Personal Fin Ch. 10

Under the nonworking spouse method, to estimate the amount of life insurance a homemaker should carry, multiply the number of years before the youngest child reaches 18 by _____.

$20,000

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

Conversion

If there are teenage children, the amount under the DINK method can typically be reduced.

False

Life expectancy tables provide:

averages

Cash-value policies are good for people who:

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

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

Blank 1: cash Blank 2: value

With an annuity, there is no maximum annual __________.

Blank 1: contribution, deposit, or payment

Some experts have said that _____________ life insurance policies are not the best buy for the protection that they offer.

Blank 1: credit

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.

Blank 1: twice or double

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

Blank 1: two or 2 Blank 2: premiums

Under the ____________ annuity option, payments vary monthly based on changes in investment returns.

Blank 1: variable

Under the ____________ of premium disability benefit, in the event of disability, the insurance company will pay the premiums as long as you have not reached a certain age.

Blank 1: waiver

People that live alone or with their parents mostly likely:

do not need life insurance

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

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

decreasing term insurance policy.

The limited installment payment option allows for the payment of life insurance to be paid in ______ periodic installments for a specified number of years after your death.

equal

In a second-to-die option, the policy pays out after the death of the second spouse usually to cover ______ taxes.

estate

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

Stock life insurance companies generally sell:

nonparticipating policies.

The ______ method takes into consideration the cost of replacing services, such as child care, housekeeping, and cooking.

nonworking spouse

For a lump-sum payment, the insurance company pays the face amount of the policy in ______ installment(s) to the beneficiary or to the estate of the insured.

one

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

rider

Accelerated benefits are life insurance policy proceeds paid to a terminally ill policyholder ___________ the time of death.

Blank 1: before, prior, or until

To estimate the total life insurance a home maker should carry (nonworking spouse method), use the formula of: ___________ ( minus the age of the youngest child age) × $20,000.

18

The grace period typically allows a lapse of ______ to pay the premium payment.

28-31 days

Under an accidental death benefit, the insurer will pay twice the face value if the insured dies in an accident, but the insured usually must die before a certain age, typically _____.

60 to 65

_____ benefits are life insurance policy proceeds paid to a terminally ill policyholder before he or she dies.

Accelerated

A universal life is essentially a term policy with a ______________ _______________

Blank 1: cash Blank 2: value

The cash values of variable life insurance policies may be invested in stocks, ________ , or money market funds.

Blank 1: bonds

___________ income earned on annuities is tax free during accumulation.

Blank 1: Interest

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

Blank 1: Nonparticipating or Nonpar

_________ life insurance cash values fluctuate with their investments.

Blank 1: Variable

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

Blank 1: accrued

The guaranteed insurability option allows you to buy specified ___________ amounts of life insurance at stated intervals without undergoing medical exams.

Blank 1: additional, added, or more

The misstatement of age provision states that if you misrepresent your _____________, the company will pay the benefits your premiums would have bought if your age had been correctly stated.

Blank 1: age

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

Blank 1: assets, property, or properties Blank 2: coverage

If you have a problem related to insurance that needs an immediate answer, you may need an insurance agent who is _________ when needed.

Blank 1: available, there, or present

A lapsed policy can be reinstated if it has not yet been turned in for _________

Blank 1: cash

An accidental death policy states that the insurer will pay _______ the face value if the insured dies in an accident. The insured usually must die before a certain age, usually 60 or 65, in order to receive this benefit.

Blank 1: double, 2x, or twice

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

Blank 1: drop, cancel, invalidate, terminate, revoke, or forfeit

An endowment policy pays the insured if he or she is alive at the end of the _______________ period. This is taken directly from the text.

Blank 1: endowment

According to the 2017 life expectancy tables, the life expectancy of a male at age 30 is 47.8. This number represents the ______________ number of additional, or remaining, years a male may live.

Blank 1: expected, average, estimated, or total

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

Blank 1: financially or economically

Payment to begin at a(n) __________ date is referred to as a deferred annuity.

Blank 1: future or later

Whole life insurance has __________ premiums, at first to build up a reserve when the chances of dying are smaller, than does ___________ life insurance.

Blank 1: higher, high, larger, large, or greater Blank 2: term or temporary

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

Blank 1: income or payments

Life expectancy in the United States has been steadily _______________.

Blank 1: increasing, rising, or growing

Cost-of-living protection is a special rider that is designed to help prevent ___________ from eroding the purchasing power of the protection your policy provides.

