CH 15 PRACTICE
You are 20 year-old now and planning for your retirement. You are healthy and therefore expect that you might live up to the 100 year-old age. Based on this forecast, you feel that receiving a monthly income of $10,000 starting at the retirement age of 65 (at the end of 1st month) until the 100 year-old age will be enough. Assuming annual interest rate is 10% in the distribution period and 8% in the accumulation period, how much monthly contributions will be sufficient if you start to contribute at the end of this month (month-end contributions)? Select one: a. none of the above b. $376.77 c. $310.02 d. $454.78 e. $220.54
e. $220.54
A mutual life insurance firm promises to pay dividends in all its policies and their policies said to be: Select one: a. non-convertible b. non-participating c. renewable d. convertible e. participating
e. participating
(TRUE or FALSE?) With the whole life insurance contracts, premiums generally do not increase over time. Select one: a. TRUE b. FALSE
TRUE
Annuity certain: Select one: a. is the stated amount of coverage of a life insurance policy. b. none of the answers is correct. c. refers to the years when the insurer makes payments to the policyholder. d. means that premium payments over time stays the same. e. pays over a fixed period of time regardless of death.
e. pays over a fixed period of time regardless of death.
(TRUE or FALSE?) "Annuity certain" type of annuity product pays over a fixed period of time regardless of the death of annuitant. Select one: a. TRUE b. FALSE
FALSE
(TRUE or FALSE?) A lapse occurs in a life insurance contract when the policyholder makes extra premium payments. Select one: a. TRUE b. FALSE
FALSE
(TRUE or FALSE?) Cash value accumulates with a term-life insurance contract. Select one: a. FALSE b. TRUE
FALSE
(TRUE or FALSE?) In a typical term life policy, the face amount remains fixed over the life of the policyholder but the death protection component decreases and the cash value component increases. Select one: a. FALSE b. TRUE
FALSE
(TRUE or FALSE?) Whole life policies are not bundled (unbundled); policyholder can see all the details of cash value accumulation. Select one: a. FALSE b. TRUE
FALSE
(TRUE or FALSE?) Smokers of all ages have significantly higher mortality risk than non-smokers. Select one: a. TRUE b. FALSE
TRUE
(TRUE or FALSE?) Whole life insurance premiums are higher at the beginning of the policy period than that of term-life policy. Select one: a. TRUE b. FALSE
TRUE
Which of the following statement is incorrect? Select one: a. Universal life policies provides flexibility in the payment of premiums, usually with a minimum and maximum amount of premium payment specified. b. With an "annuity certain" contract, the insurer's payments end only after the death of two people, usually a husband and wife. c. Whole life insurance policy period ends when insured reaches 100 or 120. d. In a typical variable-life insurance policy, the cash value depends on the returns of a portfolio stocks and bonds. e. Most of the answers are correct.
b. With an "annuity certain" contract, the insurer's payments end only after the death of two people, usually a husband and wife.
Which of the following statements is incorrect? Select one: a. with a whole life insurance policy, the insured pays more than the cost of pure life insurance protection during the early years the policy is in force b. with a whole life insurance policy, the insured pays more than the cost of pure life insurance protection during the late years the policy is in force c. there is no possibility of partial loss in life insurance as there is in the case of property and casualty insurance d. whole life insurance policy provides protection at a level premium for the entire lifetime of the insured e. none of the above
b. with a whole life insurance policy, the insured pays more than the cost of pure life insurance protection during the late years the policy is in force
___________ usually pays dividends to the policyholders. Select one: a. Face amount b. Endowment policy c. Participating life insurance policy d. Straight life annuity e. none of the answers is correct.
c. Participating life insurance policy
Which of the following statement is incorrect? Select one: a. As a person gets older, term life insurance premiums will increase. b. Variable life cash value varies with the market value of a portfolio containing stocks and bonds, or other securities. c. Variable life insurance provides pure life insurance coverage only and no savings accumulation. d. Most of the answers are correct. e. Smokers of all ages have significantly higher mortality risk than non-smokers.
c. Variable life insurance provides pure life insurance coverage only and no savings accumulation.
Term insurance premiums generally increase with: Select one: a. policyholder's age b. insurer expense loadings c. face amount of the policy d. all of the above e. none of the answers is correct.
d. all of the above
A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called: Select one: a. none of the answers is correct. b. a term life policy c. a universal life policy d. an endowment policy e. a whole life policy
d. an endowment policy
You are 30 year-old now and planning for your retirement. Your health is good and your family history points out to a long life up to the 90 year-old age. Based on your expectation, you will be content with an annual income of $100,000 (year-end payments) starting at the retirement age of 65 until the 90 year-old age. Assuming interest rate is 10% and expected to stay that way for a long time, how much year-end annual contributions will be sufficient if you start to contribute this year? Select one: a. none of the above b. $4,223.09 c. $3,980.11 d. $2,456.65 e. $3,349.16
e. $3,349.16
Which of the following statement is correct? Select one: a. Endowment insurance pays the face amount only when the policyholder dies. b. Term life insurance contracts are not usually guaranteed renewable and their premium decreases over time. c. An annuity that pays over a fixed period of time regardless of death is called an "straight life annuity." d. All the answers are incorrect. e. Women tend to have lower mortality risk at any given age compared to men.
e. Women tend to have lower mortality risk at any given age compared to men.
