Smartbook Ch 10

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

7

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

False

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

Financial

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

Front-end load

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

Greater Term

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

Higher

financially weak company

Higher rates

Term life insurance is also known as _________ life insurance.

Temporary

Term life insurance is:

Temporary insurance

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

Term

A conversion option allows you to change a(n) ____________ policy to a(n) __________ coverage life policy.

Term Permanent

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

Accrued

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

Assets Coverage

There are several reasons for the incontestable clause; one is to protect the ________ from financial loss if the insurance company refuses to meet the terms of the policy.

Beneficiary

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

Best Value

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

Death

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

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

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

Life expectancy in the United States has been steadily

Increasing

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

Less

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

Life

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

Life income option

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

decreasing term insurance policy.

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

The primary factor for determining premiums for whole life insurance policies is the:

person's age when the policy is purchased

Cash-value policies are good for people who:

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

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

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

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.

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

retirement

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

retirement income for life

Life expectancy in the United States has been:

steadily increasing

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

Interest earned on annuities is:

tax free.

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

term

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

Cancel

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

Cash value

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

Changes

Households with ________ have the greatest need for life insurance.

Children

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

Conversion

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

28-31 days

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

Age

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.

Age

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

Cash

The ________ benefit is guaranteed in a variable life insurance policy.

Death

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

financially strong company

Lower rates

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

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

Nonparticipating

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

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

Time

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

adjustable

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

the ability to provide the lowest premiums

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

whole life policy

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

Period

What characteristics should you consider in an insurance company?

Professionally qualified representatives Financial stability

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

Purchasing

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

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

Reinstatement

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

Renewable

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

Savings

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.

Sex Age

As a rule, you should deal with insurance companies with a(n) _______ or _________ rating. (use words and not letter grades for the ratings)

Superior Excellent

Which of the following is NOT true?

Surrender charges on an annuity usually run for 25 years

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

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.

Twice

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

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

Universal

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

Universal Life

With a _______ life insurance policy, the death benefit is guaranteed but the cash value of the benefit can fluctuate according to the ups and downs of the stock market.

Variable

_________ life insurance cash values fluctuate with their investments.

Variable

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

WWW.insurancecompanyconsumerguides.com

Which of the insurance ratings system uses grades that look most similar to school grades (i.e., A+, A, A-, B+ -)?

Weiss Research

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

an interest adjusted index.

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

annuity

The cash values of a variable life insurance policies:

fluctuate with investments

An annuity is a contract that provides regular ________ for as long as a person lives.

income

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

incontestability clause

If you wish to continue your existing term life insurance coverage, the easiest method is if your policy:

is renewable

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

life insurance

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

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

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

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.