Blank 1: inflation

The lower the ____________-adjusted index number, the lower the cost of the policy.

Blank 1: interest

A group insurance plan insures a(n) ______________ number of people under the terms of a single policy without requiring ____________ examinations.

Blank 1: large, big, or high Blank 2: medical, health, or physical

Cost-of-_________ protection is a special rider that is designed to help prevent inflation from eroding the purchasing power of the protection your policy provides.

Blank 1: living

After a certain number of years stated in the policy, the policy __________ provision permits you to borrow any amount of money up to the cash value of the policy.

Blank 1: loan

After a certain number of years stated in the policy, the policy ____________ provision permits you to borrow any amount of money up to the cash value of the policy.

Blank 1: loan

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

Blank 1: long, extended, or longer

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

Blank 1: modifies, changes, amends, alters, or adjusts

Understanding that a "typical" household is defined many ways, a family with more kids may need ______________ coverage.

Blank 1: more, additional, extra, increased, higher, or greater

One factor that affects the price of a life insurance policy is the rate of death among policyholders, also called ___________ rate.

Blank 1: mortality or death

A(n) ___________________ life insurance policy, often sold by stock companies, will have guaranteed premiums.

Blank 1: nonparticipating or nonpar

If you are in poor health, an annuity would be considered a(n) __________ investment.

Blank 1: poor, bad, incorrect, unwise, risky, or unadvisable

Return-of-______________ policies refund all money if you outlive the time period in the contract.

Blank 1: premium

Inflation creates a loss, reduction, or erosion of ________ power.

Blank 1: purchasing, buying, spending, or financial

Limited to one or two years, a policy _____________ is possible if you have missed payments and your policy has not been redeemed for cash.

Blank 1: reinstatement

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

Blank 1: renewable

In a __________-to-die option, the policy pays out after the death of the ___________ spouse usually to cover estate taxes, which are payable upon death.

Blank 1: second Blank 2: second

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

Blank 1: seven or 7

Under the life income option, the amount received by the beneficiary depends on the ___________ and attained ___________ of the individual receiving the benefits at the time of the insured's death.

Blank 1: sex or gender Blank 2: age

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 or temporary Blank 2: whole, permanent, ordinary, or straight

Interest-adjusted index is the method of evaluating the cost of life insurance by taking into account the _________ value of money.

Blank 1: time

If a person leaves their benefits with the insurance company, the company acts as a(n) ___________ of the money and pays the interest to the beneficiary.

Blank 1: trustee

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

The ______________ insurance method is for families with no children.

DINK

The ______________ method is used for families with simple insurance needs that have no dependents.

DINK

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

True or false: A beneficiary is a person named in a will to receive part of an estate and pay premium on the behalf of a deceased person.

False

True or false: An annuity is a good investment for a person who needs a monthly check.

False

True or false: Funding your annuity should be your first use of funds.

False

True or false: In most cases, the cost of group health insurance is entirely paid by the employee.

False

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

False

True or false: An endowment life insurance policy will pay a specified sum to beneficiaries at the time of death. It pays nothing to the insured.

False; If the insured dies before the endowment period ends, the proceeds will be paid to the beneficiaries. Otherwise, it will be paid to the insured.

Unlike other methods of determining life insurance coverage, which method takes into consideration your Social Security and liquid assets?

Family need

A "typical" family who can use the easy method has characteristics like:

Fewer than four children Average family debt

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

Front-end load

Which of the following is not a common question for choosing an insurance agent?

Have you heard of the company they represent?

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

Higher

Which of these are important to fund before funding annuities?

IRA 401(k)

Under what option are insurance payments sent to beneficiaries for their entire life?

Life income option

Which type of insurance provides liquidity at the time of death?

Life insurance

Which option pays beneficiaries in equal, periodic installments for a specified number of years after the death of the insured?

Limited installment payment

What characteristics should you consider in an insurance company?

Professionally qualified representatives Financial stability

Which of the following refers to the amount of impact inflation has on a fixed amount of money?

Reduction of purchasing power Increase in the cost of goods and services

Which of the following is NOT true? Surrender charges usually decline gradually over a period of 7 to 10 years Surrender charges on an annuity usually run for 25 years Administrative fees may be a flat fee or a percentage of the account value Mortality and expense charges are usually about 1.25% on annuities

Surrender charges on an annuity usually run for 25 years

Which of the following are factors that affect the price of an insurance policy?

