Chapter 9

Alfred lost his 3-year-old camera. It cost him $200 three years ago and had a life expectancy of 6 years. Alfred has actual cash value insurance on this camera, which means his insurance company will issue him a check for ________ for his loss. A new camera costs $150. A) $75 B) $150 C) $200 D) none of the above

$75

Who needs disability insurance? A) Anyone who relies on income from a job B) Only people who are married C) Only people who have dependents D) Only people who have no investment income

Anyone who relies on income from a job

At what point does whole life insurance pay the death benefit? A) When the insured turns 100 years old B) When the maximum stated age is reached by the insured C) Upon due proof of death of the insured D) When the cash value equals the death benefit E) Either A, B, or C above

Either A, B or C above

The ________ is the right of the policyholder to choose to receive the policy's cash value in exchange for the policyholder giving up his or her right to a death benefit. A) nonforfeiture right B) cash exchange right C) cash-out privilege D) residual cash right E) none of the above

Nonforfeiture right

For which of these situations is life insurance a good idea? A) Married with children B) Married, single-income couple with no children C) Single with no dependents D) Only A and B E) All of the above

Only A and B

Javier Jimenez was pleasantly surprised to find out that within three to five years after expiration of a previous life insurance policy, he can A) change beneficiaries. B) void the grace period. C) reinstate the policy subject to current qualifications. D) change the incontestability clause. E) both A and D above

Reinstate the policy subject to current

The policy feature that allows you to pay the premium late but still retain coverage is known as the A) loan clause. B) nonforfeiture clause. C) incontestability clause. D) grace period. E) policy reinstatement clause.

grace period

Sally Heath has the option of obtaining life insurance through her place of employment. She will not need to take a physical exam. This type of policy would be a/an ________ policy. A) universal life B) employer's life C) renewable term life D) group term life E) intermediate term life

group term life

Which of the following factors is connected with convertible term life insurance? A) A medical exam is not required. B) It helps make a smooth transition from term to cash-value insurance. C) There is a corresponding increase in premium cost. D) Generally, the conversion feature is only offered during the first two years. E) All of the above

all of the above

What factors are considered when insurance companies decide what rates to charge you for homeowner's insurance? A) Whether you have an in-home sprinkler system B) What type of building materials were used in the house C) Your credit score D) All of the above are correct. E) All but B are correct.

all of the above are correct

The settlement option that provides for ongoing payments for a period of time is called A) an annuity. B) a reverse premium. C) a premium payout. D) an annual premium.

an annuity

You want to get a good buy on your life insurance contract. You find a book that compares insurance costs by incorporating the time value of money into its calculations. This method allows you to select wisely using the A) interest-adjusted net cost method. B) traditional net cost method. C) variable method. D) comparison cost index.

interest-adjusted net cost method

The alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured are called A) premium options. B) settlement options. C) terminal options. D) residual options. E) none of the above.

settlement options

Billy's occupation is a potentially dangerous one — he is a skydiving instructor. His agent pointed out that the monthly premiums will be high. Billy wants a lot of value for his money. He could take advantage of ________ life insurance at this time to save money. A) universal B) variable C) term D) credit E) whole

term

What is the main difference between replacement cost coverage and actual cash value coverage? A) Replacement cost coverage does not consider depreciation. B) Actual cash value does not consider depreciation. C) Replacement cost coverage requires an endorsement to your policy D) All of the above are correct. E) Only A and C are correct.

