Your Money and Credit Chapter 8

Generally, the primary purpose of life insurance is to provide a tax-advantaged investment plan.

False

Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?

Guaranteed purchase option

You can learn about the financial strength of an insurance company by checking ______________ rating system.

Standard & Poor's

_____ determines the amount of life insurance coverage required for an individual by considering his or her financial obligations and available financial resources in addition to life insurance.

The needs analysis method

The availability of group coverage through employee benefit programs should be considered when developing a life insurance program.

True

Which of the following is true of insurance underwriting?

Underwriters design rate classification schedules so that people pay premiums that reflect their chance of loss.

It can be difficult to evaluate the true cost of a _____ at the time of purchase.

Universal life insurance

The most preferred technique for determining how much life insurance coverage is needed for an individual is:

assessing the family's total economic needs and subtracting the financial resources available to meet those needs

Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.

continuous whole life

Insurance is a tool that can reduce one's _____ risk.

economic

If an insured has a high-risk hobby, then he or she should expect to pay less for life insurance

false

Insurance agents always disclose their commissions in an insurance policy.

false

Only one agent should be consulted for discussing personal financial needs and insurance requirements while buying life insurance.

false

____ can be both an advantage and a disadvantage of universal life insurance.

flexible premiums

The primary purpose of a life insurance plan is to help:

in the protection of the dependents of the insured from financial loss in the event of his or her untimely death.

A life insurance policy with a small face amount where the premium may be collected weekly by agents is termed _____.

industrial life insurance

You want to pay premiums for 20 years and have your insurance premium obligations finished at that time. However, you feel you will need life insurance for the rest of your life. You should choose a _____ insurance.

limited payment whole life

The probability of a loss occurring can be reduced by_____.

loss prevention

_______is an activity that reduces the chance that a loss will occur.

loss prevention

A life insurance policy can be structured so that death benefits are paid directly to a(n) ____________, which means that creditors cannot claim the cash benefits from the life insurance policy.

named beneficiary

A ______ is a common provision in many term policies.

renewable clause

______is the choice to accept and bear the risk of loss

risk assumption

_____ involves abstaining from any activity that will affect an individual financially.

risk avoidance

A(n) _____ policy is a type of term insurance.

straight term

A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary, which means that _____.

the cash benefits from your life insurance policy cannot be claimed by creditors.

Underwriting refers to _____:

the determination of which exposures to insure.

An individual's need for additional life insurance can be determined by looking at the difference between his or her family's available financial resources after his or her death and his or her family's total economic needs.

true

Avoiding alcoholic beverages while driving is an example of loss prevention.

true

Guaranteed renewable term insurance allows you to renew a policy for another term without qualifying medically.

true

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

true

Social Security survivor's benefits are intended to provide basic, minimum support to families faced with the loss of the principal wage earner.

true

The need for life insurance increases with children.

true

By ______,insurance companies decide who will be insured by them.

underwriting

Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.

underwriting

Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death. What is the amount of insurance, as per the needs analysis method, that Jonathan should purchase if he has current financial resources worth $1,000,000?

$1,000,000