Personal Finance CH 12

If current income is $50,000, then what is the amount of life insurance coverage needed using the easy method?

$245,000; Amount of coverage=$50,000*7 years*70%=$245,000

Debts equal $100,000, and funeral costs equal $4,500. Using the DINK method, what is the total insurance need?

$54,500; 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; Amount of coverage=$20,000*7 years*70%=$98,000

BLANK life insurance is used to repay certain debts, such as auto loans, should the borrower die before doing so.

Credit

True or false: A person should never reevaluate their insurance needs once they sign a policy.

False

What are the two types of insurance companies?

Stock and Mutual

Term life insurance is:

Temporary insurance

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

True

BLANK life allows you to change your premium without changing your coverage.

Universal

When considering life insurance, what questions should you ask?

When would you like to retire? How much are you able to pay? How much money do you want to leave?

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

beneficiary

Which form of life insurance is used to repay a personal debt should the borrower die before doing so?

credit life insurance

Participating policies refund part of the policy premium called a policy BLANK

dividend

The cash values of variable life insurance policies:

fluctuate with investments.

The BLANK risk is assumed by policyholders for a variable life insurance policy.

investment

One question to ask when considering life insurance is "how much money you would like to BLANK to your dependents"?

leave

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

life

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

nonparticipating

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

seven

Stock life insurance companies are owned by

shareholders

Households with BLANK children have the greatest need for life insurance.

small

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

stage in the life cycle. type of household.

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 which will typically include categories such as a(n) BLANK fund, a money market fund, or a(n) BLANK fund.

stock, bond

Term life insurance is a(n) BLANK life insurance option.

temporary

Universal life is a whole life policy that combines BLANK life insurance and BLANK elements.

term, investment

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

true

A person should reevaluate their insurance needs every BLANK year(s).

two

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

universal life

Universal life allows you to access your cash value by a policy loan or Blank______, while whole life allows only for policy Blank______.

withdrawal; loans