Only A and C are correct

Alice and Tommy have 3 dependent children. Alice earns $125,000 per year. They are taking out insurance on Alice for the next 30 years. Tommy expects to get a 9.25% rate of return on the life insurance payoff. Using the earnings multiple approach calculate how much life insurance they need to take out on Alice. A) $987,440 B) $1,005,011 C) $1,105,447 D) $2,228,553 E) None of the above

$1,005,011

Deon tried to merge onto the Atlantic Expressway and caused a three-car accident. He has automobile insurance with limits of 50/100/25. What is the maximum amount that his insurance company will pay for the bodily injury liability claims? A) $50,000 B) $75,000 C) $100,000 D) $125,000

$100,000

Your home and property have a market value of $200,000. Since you want to make sure that you meet the coinsurance provisions, you should have at least ________ of insurance. A) $160,000 B) $180,000 C) $200,000 D) $220,000 E) none of the above

$160,000

Your home and property have a market value of $240,000. To meet the coinsurance provision, you would need at least ________ of insurance. A) $144,000 B) $168,000 C) $192,000 D) $216,000 E) none of the above

$192,000

Sally brings home $50,000 a year to help provide financial support to her family, comprised of her husband and two children. She is considering purchasing life insurance. Using the earnings multiple approach, how much coverage should she purchase using a discount rate of 5% to replace 10 years of earnings. A) $500,000 B) $386,000 C) $340,005 D) $301,148

$386,000

Joleene is a single parent with two children and earns $45,000 per year. She is purchasing term life insurance for 15 years until her youngest child is self supporting. Assuming her survivors can receive a 3% after-tax, inflation return on insurance proceeds, use the earnings multiple approach to calculate the face value of Joleene's policy. A) $33,445 B) $547,851 C) $397,548 D) $556,668 E) None of the above

$397,548

Suppose that you earn $50,000 annually. You expect expenses to drop by 22% for your family in the event of your death. Currently, if you die, you want to provide for your family for at least 15 more years, and the applicable after-tax and inflation return assumed is 5%. Using the earnings multiple approach provided in your textbook, what would be the amount of life insurance that you should purchase? A) $301,080 B) $404,820 C) $485,940 D) $500,000 E) 519,000

$404,820

Luke is 30 years old and earns an annual salary of $55,000. His wife wants to take out a life insurance policy on him until he turns 67. Using the earnings multiple approach, how large should the face value of his insurance policy be—assuming his wife can earn an annual rate of return of 8.5% on his life insurance pay off? A) $223,985 B) $1,225,462 C) $430,803 D) $6,154,330 E) None of the above

$430,803

Let's assume you are the beneficiary of your great Aunt's life insurance policy. Sadly she passed away yesterday. You elect to receive annual payments from this policy for the next 20 years. The settlement amount is $500,000 and the interest accruing on the policy is an annual 8%. What will be your annual life insurance annuity payments? A) $10,923 B) $50,926 C) $72,551 D) $98,934

$50,926

Nancy and Leonard are married. They have two children who will be financially dependent for the next 20 years. They are taking out life insurance on Leonard, the bread winner and earns an annual salary of $80,000. Nancy is sure she is able to get a 9.5% rate of return on the policy settlement. Using the earnings multiple approach calculate how much life insurance they should take out on Leonard. A) $1,038,225 B) $1,704,952 C) $549,893 D) $301,471 E) None of the above

$549,893

Using the earnings multiple approach calculate how much life insurance Heather and Robert need to take out on Heather. She earns $80,000 and is 37 years old. They want coverage until she retires at age 67. Robert is sure he can get an annual rate of return on the policy settlement of 8%. They have no children. A) $1,004,227 B) $997,553 C) $854,214 D) $630,417 E) None of the above

$630,417

Charles is the sole beneficiary of his late uncle's life insurance policy. The face value of the policy is $785,000. Charles has decided to accept annual annuity payments of $95,000. The interest rate on the policy is 5%. How many annual payments will Charles receive from this policy? A) 7.08 years worth of payments B) 8.26 years worth of payments C) 10.92 years worth of payments D) None of the above

10.92 years worth of payments

) If you have a significant amount of assets, most financial planners recommend the following automobile liability insurance limits. A) 50/100/25 B) 100/300/100 C) 250/500/100 D) 500/1,000/250

250/500/100

The coverage grace period gives you an extension of generally ________ in which to make your premium payment without cancelling your policy. A) 15 days B) 30 days C) 45 days D) 60 days

30 days

According to the Keown book, ________of U.S. households have no life insurance coverage. A) 15 percent B) 30 percent C) 50 percent D) 65 percent

30%

Lisa and Eric were notified that replacement cost coverage is in effect on a home owner's policy only if the home is insured for at least 80% of its replacement cost. This provision is known as the A) Replacement Cost Rule. B) 80 Percent Rule. C) Replacement Cost Provision. D) none of the above.

