the total insurance need?
$45,000 Reason: .Total insurance need=Funeral costs+Half of all debt=$5,000+$40,000=$45,000
Debts equal $100,000, and funeral costs equal $4,500. Using the DINK method, what is the total insurance need?
$54,500 Reason: Total insurance need=Funeral costs+Half of all debt=$4,500+$50,000=$54,500
If current income is $20,000, then what is the amount of life insurance coverage needed using the easy method?
$98,000 Reason: Amount of coverage=$20,000*7 years*70%=$98,000
A person should reevaluate their insurance needs every ____ year(s).
2
The easy method is based on the assumption that it will take _____________ years to adjust to financial consequences of death.
7 yrs
_____ life insurance is used to repay certain debts, such as auto loans, should the borrower die before doing so.
Credit
Which form of life insurance is used to repay a personal debt should the borrower die before doing so?
Credit life insurance
If a spouse has an unstable job or poor health, then the ____ method may not be the best option. (Answer with the acronym.)
DINK
The _____ method is used for families with simple insurance needs that have no dependents.
DINK
Life insurance is important, but can also be very____.
Expensive
True or false: A term life insurance policy is one in which policyholders pay the same premium each year as long as they live.
False
True or false: If there are teenage children, the DINK method can typically be reduced.
False
Which household has the highest need for life insurance?
Households with small children
When considering life insurance, what questions should you ask?
How much money do you want to leave?When would you like to retire?How much are you able to pay?
Records covering many years and including millions of lives have been combined into tables called the Blank______.
Standard Ordinary Mortality Table
True or false: Life insurance is one of a few ways to provide income and liquidity at the time of death.
True
True or false: Multiyear level term insurance is also called straight term insurance.
True
The nonworking spouse method takes into consideration the cost of replacing the services of Blank______.
a child care provider a housekeeper a cook
Group insurance plans insure a large number of people under the terms of Blank______.
a single policy
The DINK method may not be the best method for couples who have Blank______.
a spouse in poor health unstable income
With a(n) _____ life insurance policy, you can change your policy as your needs change.
adjustable
A "typical" household takes into consideration the following:
amount of debt number of kids
John has an adjustable life insurance policy and he decides that he no longer needs the large amount of coverage he has. Therefore, as John's coverage decreases, his premiums:
are reduced.
If your family is not "typical", then the family need method may be the best alternative. It considers your social security and liquid ____ when determining the amount of coverage needed.
assets
Term life insurance is a(n) ____ life insurance option.
basic
For most consumers, term life insurance is considered to be the Blank______.
best value
A universal life is essentially a term policy with a ____ value.
cash
The amount received after giving up a whole life type of insurance policy is called the Blank______.
cash value
Which option allows you to change your term policy into a whole life policy without an additional medical examination?
conversion
The guidelines required for preferred insurance rates include Blank______.
correct weight for height good cholesterol
Some experts have said that life insurance policies are not the best buy for the protection that _____ they offer and that they are the nation's biggest ripoff.
credit
A policy that pays the beneficiary less as time passes is:
decreasing term insurance policy.
A better option than credit life insurance is:
decreasing term insurance.
Participating policies refund part of the policy premium called a policy ____.
dividends
People that live alone or with their parents mostly likely:
do not need life insurance
Which method uses an equation of 70% of your salary for seven years?
easy method
Which policy provides coverage from the beginning of the contract to the maturity date and then pays a specified lump sum regardless of if the person is still living or has died?
endowment life insurance
True or false: An endowment life insurance policy will pay a specified lump sum only to beneficiaries at the time of death.
false
True or false: In most cases, the cost of group health insurance is entirely paid by the employee.
false
Unlike other methods of determining life insurance coverage, which method takes into consideration your social security and liquid assets?
family need
The advantages of a universal life policy include:
flexible premium amount flexible time period.
The cash values of variable life insurance policies:
fluctuate with investments.
When considering life insurance, you should consider present and _____ sources of income.
future
The Standard Ordinary Mortality Table of 2001 was originally structured based on age and
gender
Which of the following factors should be considered before buying life insurance?
group life insurance net worth present and future income
Life insurance is:
important and costly.
In insurance, an example of a risk-sharing group is a(n):
insurance company.
The ____ risk is assumed by policyholders for a variable life insurance policy
investment
Death benefits vary with a variable life insurance policy; however, a minimum death benefit:
is guaranteed.
