PF13
Purchasing term insurance with benefits large enough to pay off the mortgage is often _______________ than purchasing mortgage life insurance.
Cheaper
When might a policyholder use this option? (Select the best answer below.)
This option kicks in when special circumstances such as a terminal illness or long-term care needs arise.
Review #17 (static): Installment Payment Installment Payments Settlement. What is an installment payments settlement? When would an insured individual choose this option? The installment settlement option provides the beneficiary with:
an equal stream of payments over a specified number of years.
Review #8 (similar to): Universal Life I Universal Life Insurance. What is universal life insurance? How does it differ from term life and whole life? Universal life insurance: (
is classified as a cash dash value life insurance policy OR provides insurance over a specified term like term life insurance
With decreasing-term insurance
the premium paid for the insurance remains constant over the term
Review #22 (static): Limitations in Esti Limitations in Estimating Life Insurance Needs. What are some factors that make estimating life insurance needs difficult? Some factors that make estimating life insurance needs difficult are
All of these unpredictable events can impact the amount of life insurance you need to buy.
Why is it important to periodically review your beneficiaries? (Select the best answer below.)
Any change in family status such as marriage, divorce, or death of a beneficiary needs to trigger a review of the beneficiaries listed in your life insurance policy.
Review #9 (similar to): Variable Life In Variable Life Insurance. What is variable life insurance? What are the advantages and disadvantages of variable life policies? How can individuals avoid the high fees of variable life insurance? Variable life insurance
allows the policyholder to invest funds in excess of the term premium payment OR
#6 NONFORFEITURE Review #6 (similar to): Loan Clauses Loan Clauses. Describe the nonforfeiture and loan clasues of whole life insurance policies. The nonforfeiture clause:
allows you to receive the savings you accumulated if you terminate your whole life policy
Review #23 (static): Living Benefits Living Benefits. What are living benefits? When might a policyholder use this option? Living benefits:
also known as an accelerated death benefit, allows policyholders to receive a portion of their death benefits while they are still alive.
Review #15 (static): Settlement Options Settlement Options. What are settlement options? Which option should you choose? Settlement options are:
alternative ways in which a beneficiary can receive life insurance benefits in the event the insured person dies.
Review #24 (static): Conversion Option Conversion Option. What is a conversion option? What are the benefits of having this option? Conversion options allow you to:
convert a term life insurance policy to a whole life insurance policy.
partial credit, Review #13 (static): Factors Affecting P Factors Affecting Premiums. List and briefly discuss the factors that affect an individual's life insurance premium. The larger the amount of life insurance needed, the ___________ Any policy that builds cash value _____________ expensive than one that only provides insurance protection. Whole and universal life insurance policies are _________ expensive than term life insurance policies________ Premiums charged on insurance ____________ for individuals more likely to die during the term of the policy.
higher cash value more more higher
Review #20 (static): Psychology and Lif Psychology and Life Insurance. Why do some people postpone buying life insurance even when they need it? Some people postpone buying life insurance even when they need it because: (
A. many people find it difficult to focus on preparing for their death. This fact makes it difficult to spend money on insurance premiums when you could use the funds for something more pleasant. B. they do not receive immediate satisfaction from their purchase.
Decision to Purchase Insurance. Bart is a college student. Since his plan is to get a job immediately after graduation, he determines that he will need about $250 comma 000 in life insurance to provide for his future wife and future children (Bart is not married yet and does not have any children). Bart has obtained a quote over the Internet that would require him to pay $200 annually in life insurance premiums. As a college student, this is a significant expense for Bart, and he would likely have to borrow the money necessary to pay for the insurance premiums. Advise Bart on the timing of his life insurance purchase. How would you advise Bart on the timing of his life insurance purchase?
Bart should probably wait to purchase life insurance until he is married and/or has children. Bart currently has no dependents, which would make it difficult for him to specify a beneficiary.
The disadvantage of this method is that it does not consider your:
age or your household situation.
partial credit, Review #16 (static): Lump-sum Settlement Lump-sum Settlement. What is a lump-sum settlement? What kind of beneficiary would benefit most from this option? A lump-sum settlement means that the beneficiary receives all of the benefits provided by the policy upon the death of the insured in the form of a single payment . (Select from the drop-down menus.) A beneficiary who is disciplined and can use the proceeds wisely would benefit the most from the lump-sum settlement option.
all a single payment disciplined most
Review #1 (similar to): Purpose of Life Purpose of Life Insurance. What is the purpose of life insurance? Do you think everyone needs life insurance? Explain. Life insurance:
allows individuals to eliminate or substantially reduce the financial consequences of their death on dependents
#6 LOAN CLAUSE Loan Clauses. Describe the nonforfeiture and loan clasues of whole life insurance policies. The loan clause:
allows the policyholder to borrow at a lower rate than that offered by financial institutions
One element that must be considered in making this calculation according to the budget method is the:
annual living expenses or value of existing savings
Review #10 (static): Income Method Income Method. Describe the income method to determine the amount of life insurance needed. What is the disadvantage of this method? The income method of determining the amount of life insurance needed specifies the life insurance amount:
as a multiple of the insured's annual income.
Review #11 (static): Life Insurance Need Life Insurance Needs. Discuss why life insurance needs should not be based on a family's dreams for the future. Life insurance needs should be based on a family's:
current standard of living and include some improvement in the future standard of living.