80 Percent rule

Eric and Lisa Lambert are purchasing a home for the first time. Their insurance company wants them to insure at least ________ of the home's full replacement cost. A) 70% B) 75% C) 80% D) 85% E) 90%

80%

Which of the following will most likely pay the least for automobile insurance, assuming they all drive identical cars? A) A 29-year-old woman with a good credit score and driving record B) A 55-year-old woman with two drunk driving arrests C) A 32-year-old married man with bad credit and a bad driving record D) A 20-year-old man who drives 50,000 miles per year and lives in a big city

A 29-year old woman with a good credit score and driving record

Your best friend's apartment has just been robbed, and he had no insurance. What would you suggest to your friend to better protect himself from such losses in the future? A) Purchase renter's insurance and add a personal articles floater. B) Take out personal property replacement cost coverage. C) Take a written and video tape inventory of your property. D) Only B and C above E) A, B, and C above

A, B, and C above

Your boyfriend is living in an apartment complex that has had a recent rash of robberies. He has $5,000 worth of rare coins. What should he do to protect himself in case of a robbery? A) Take a written and video tape inventory of his property. B) Add a personal articles floater to his policy. C) Take out personal property replacement cost coverage. D) Only B and C above E) A, B, and C above

A, B, and C above

Choose the option(s) available in the nonforfeiture clause of a cash-value life policy. A) Exchange the policy for a paid-up term policy of equal face value. B) Receive the policy's cash value. C) Retain rights to a death benefit. D) Exchange the policy's cash value for a paid-up policy with a reduced face value. E) A, B, and D above

A, B, and D above

Sonny Coltraine was told by a friend that universal life is the best policy. He will find that A) it will have a tax-deferred savings feature. B) death benefits are not taxable income. C) death benefits and premiums are fixed. D) death benefits and premiums are flexible. E) A, B, and D above.

A, B, and D above

The replacement value of the house less accumulated depreciation (which is the decline in value over time due to wear and tear) is known as A) actual cash value. B) replacement value. C) market value. D) depreciation. E) none of the above.

Actual cash value

Statisticians who specialize in estimating the probability of death based on personal characteristics are called A) morbidity analysts. B) actuaries. C) insurance analysts. D) morbidity statisticians. E) none of the above.

Actuaries

The primary advantage of term insurance is A) a flexible premium. B) a savings component. C) affordability. D) convertibility.

Affordability

What are the main features of whole life insurance? A) The premiums stay constant for your entire life. B) The nonforfeiture right allows you access to the cash value account if needed. C) It provides your with permanent insurance regardless of age and health issues. D) All of the above are correct. E) All but B are correct.

All but B are correct

Barry Blair wants to select a good life insurance agent. His dad has had several negative experiences with life insurance agents in the past. What should Barry consider when selecting an agent? A) Has a professional designation B) Is a full-time agent C) Has the necessary experience and training D) Has references E) All of the above

All of the above

Life insurance may not be necessary if A) you're single and don't have any dependents. B) you're married, a double-income couple, with no children. C) you're married but aren't employed. D) you're retired. E) all of the above.

All of the above

Policies define people as disabled if they can't perform A) the duties of their own occupation. B) the duties of any occupation for which they are reasonably suited. C) their own occupation for the first two years of their disability, and thereafter if they can't perform any occupation for which they are reasonably suited. D) All of the above could be correct, it varies with the policy.

