ch. 13
An alternative approach to purchasing whole life insurance is to: (Select the best answer below.) A. purchase term life insurance and invest the premium difference in other investments. B. purchase term life insurance with higher premiums for a shorter period of time. C. not purchase life insurance and put the savings in a high yield asset. D. purchase a small term life insurance policy and a small whole life policy.
a
Does everyone need life insurance? (Select the best answer below.) A. No, only those with financial dependents need life insurance. B. Yes, all legal adults need life insurance. C. No, only those with children need life insurance. D. Yes, all people need life insurance.
a
Using the Internet to receive quotes on term insurance is popular because: (Select the best answer below.) A. it provides for an easy cost comparison for customers without sales pressure. B. insurance companies don't want to take the time to talk to each potential client. C. people are using the Internet all the time. D. it is easy to advertise on the Internet.
a
It is important to evaluate the financial condition of a life insurance company because: (Select the best answer below.) A. life insurance payouts are expected to be paid in full upon the policyholder's death so you want to make sure you buy life insurance from a financially strong firm that will not pay the benficiary in annual installments over a 20 year period. B. 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. C. life insurance payouts are expected to occur when the policyholder dies so you want to make sure you buy life insurance from a financially strong firm that will not try to cheat the beneficiary out of the money due. D. life insurance payouts are expected to occur years in the future so you want to make sure you buy life insurance from a financially weak firm that will still be in existence and able to pay the settlement when you die.
b
Living benefits: (Select the best answer below.) A. also known as an accelerated death benefit, allows policyholders to receive all of their death benefits while they are still alive. B. also known as an accelerated death benefit, allows policyholders to receive a portion of their death benefits while they are still alive. C. also known as an accelerated death benefit, allows beneficiaries to receive a portion of the death benefits while the policyholders are still alive. D. also known as an advanced death benefit, allows policyholders to receive a portion of their death benefits while they are still alive.
b
The beneficiary is: (Select the best answer below.) A. the person or persons who took care of the policyholder during the year prior to their death. B. the person or persons named to receive the life insurance proceeds in the event the policyholder dies. C. always the policyholder's children. D. the policyholder's attorney.
b
The budget method to determine the amount of life insurance needed is based on a household's: (Select the best answer below.) A. ability to pay the premiums. B. future expected expenses and the individuals' current financial situation. C. current and future expected income. D. current and future expected expenses.
b
The installment settlement option provides the beneficiary with: (Select the best answer below.) A. an increasing stream of payments over a specified number of years. B. an equal stream of payments over a specified number of years. C. a lump sum payment at a specified time period. D. a decreasing stream of payments over a specified number of years.
b
The settlement option should be selected with an understanding of : (Select the best answer below.) A. the ability to pay the premium. B. the needs and characteristics of the beneficiary. C. the type of policy chosen. D. the higher taxes the beneficiary will have.
b
With decreasing-term insurance,: (Select the best answer below.) A. the term decreases with age. B. the amount of benefits to the beneficiary is reduced over time. C. the term is adjusted by age. D. the premium paid for the insurance decreases over the term.
b
An advantage of variable life policies is that: (Select the best answer below.) A. fees on these policies are usually lower. B. they are offered in combination with health insurance. C. policyholders have flexibility in making their own investments. D. the insurance company provides investment advice.
c
Conversion options allow you to: (Select the best answer below.) A. convert a term life insurance policy to a variable life insurance policy. B. convert a whole life insurance policy to a term life insurance policy. C. convert a term life insurance policy to a whole life insurance policy. D. convert a whole life insurance policy to a universal life insurance policy.
c
Group term life insurance: (Select the best answer below.) A. is for group of 100 people or more. B. is available to anyone who has graduated from college. C. may be available to a group of people with a common bond, such as working for the same employer. D. may be available to any person who is willing to sell life insurance.
c
Mortgage life insurance is a: (Select the best answer below.) A. type of mortgage insurance that is sold by banks. B. special form of group life insurance that must be purchased when an individual takes out a mortgage. C. special form of decreasing term life insurance that pays off the mortgage if the insured dies. D. type of life insurance policy in which the payments are made monthly like a mortgage.
c
Settlement options are: (Select the best answer below.) A. a way to convert a term life policy to a whole life policy. B. a way to satisfy the insurance premium in a shorter time frame. C. alternative ways in which a beneficiary can receive life insurance benefits in the event the insured person dies. D. alternative ways in which an insured person can pay the premiums on a life insurance policy.