(TRUE or FALSE?) Variable life policies are bundled; policyholders cannot see the details of cash value accumulation. Select one: a. FALSE b. TRUE
FALSE
(TRUE or FALSE?) "Joint and last survivor" annuity contracts pay until the both beneficiaries; usually a wife and husband, pass away. Select one: a. TRUE b. FALSE
TRUE
(TRUE or FALSE?) A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called an endowment policy. Select one: a. TRUE b. FALSE
TRUE
(TRUE or FALSE?) As a person gets older, term life insurance premiums will increase. Select one: a. TRUE b. FALSE
TRUE
(TRUE or FALSE?) If the objective of your life insurance program is to get the greatest death protection for your insurance dollars, you should choose a term life insurance policy. Select one: a. FALSE b. TRUE
TRUE
(TRUE or FALSE?) In a typical whole life policy, death benefit (face value of the contract) is at level and predetermined. Select one: a. TRUE b. FALSE
TRUE
Which of the following statement is incorrect? Select one: a. "Annuity certain" pays until the death of annuitant. b. Most of the answers are correct. c. Whole life policies are not unbundled (bundled); policyholder does not see all the details of cash value accumulation. d. In a typical whole life policy, death benefit (face value of the contract) is at level and predetermined. e. An annuity that pays over a fixed period of time regardless of death is called an annuity certain.
a. "Annuity certain" pays until the death of annuitant.
Which of the following statement is incorrect? Select one: a. A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called a term life policy. b. Most of the answers are correct. c. Whole life insurance premiums are higher at the beginning of the policy period than that of term-life policy. d. Smokers of all ages have significantly higher mortality risk than non-smokers. e. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses.
a. A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called a term life policy. b. Most of the answers are correct.
Which of the following statement is incorrect? Select one: a. Death benefit means how much the insured will receive personally if she dies. b. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses. c. A life insurance contract's renewability implies that a policyholder can extend the coverage term without re-qualifying for the coverage. d. Life insurance agents usually use an ad-hoc benchmark and recommend that life insurance policyholders buy coverage 5 to 10 times of their annual income. e. Most of the answers are correct.
a. Death benefit means how much the insured will receive personally if she dies.
___________ provides death protection benefits only and there is no savings accumulation. Select one: a. Term life insurance b. Front-end expense charge c. none of the answers is correct. d. Limited pay whole life policy e. Payout period
a. Term life insurance
Which of the following statements is incorrect? Select one: a. none of the above b. variable life insurance policies require insurance agents and brokers to have additional certifications to assure that agents and brokers have authority to buy and sell commons stocks and other publicly traded securities c. cash value policies provide a tax-advantaged method of saving, including income tax deferral on savings accumulations d. whole-life policy premiums are usually at level during the whole life of the policyholder. e. term-life policy premiums are higher at the beginning years of the contract but gradually decrease with age
e. term-life policy premiums are higher at the beginning years of the contract but gradually decrease with age
(TRUE or FALSE?) Life insurance premiums are determined basically by the use of mortality tables. Select one: a. FALSE b. TRUE
TRUE
___________ pays only until the annuitant dies. Select one: a. Guaranteed renewable b. Fixed annuity c. Straight life annuity d. Cash value policy e. none of the answers is correct.
c. Straight life annuity
Which of the following life insurance contract does not have cash value component? Select one: a. variable life b. whole life c. none of the above d. term life e. universal life
d. term life
(TRUE or FALSE?) Universal life policy premiums depends on the market value of a portfolio with stocks and bonds. Select one: a. TRUE b. FALSE
FALSE
Face amount: Select one: a. none of the answers is correct. b. is the amount of money that the beneficiaries pay to the insurer when the insured dies. c. requires a person to pay a level premium for a certain number of years and then have continuous coverage for his/her whole life. d. has the return credited to the annuity contract that varies with the return on stock and bond funds that policyholder chooses and there is no minimum rate of return. e. is the stated amount of coverage of a life insurance policy.
e. is the stated amount of coverage of a life insurance policy.