If you wish to continue your existing term life insurance coverage, the easiest method is if your policy:
is renewable.
A Blank______ policy can be reinstated if you again qualify as an acceptable risk and you pay overdue premiums with interest.
lapsed
A group insurance plan insures a(n) ____ number of people under the terms of a single policy without requiring _____ examinations.
large medical
One question to ask when considering life insurance is "how much money you would like to ___ to your dependents"?
leave
Decreasing term insurance policy pays the beneficiary ____ as time passes.
less
Which type of insurance provides liquidity at the time of death?
life insurance
With the ____ payment policy, you pay premiums up to a certain age until you are paid up, and then you are insured for life.
limited
Cash-value policies are good for people who must be forced to save and for those who plan to keep the policy for the ____ term.
long
Costs not associated with replacing the services of a nonworking spouse include:
lost wages for time away from work for the surviving spouse
Return-of-premium policies refund every premium if you outlive the time period provided. However, these policies cost Blank______ than traditional term life.
more
Return-of-premium policies typically cost 30% to 50% Blank______ than traditional term life.
more
Understanding that a "typical" household is defined many ways, a family with more kids may need _____ coverage.
more
The two types of insurance companies are stock life insurance companies and Blank______ life insurance companies.
mutual
A provision that prevents the forfeiture of accrued benefits if you choose to drop the policy is called a(n):
nonforfeiture clause.
A(n) ____ life insurance policy will have guaranteed premiums.
nonparticipating
Life insurance that does not provide policy dividends is also called a nonpar, or Blank______ policy.
nonparticipating
Stock life insurance companies generally sell:
nonparticipating policies.
The Blank______ method takes into consideration the cost of replacing services, such as child care, housekeeping, and cooking.
nonworking spouse
Jim has what some would call "the best life insurance policy on the market," but it does not meet his objectives. Therefore, to Jim this policy is Blank______.
not valuable
Life insurance that provides policy dividends is called:
participating
Mutual life insurance companies generally sell ___ or par policies.
participating
Cash-value policies are good for people who:
plan to keep the policy long term. must be forced to save.
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
For ___ insurance rates, a person must have a good personal and family history, good blood profile, good blood pressure, good driving record, and a good weight for their height.
preferred
Nonparticipating life insurance policies do not provide annual policy _____.
refunds
Limited to one or two years, policy ____ is possible if you have missed payments and your policy has not been redeemed for cash.
reinstatement
With the limited payment policy, you pay premiums up to a certain age (e.g., 60, 65) and after that age has been reached you:
remain insured for life.
With a ____ option, you can continue your existing term coverage for the next period without a medical reexamination.
renewable
Cash-value policies provide a death benefit and a(n) account.
savings
Stock life insurance companies are owned by Blank______.
shareholders
The DINK method is for families with:
simple insurance needs.
Life expectancy in the United States has been
steadily increasing
Life expectancy in the United States has been Blank______.
steadily increasing
The cash values of variable life insurance policies fluctuate based on the yields earned by a separate fund which which will typically include categories such as a(n) ____ fund, a money market fund, or a(n) ___ fund.
stock bond
The name of a provision stating that if the insured dies by suicide during the first two years that the policy is in force, then the death benefit will equal the amount of premium paid is a(n) Blank______.
suicide clause
Life insurance protection for a specified period of time is called Blank______.
term
Universal life is a whole life policy that combines ___ life insurance and ____ elements.
term investment
An incontestability clause states that the insurer cannot dispute the ____of a policy after a specific ____ of time. These are one-word answers.
terms period
For fairly young people, ______ life insurance is less expensive than ____ life insurance. These are one-word answers.
termwhole
The cost of group health insurance is sometimes split between:
the employer and employee.
Multiyear level term insurance is advantageous because it allows you to pay:
the same premium for the life of the policy.
True or false: If you have not paid your premium by the end of the grace period, your policy lapses.
true
A whole life policy that combines term insurance and investment elements is called Blank______.
universal life
A whole life policy that combines term insurance and investment elements is called ____
universal life
If anyone suffers from poor health or there are more than two children under the age of 13, the nonworking spouse method should be adjusted Blank______.
upward
A plan where the policyholder pays the same premium for as long as they live is called a(n):
whole life policy.
For the nonworking spouse method, extra costs not considered include the surviving spouse's time away from their ____ to care for the family.
work
Households with _____ children have the greatest need for life insurance.
young