The return on investments The mortality rate it expects among policyholders The cost of doing business

The DINK (Dual Income, No Kids) method is useful if you have no dependents and your spouse earns as much as or more than you do.

True

True or False: Before you switch from a whole life policy, you should make sure that you are still insurable.

True

True or false: A cash-value life insurance policy provides both insurance and a savings account.

True

True or false: Multiyear level term insurance is also called straight term insurance.

True

True/False: If you have not paid your premium by the end of the grace period, your policy lapses.

True

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

Universal

Which of the following is not a source of ratings for insurance companies?

WWW.insurancecompanyconsumerguides.com

Group insurance plans insure a large number of people under the terms of:

a single policy

With a(n) ______ life insurance policy, you can change your policy as your needs change.

adjustable

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

age

The advantages of a universal life policy include:

current interest rates. more flexibility.

People with poor family health history and living habits should be careful about considering:

an annuity investment.

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

annuity

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

The person named in a life insurance policy to receive benefits from the insurance company is called a(n):

beneficiary.

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

best value

After a certain number of years stated in the policy, the policy loan provision permits you to borrow any amount of money up to the _____ value of the policy.

cash

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

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 better option than credit life insurance for helping to pay off debt if you die is:

decreasing term insurance

When looking to buy insurance, you should purchase from a company that is:

financially strong

Match a company's financial strength with its premiums.

financially strong company ➡️ lower rates financially weak company ➡️ higher rates

Match fixed and variable annuities.

fixed annuities ➡️ The same income for a certain period of life variable annuities ➡️ Monthly payments vary based on income received from stocks and investments

The _____ option allows you to buy specified additional amounts of life insurance at stated intervals without undergoing medical exams.

guaranteed insurability.

Annuities are a "good" investment for people who are:

healthy and expect to live longer than average

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

incontestability clause

A method of evaluating the cost of life insurance by taking into account the time value of money is called the:

interest-adjusted index.

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

Decreasing term insurance policy pays the beneficiary _____________ as time passes.

less

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

life

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

Costs not associated with replacing the services of a nonworking spouse include:

lost wages for time away from work for the surviving spouse

match the interest-adjusted index with cost for policy

low interest-adjusted index: lower lower cost high interest-adjusted index: higher cost

The most widely used option of insurance proceeds payment is the:

lump-sum payment

When looking to switch insurance companies, it is important to:

make sure you are still insurable

The _____ of age provision states that if you misrepresent your age, the company will pay the benefits your premiums would have bought if your age had been correctly stated.

misstatement

Return-of-premium policies refund every premium if you outlive the time period provided. However, these policies cost ______ than traditional term life.

more; These policies cost more, because they offer the return of everything you've paid in.

The two types of insurance companies are stock life insurance companies and ______ life insurance companies.

mutual

During the accumulation period of an annuity, if you die then your beneficiary is guaranteed:

no less than the amount invested.

With an annuity, there is:

no maximum annual contribution.

A(n) _________________ life policy provides policy dividend.

par; participating

Life insurance that provides policy dividends is called:

participating

Match immediate annuity and deferred annuity.

payments begin at once ➡️ immediate annuity payments at some future date ➡️ deferred annuity

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

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 the limited payment policy, you pay premiums up to a certain age and after that age has been reached you:

remain insured for life.

You can locate an insurance company that is financially strong by checking the _________ of local agencies.

reputations

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

retirement

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

retirement income for life

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

savings

Stock life insurance companies are owned by:

shareholders

Life expectancy in the United States has been:

steadily increasing

The cash values of variable life insurance policies fluctuate based on the yields earned by a separate fund, which will typically include categories such as a(n) ___________, bond, or a money market fund.

stock

Interest earned on annuities is:

tax free.

Term life insurance is:

temporary insurance

At any given age you purchase life insurance, which type of policy will have the lowest premium?

term

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 you happen to die during the accumulation period of the annuity, your beneficiary is guaranteed no less than:

the amount invested

The cost of group health insurance is sometimes split between:

the employer and employee

Under the waiver of premium disability benefit, a person that becomes completely disabled has her or his premiums paid for by:

the insurance company

If the policyholder decides on the "left with the company" option for a life insurance policy, the beneficiary will receive

the interest earned.

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

universal life

The DINK method may not be the best method for individuals who have:

unstable income a spouse in poor health

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:

upward; If anyone in the family suffers from poor health or there are more than two children under the age of 13, the nonworking spouse method should be adjusted upward to take care of those additional financial needs.

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.