chapter 12

Insurance dividends may be

(all of these) received in cash. left with the insurance company to earn interest. used to buy small amounts of paid-up life insurance.

Jonna purchased a $25,000 cash value policy with a guaranteed insurability option that can be exercised a maximum of four times at $25,000, each over the next 12 years. Which of the following statements is false?

Jonna will have to prove she is still insurable each time she exercises a purchase option.

____ should be considered when evaluating income-replacement needs.

Lost income of the deceased The value of employment fringe benefits Contributions of a spouse's income (all of these)

Endorsements may be added at any time during the life of an insurance policy to

expand coverage. raise policy limits. (All of these) make other changes.

Which of the following is not characteristic of a cash-value life insurance policy?

The beneficiary receives the sum of the face amount and the cash value.

One's need for life insurance is generally the greatest during which phase of the life cycle?

Young married with children

Settlement options for life insurance proceeds include all of the following except

additional paid-up insurance.

A term life insurance policy will pay out the ____ value if the insured dies during the term of the contract.

face

Ratings of the financial strengths of insurance companies are available from

both Standard & Poors and A.M. Best Company.

Life insurance is generally least needed on the lives of

children.

Variations on term life insurance include

credit life.

Which of the following rates of return in a cash-value life insurance policy does the agent tend to focus on and which should the purchaser focus on?

current; guaranteed minimum

The promise not to smoke in exchange for lower life insurance premiums would be included in the ____ section of an insurance policy.

declarations

With a decreasing term policy, the face value amount ____ annually and the premiums ____ annually.

decreases; remain constant

Credit term life insurance is a ____ policy with ____ named as beneficiary.

decreasing term; the creditor

Group term life insurance would be especially beneficial for persons who

have health problems.

The ____ are the broadly defined coverages provided under the policy.

insuring agreements

The rate of return on cash-value life insurance has historically ____ what can be achieved by a diversified portfolio of stock and bond mutual funds.

lagged well behind

A 5-year term life policy will cost ____ a 1-year renewable term policy during the fifth year of the 5-year period, other factors being equal.

less than

Life insurance needs are ____ until your first child is born, then the need is ____ until the youngest child is ten, and then the need ____ until retirement.

low; high; decreases

Determining the magnitude of possible losses from a premature death can be complicated. The best method is the

needs-based approach.

Typically, when one borrows from his or her cash value in a life insurance policy,

only the guaranteed minimum rate is paid on the remaining nonborrowed cash value.

If one commits suicide less than one year after becoming insured, the life insurance will pay the beneficiary

the amount of premiums that had been paid.

Adjustable life insurance allows you to change ____ on your policy.

the rate of cash-value accumulation the premium the face amount any of these

Straight life is a label sometimes used interchangeably with

whole life.