All of the above

The needs approach to determining life insurance amounts considers which of the following? A) Immediate financial needs B) Debt elimination funds C) Dependency expenses D) All of the above

All of the above

What characteristics will affect the cost of your car insurance? A) The type of automobile you drive B) Where you reside C) How many miles you drive D) All of the above E) All but B are correct.

All of the above

What determines the cost of your homeowner's insurance? A) The location of your home B) The type of structure C) The level of coverage and policy type D) All of the above

All of the above

What is it about liability coverage that makes it so important? A) There is no way to know in advance what your potential liability loss will be. B) Huge sums of money are handed out in settlements over lawsuits over auto accidents. C) This coverage will pay all legal costs should you be involved in a civil case arising from an accident. D) All of the above are correct.

All of the above

Which of the following are among the most common driver distractions that lead to insurance claims? A) Talking on cell phones B) Applying make-up or shaving C) Reading something D) Eating something E) All of the above are cited as the most common driver distractions.

All of the above

Which of the following could increase the cost of your auto insurance? A) Driving a sportier car B) Driving more miles per year C) Decreasing the amount of your deductible D) All of the above

All of the above

Why is it a good idea for you to purchase uninsured and underinsured motorist coverage? A) 15% of drivers have no automobile insurance. B) A majority of drivers only carry the legal minimum liability coverage. C) This coverage protects you and your passengers for medical expenses. D) All of the above are correct.

All of the above

You know you desperately need life insurance but don't have much money available for premiums. What is the best thing you can do to find affordable insurance? A) Buy directly from the insurance company. B) Buy term insurance. C) Use the Internet to shop around for the best quotes. D) All of the above

All of the above

Your agent argues in favor of cash-value life insurance. You counteract with term to A) have a larger policy and keep things simple. B) enjoy a relatively low cost per each $1,000 of coverage. C) have a lot of insurance at affordable prices when you need it the most. D) save the difference you would pay, invest it, and come out ahead. E) all of the above.

All of the above

What should a 20-year-old man consider when he is thinking about purchasing a new car? A) The sportier the car he purchases is, the more his insurance will cost. B) Because of his demographics, he will pay higher rates for car insurance. C) The type of car he purchases could have a dramatic impact on the cost of his insurance. D) All of the above are correct. E) All but A are correct.

All of the above are correct

Suppose that your husband was killed in a bank robbery. Which of the following is not one of the typical settlement options that would be available? A) Installment-payments B) Interest-only C) Conversion of spousal insurance D) Lump-sum E) Life annuity

Conversion of spousal insurance

Using the needs approach to determine the amount of coverage looks from the perspective of the A) policy owner. B) named insured. C) beneficiary. D) salesman.

Beneficiary

Managed health care/prepaid care plans differ from fee-for-service or traditional indemnity plans in that they A) automatically file the claims for you. B) require you to see only a specified group of doctors, hospitals, and clinics. C) are more expensive to operate and cost you more money. D) are less efficient. E) both A and B above.

Both A and B above

Which of the following is a way for consumers to keep their automobile insurance rates down? A) Improve their driving records. B) Lower their deductibles. C) Consider only high-quality insurers. D) Both A and C

Both A and C

What are the risks associated with term insurance policies? A) You may need to have insurance coverage past the term expiration date. B) The cash value does not earn a decent return. C) The renewal premium may be cost prohibitive. D) Both A and C are correct.

Both A and C are correct

What are the disadvantages of group term insurance? A) The premiums are usually subsidized by the employer. B) The cost to covert from group coverage to individual coverage if you leave the company may be cost prohibitive. C) Relying on group insurance may hinder your decision to leave the company. D) Both B and C are correct.