Review #12 (similar to): Budget Method Budget Method. Describe the budget method to determine the amount of life insurance needed. What elements must be considered in making this calculation? The budget method to determine the amount of life insurance needed is based on a household's:
future expected expenses and the individuals' current financial situation.
Interest Payments Option. What is the interest payments option? How does it differ from the installment payments option? Under the interest payments option, the amount owed to the beneficiary will be:
held by the life insurance company for a specified number of years.
Review #5 (similar to): Whole Life Insur Whole Life Insurance. What is whole life insurance? What benefit does it provide that term insurance does not? Whole life insurance:
is also called cash dash value life insurance or provides insurance as long as premiums are paid
Review #2 (similar to): Term Insurance Term Insurance. What is term insurance? What factors determine the premium for term insurance? What is decreasing-term insurance? Term insurance:
provides protection over the specified period OR does not grow in cash value
An alternative approach to purchasing whole life insurance is to:
purchase term life insurance and invest the premium difference in other investments.
Individuals avoid the high fees of variable life insurance by:
purchasing lower-cost term insurance and investing the cost difference.
Review #3 (static): Mortgage Life Insura Mortgage Life Insurance. What is mortgage life insurance? Is mortgage life insurance a good buy? Why or why not? Mortgage life insurance is a:
special form of decreasing term life insurance that pays off the mortgage if the insured dies.
An insured individual would choose this option when they anticipate: (Select the best answer below.)
the beneficiary might quickly spend the total amount to be received.
The settlement option should be selected with an understanding of :
the needs and characteristics of the beneficiary.
Review #19 (static): Beneficiary Beneficiary. What is a beneficiary? Why is it important to periodically review your beneficiaries? The beneficiary is:
the person or persons named to receive the life insurance proceeds in the event the policyholder dies.
Some advantages of group term life insuarance are: (Select all that apply.)
your employer may pay for all or part of the premiums. premiums are typically lower than term life premiums purchased by an individual.
b. Taking just the first policy, would Steve have been better off to invest the $280 annual premium per policy in mutual funds that would have given an annual return of 8 percent per year (assume a 30-year investment period)? (Select the best answer below.)
Yes, because he would have had nearly $32,000 worth of earnings per invested policy premiums.
Does everyone need life insurance?
No, only those with financial dependents need life insurance.
Review #14 (static): How the Internet Fa How the Internet Facilitates Insurance Quotes. Explain how use of the Internet can expedite the purchase of insurance. Why do many customers prefer this method? Using the Internet to receive quotes on term insurance is popular because:
it provides for an easy cost comparison for customers without sales pressure.
The factors that determine the premium for term insurance include:
length of time covered OR Health
Review #25 (static): Financial Condition Financial Condition of Insurance Company. Why is it important to evaluate the financial condition of a life insurance company? It is important to evaluate the financial condition of a life insurance company because:
life insurance payouts are expected to occur years in the future so you want to make sure you buy life insurance from a financially strong firm that will still be in existence and able to pay the settlement when you die.
Review #21 (static): Group Term Life Ins Group Term Life Insurance. What is group term life insurance? What are the advantages of group term life insurance? Group term life insuran
may be available to a group of people with a common bond, such as working for the same employer.
Review #4 (similar to): Term Insurance O Term Insurance Options. Briefly describe some of the term insurance options. A term insurance policy:
may have a renewability option allowing you to renew for additional terms
Universal life insurance differs from TERM life insurance in that: OR WHOLE LIFE
payments above that required for the term portion are invested and earn interest OR it allows policyholders to skip premium payments and have the amount withdrawn from their savings plan
An advantage of variable life policies is that:
policyholders have flexibility in making their own investments.
Planning #7 (static): Ethical Dilemma Ethical Dilemma. Shortly after Steve graduated from college, he considered a whole life insurance policy that would provide $10,000 in life insurance protection and accumulate a cash value of twice his current annual income by age 65. Two years later, after Steve's marriage, he bought a second policy. Through his working years, he paid the $280 annual premium per policy. Steve kept remembering what the agent had told him many years before about each policy having a cash value double his annual income. Steve was nearing age 65 and dug out the policies from his safety deposit box so that he could begin to put numbers together to plan his retirement. As he opened the two policies, he was appalled to see that the cash value on the older policy was $17,000 and on the newer policy was only $15,000. The two policies together amounted to only one-third his current annual earnings, far from the figure promised him by the agent. a. Was the agent being unethical in not showing Steve the potential impact of inflation on the policies' cash value? b. Taking just the first policy, would Steve have been better off to invest the $280 annual premium in a mutual fund that would have given an annual return of 8% per year (assume a 30-year investment period)? a. The agent's failure to show Steve the potential impact of inflation on the policies' cash value was:
unethical since he failed to fully disclose the factors that influence future earnings.
The benefits of having this option are: (Select the best answer below.)
while your premiums will increase at the time of conversion they will be fixed for the life of the policy at that time. In addition you will begin building some cash value.
Review #7 (static): Whole Life Premium Whole Life Premium. Why is the premium paid for whole life higher than the premium paid for term life? What alternative approach to purchasing life insurance might provide the same benefits as whole life? The premium paid for a whole life policy is higher than the premium for term life because:
whole life insurance provides both insurance protection and savings.