c
Term insurance: (Select the best answer below.) A. provides insurance for the term of the investment. B. serves as an investment. C. provides protection over the specified period. D. provides insurance for the term of employment.
c
The factors that determine the premium for term insurance include: (Select the best answer below.) A. religious affiliation. B. geographic location. C. gender. D. eduational level.
c
The loan clause: (Select the best answer below.) A. allows the policyholder to borrow against the cash value at a zero interest rate. B. creates a tax liability if the cash value withdrawn exceeds the premiums that were paid. C. allows the policyholder to borrow at a lower rate than that offered by financial institutions. D. allows the policyholder to borrow at a higher rate than that offered by financial institutions.
c
The premium paid for a whole life policy is higher than the premium for term life because: (Select the best answer below.) A. the insured values for whole life policies are higher. B. term life insurance policies are not available to everyone. C. whole life insurance provides both insurance protection and savings. D. regulators set the premium prices.
c
Under the interest payments option, the amount owed to the beneficiary will be: (Select the best answer below.) A. paid out by the life insurance company in two payments: one of interest and one of the accumulated premiums. B. paid out by the life insurance company over a specified number of years. C. held by the life insurance company for a specified number of years. D. paid out by the life insurance company in a lump sum.
c
Variable life insurance: (Select the best answer below.) A. has variable premiums. B. is an option for a term policy. C. is related to universal life insurance. D. has a benefit that varies throughout the term of the policy.
c
Whole life insurance: (Select the best answer below.) A. provides insurance until the premiums are paid. B. allows policyholders to terminate their policy but not withdraw any premiums they have paid. C. is also called cash-value life insurance. D. is also called savings dash value life insurance.
c
A term insurance policy: (Select the best answer below.) A. has constant premiums as you get older. B. can only be purchased if you are under age 50. C. must have a conversion option allowing you to change the policy type. D. may have a conversion option allowing you to change the policy type.
d
An insured individual would choose this option when they anticipate: (Select the best answer below.) A. they can pay more modest premiums with this option. B. they may die before the premiums are paid. C. the insurance provider may be in financial distress. D. the beneficiary might quickly spend the total amount to be received.
d
Individuals avoid the high fees of variable life insurance by: (Select the best answer below.) A. negotiating with the insurance company. B. purchasing a policy with smaller benefit amounts. C. purchasing shorter-term insurance and investing the cost difference. D. purchasing lower-cost term insurance and investing the cost difference.
d
Life insurance needs should be based on a family's: (Select the best answer below.) A. ability to pay the premiums. B. dreams for the future. C. current standard of living. D. current standard of living and include some improvement in the future standard of living.
d
Life insurance: (Select the best answer below.) A. provides for other insurance expenses. B. allows individuals to eliminate any inheritance for dependents. C. provides a payment to the policyholder's children when the policyholder dies. D. allows individuals to eliminate or substantially reduce the financial consequences of their death on dependents.
d
The income method of determining the amount of life insurance needed specifies the life insurance amount: (Select the best answer below.) A. using the insured's income divided by the premium payments. B. as the insured's annual income. C. as a fraction of the insured's annual income. D. as a multiple of the insured's annual income.
d
Universal life insurance differs from whole life insurance in that: (Select the best answer below.) A. it is only offered through employers. B. it does not allow policyholders to skip premium payments. C. it allows policyholders to alter their payments over time. D. it allows the insured to choose how the difference is invested.
d
Universal life insurance: (Select the best answer below.) A. is classified as a term life insurance policy. B. is a combination of whole insurance and a death benefit. C. provides insurance over a specified term like whole life insurance. D. has a savings component like whole life insurance.
d
Why is it important to periodically review your beneficiaries? (Select the best answer below.) A. Any change in family status such as marriage, divorce, or adoption needs to trigger a review of the beneficiaries listed in your life insurance policy. B. Any change in family status such as marriage, birth of a child, or death of a beneficiary needs to trigger a review of the beneficiaries listed in your life insurance policy. C. Any change in family status such as marriage, divorce, or death of a grandparent needs to trigger a review of the beneficiaries listed in your life insurance policy. D. 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.
d
Some factors that make estimating life insurance needs difficult are: (Select all that apply.) A. household income may not rise over time as expected B. inflation rates could exceed your forecasts. C. someone listed as a beneficiary may have an accident or contract a serious illness and need more cash than anticipated. D. household debt could increase over time. E. All of these unpredictable events can impact the amount of life insurance you need to buy.
e