(TRUE or FALSE?) Life insurance premiums are determined basically by the use of present value tables applied to the expected future premiums. Select one: a. TRUE b. FALSE
FALSE
(TRUE or FALSE?) One of the tax problem of life insurance is that high levels of income tax is paid on the annual increase in cash value while the policy in force. Select one: a. TRUE b. FALSE
FALSE
(TRUE or FALSE?) Policyholders are entitled to receive back a portion of a term life policy's cash value if they terminate, lapse, or surrender the policy. Select one: a. FALSE b. TRUE
FALSE
(TRUE or FALSE?) Universal life insurance provides pure life insurance coverage only and no savings accumulation. Select one: a. TRUE b. FALSE
FALSE
Which of the following statement is incorrect? Select one: a. Variable life insurance provides pure life insurance coverage only and no savings accumulation. b. A participating whole life policy is one that can and usually does pay dividends. c. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses. d. Most of the answers are correct. e. As a person gets older, term life insurance premiums will increase.
a. Variable life insurance provides pure life insurance coverage only and no savings accumulation.
Whole life insurance: Select one: a. all of the answers are correct. b. none of the answers is correct. c. provides death protection and savings accumulation. d. provides death protection equal to the face amount of the policy less the cash value. e. is a type of cash value life insurance.
a. all of the answers are correct
Which of the following statement is incorrect? Select one: a. In a typical term-life insurance policy, premiums are flexible and customized to insured's needs. b. Whole life insurance has higher upfront premiums than that of term life insurance policy. c. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses. d. Most of the answers are correct. e. A participating whole life policy is one that can and usually does pay dividends.
a. In a typical term-life insurance policy, premiums are flexible and customized to insured's needs.
Which of the following statement is correct? Select one: a. In a typical whole life policy, the face amount remains fixed over the life of the policyholder but the death protection component decreases and the cash value component increases. b. All the answers are incorrect. c. A lapse occurs in a life insurance contract when the policyholder makes extra premium payments. d. In a typical universal-life insurance policy, the cash value depends on the returns of a portfolio stocks and bonds. e. Smokers of all ages have significantly lower mortality risk than non-smokers.
a. In a typical whole life policy, the face amount remains fixed over the life of the policyholder but the death protection component decreases and the cash value component increases.
Which of the following statements is incorrect? Select one: a. in a variable life policy, cash value grows at an uncertain rate that depends on premium payments, expense and profit loading, mortality charges, and interest rates b. in a typical universal life insurance policy, the policyholder has considerable flexibility in the payment of premiums c. in whole-life insurance policy, cash value grows according to a fixed schedule over time d. term insurance provides pure death protection coverage e. cash value policies provides both death protection and savings accumulation
a. in a variable life policy, cash value grows at an uncertain rate that depends on premium payments, expense and profit loading, mortality charges, and interest rates
Which of the following statement is correct? Select one: a. One of the tax problem of life insurance is that death benefits are taxable as income (also they may be subject to estate taxes). b. "Straight life annuity" pays until the death of annuitant. c. A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called a term life policy. d. All the answers are incorrect. e. With the term life insurance contracts, usually the policy period ends when insured reaches 100 and the term life insurance contract is equivalent to endowment policy to 100.
b. "Straight life annuity" pays until the death of annuitant.
Which of the following statement is incorrect? Select one: a. As a person gets older, term life insurance premiums will increase. b. Variable life insurance provides pure life insurance coverage only and no savings accumulation. c. Whole life policies have relatively high level premiums because higher premium collected in early years must subsidize the higher cost of death protection in the later years. d. Most of the answers are correct. e. Smokers of all ages have significantly higher mortality risk than non-smokers.
b. Variable life insurance provides pure life insurance coverage only and no savings accumulation.
Which of the following statement is correct? Select one: a. In a typical universal-life insurance policy, the cash value depends on the returns of a portfolio stocks and bonds. b. Whole life is a cash value policy. c. Whole life policies are not bundled (unbundled); policyholder can see all the details of cash value accumulation. d. All the answers are incorrect. e. If the objective of your life insurance program is to get the greatest death protection for your insurance dollars, you should choose a whole life insurance policy.
b. Whole life is a cash value policy.
Which of the following statement is correct? Select one: a. Term life insurance has higher upfront premiums than that of whole life insurance policy. b. All the answers are incorrect. c. A life insurance contract's renewability implies that a policyholder can extend the coverage term without re-qualifying for the coverage. d. With the term life insurance contracts, premiums generally do not increase over time. e. With variable annuities, the return credited to the contract varies with the premiums paid by the policyholder in the distribution period.
c. A life insurance contract's renewability implies that a policyholder can extend the coverage term without re-qualifying for the coverage.
Which of the following statement is incorrect? Select one: a. "Joint and last survivor" annuity contracts pay until the both beneficiaries; usually a wife and husband, pass away. b. Most of the answers are correct. c. Universal life policy premiums depends on the market value of a portfolio with stocks and bonds. d. Universal life policies provides flexibility in the payment of premiums, usually with a minimum and maximum amount of premium payment specified. e. Term life insurance premiums generally increase with face amount of the policy.
c. Universal life policy premiums depends on the market value of a portfolio with stocks and bonds.
