Ch 10

A nonworking parent of two children ages 4 to 10 wants to purchase life insurance. What is the total need under the nonworking spouse method?

$140,000 (# of years it will take youngest child to reach 18 x 10k)

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

$240,000 (50,000x0.7)

Total debts equal $80,000, and funeral costs equal $5,000. Using the DINK method, what is the total insurance need?

$45,000

If current income is $20,000, then what is the amount of life insurance coverage needed using the easy method?

$98,000

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

28-31 days

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

7

If a spouse has an unstable job or poor health, then the ______ method may not be the best option.

DINK

Which policy provides coverage form 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

A term life insurance policy is one in which policyholders pay the same premium each year as long as they live.

False

Decreasing term insurance policy pays the beneficiary higher amount as time passes.

False

The premium of whole life policies will increase each time you renew your insurance. In contrast, term insurance policies will have a higher annual premium at first, but the rate remains the same for the rest of your life.

False

True or false: A beneficiary is a person named in a will to receive part of an estate of a deceased person.

False

True or false: If there are teenage children, the DINK method can be typically reduced.

False

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

False

Which characteristics should you consider in an insurance company?

Financial stability; Professionally qualified representatives

Which household has the highest need for life insurance?

Households with small children

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

Life insurance

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(an):

Suicide Clause

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

Term

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

True

True or false: Multi-year level term insurance is also called straight term insurance.

True

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

additional

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

adjustable

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

annuity

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

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

best value

A universal life is essentially a term policy with a _____ ______.

cash value

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

changes

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

Some experts have said that _____ life insurance policies are not the Best Buy for the protection that they offer.

credit

The _____ insurance method is for families with no children.

dink

Nonparticipating policies do not provide policy _________.

dividends

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

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.

endowment

According to the 2012 life expectancy tables, the life expectancy of a male at age 30 is 48.0. This number represents the __________ number of additional, or remaining, years of a male.

expected

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 amount for a certain period of life. variable annuities: Monthly payments vary based on income received from stocks and investments

A nonparticipating policy will have:

guaranteed premiujms

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

incontestability clause

A beneficiary:

is a person named to receive the insurance benefits from a policy

For the nonworking spouse method, extra costs not considered include the lost potential earnings of the spouse's time away from their ______ to care for the family.

job

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

large; medical

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

limited installment payment

The family need method takes the total family financial need and subtracts the total family ______ assets.

liquid

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.

long

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

more

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

mortality

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

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

mutual

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

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

nonparticipating

Life insurance that does not provide policy dividends is also called a nonpartisan, or ____________ policy.

nonparticipating

Stock life insurance company generally sell:

nonparticipating policies

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

nonworking spouse

Life insurance that provides policy dividends is called:

participating

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

period

The primary factor for determining premium's for whole life insurance policies is the:

person's age when the policy is purachsed

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

To utilize the interest-adjusted index, which of the following are included in the equation?

premium payments; time value of money; cash-value

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

purchasing

Cash value is the amount the policy holder ________ after giving up a life insurance policy.

receives

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

renewable

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

savings

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

stage in the life cycle; type of household

Life expectancy in the United Sates has been:

steadily increasing

Term life insurance is:

temporary insurance

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

term

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

term; investment

A conversation option allows you to change a(n) _________ policy to a(n) __________ life policy.

term; permanent

Many times the company that is the most financially secure is the one with:

the ability to provide the lowest premiums

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

trustee

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

universal

The DINK method is for families with:

very simple insurance needs

A plan where the policyholder pays the same premium for as long as they live is called a(n):

whole life policy