Which of the following statements is incorrect? Select one: a. in a typical variable life policy, the cash value grows at a guaranteed rate b. with a typical variable life policy, the policyholder pays premiums according to a fixed schedule c. a typical variable life policy provides a death benefit equal to a minimum amount plus the cash value of the policy d. most whole-life policies are endowment policies to age 100 e. none of the above
c. a typical variable life policy provides a death benefit equal to a minimum amount plus the cash value of the policy
Variable annuity: Select one: a. none of the answers is correct. b. means that premium payments over time stays the same. c. has the return credited to the annuity contract that varies with the return on stock and bond funds that policyholder chooses and there is no minimum rate of return. d. means that the policy can be renewed at a predetermined premium at the end of the term without proving insurability by taking a physical exam up to an advance age such as 65 or 70. e. pays over a fixed period of time regardless of death.
c. has the return credited to the annuity contract that varies with the return on stock and bond funds that policyholder chooses and there is no minimum rate of return.
Which of the following statement is incorrect? Select one: a. Policyholders are entitled to receive back a portion of a whole life policy's cash value if they terminate, lapse, or surrender the policy. b. Variable life insurance provides both pure life insurance coverage and savings accumulation. c. Most of the answers are correct. d. "Straight-life annuity" pays over a fixed period of time regardless of the death of annuitant. e. With a typical whole life insurance policy, the death benefit is kept at level and squency of cash values grow according to a fixed schedule over time.
d. "Straight-life annuity" pays over a fixed period of time regardless of the death of annuitant.
Which of the following statement is correct? Select one: a. All the answers are incorrect. b. Term life insurance provides death protection and savings accumulation. c. With the term life insurance contracts, premiums generally do not increase over time. d. Whole life insurance is a type of cash value life insurance. e. Whole life policies are not bundled (unbundled); policyholder can see all the details of cash value accumulation.
d. Whole life insurance is a type of cash value life insurance.
Term life insurance: Select one: a. provides death protection and savings accumulation. b. provides death protection that varies with interest rates. c. none of the answers is correct. d. provides a death benefit equal to the face amount of the policy if the insured dies during the policy period. e. provides a death benefit that depends on the term of the policy.
d. provides a death benefit equal to the face amount of the policy if the insured dies during the policy period.
Which of the following statements is incorrect? Select one: a. while life insurance policyholder is alive, the income earned on cash value is not taxed b. term life insurance policy typically provides death coverage with increasing premiums every year c. none of the above d. with a term life insurance policy, the insured pays more than the cost of pure life insurance protection at the beginning of the protection period e. with a life insurance contract, the death benefit amount to beneficiaries is not included in taxable income
d. with a term life insurance policy, the insured pays more than the cost of pure life insurance protection at the beginning of the protection period
Which of the following statement is correct? Select one: a. All the answers are incorrect. b. Term life insurance premiums are higher at the beginning of the policy period than that of whole-life policy. c. "Joint and last survivor" annuity contracts pay for a specific number of years. d. An insured usually chooses term life insurance in order to emphasize the savings portion. e. "Straight life annuity" pays until the death of annuitant.
e. "Straight life annuity" pays until the death of annuitant.
Which of the following statement is correct? Select one: a. All the answers are incorrect. b. Universal life is a called a "market value policy." c. A rare type of endowment life insurance is called decreasing endowment insurance and it usually has an increasing face value and premium. d. Cash value accumulates with a term-life insurance contract. e. A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called an endowment policy.
e. A policy which pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called an endowment policy.
What is the main reason that term life insurance premiums increase over time? Select one: a. Life insurance firms have to take into account the inflation b. Loading costs of insurance firms forces firms to increase their premiums every year c. none of the above d. Life insurance firms have to enhance their capital for future uncertainties e. Mortality tables show that probability of dying increases with age
e. Mortality tables show that probability of dying increases with age
Which of the following statement is correct? Select one: a. A lapse occurs in a life insurance contract when the policyholder makes extra premium payments. b. An insured usually chooses term life insurance in order to emphasize the savings portion. c. Term life insurance provides cash value equal to the face amount of the policy if the insured dies during the policy period. d. All the answers are incorrect. e. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses.
e. Universal life policy premiums depends on expected losses due to mortality rates, loadings, and market interest rates that the insurer uses.
Which of the following statement is correct? Select one: a. Term life is a cash value policy. b. Term life insurance has higher upfront premiums than that of whole life insurance policy. c. Men tend to have lower mortality risk at any given age compared to women. d. All the answers are incorrect. e. Whole life policies are not unbundled (bundled); policyholder does not see all the details of cash value accumulation.
e. Whole life policies are not unbundled (bundled); policyholder does not see all the details of cash value accumulation.