Both B and C are correct

You were standing on the sidewalk waiting for a bus when a car lost control, jumped the curb, and hit you in the leg causing medical injuries. Which of the following provides reimbursement for your medical expenses? A) The driver's collision coverage. B) The driver's liability coverage. C) Your comprehensive physical damages coverage. D) Your medical expenses coverage E) Both B and D are correct.

Both B and D are correct

Coverage A: Dwelling protects A) personal property in a dwelling. B) unattached structures on the dwelling site. C) your home. D) any attachments to your home. E) both C and D above

Both C and D above

Which of the following term plans is intended to cover an individual's outstanding debt? A) Renewable term B) Reentry term C) Credit life D) Mortgage life E) Both C and D above

Both C and D above

Health insurance that provides payments to the insured in the event that the insured's income is interrupted by illness, sickness, or accident is called ________ insurance. A) accident and sickness B) disability C) income interruption D) unemployment

Disability

Suppose that you have decided to buy some life insurance. Which method of determining your life insurance needs calculates the annual loss of income stream? A) Needs approach B) Earnings multiple approach C) Limited term approach D) Whole life approach

Earnings multiple approach

Jenny and Joey have seven children and are expecting another. Joey is the primary income provider for his family, and the couple recognizes that the growing family is in need of life insurance. To begin the agent search process, Jenny and Joey make a list of prospects from reputable companies. Both Jenny and Joey prefer to speak to an agent with a life insurance certification. What life insurance agent designation do you recommend? A) CLU B) LICA C) AIA D) CIR

CLU

Suppose Lisa and Eric do not purchase an adequate amount of insurance on their home. In the event of a claim, they would pay a portion of it. This is the A) inflation guard. B) added liability. C) replacement cost. D) coinsurance provision. E) 70 percent rule.

Coinsurance provision

) On your home owners policy ________ protects any personal property that's owned or used by the policyholder, regardless of the location of this property. In other words, if you're on a vacation in Hawaii and someone hits you with a pineapple and steals your suitcase, your personal property is still covered. A) Coverage A B) Coverage B C) Coverage C D) Coverage D E) None of the above

Coverage C

Insurers in California are required to offer ________ coverage to consumers due to the substantial risk factors in that state. A) renters B) liability C) inflation D) earthquake E) bankruptcy

Earthquake

The ________ is the amount that you agree to pay before insurance coverage kicks in. A) pro rata share B) gratis C) allowance D) deductible E) none of the above

Deductible

A(n) ________ is an insurance company that distributes its products to customers without the use of agents. A) direct writer B) private writer C) underwriter D) public writer

Direct writer

John Murphy experienced a freak storm that damaged his roof and allowed water to leak into the house. The agent and adjuster said the peril was not covered under his HO-2 policy. John wishes he had taken out an ________ policy. A) HO-1 B) HO-3 C) HO-4 D) HO-5 E) HO-6

HO-3

John Meadow rents an apartment and wants tenant's insurance or an ________ policy. A) HO-1 B) HO-2 C) HO-3 D) HO-4 E) HO-6

HO-4

You have recently inherited a sum of money. You are purchasing an old Victorian home which was built in 1856. The type of insurance needed on the house would be A) HO-1. B) HO-4. C) HO-6. D) HO-8.

HO-8

Antoine LaDuke suffered a major loss on his older home due to mud from a flood. Although he had homeowner's insurance, what was the probable reason he was not covered? A) His home was probably too expensive. B) His policy excluded flood-related damages. C) This is a personal liability issue. D) Older homes are excluded from flood-related damages.

His policy excluded flood-related damages

If you wanted to obtain an endorsement that automatically updates the level of property coverage based on an index of replacement costs that continually updates the cost of building a home, you would ask for a(n) A) inflation guard. B) automatic adjustment policy. C) replacement cost index. D) continual adjustment policy. E) none of the above.

Inflaation guard

The purpose of a personal umbrella policy, as an addition to your homeowner's policy, is primarily to protect you from A) acts of God, such as falling objects, hail, etc. B) flood damage. C) lawsuits and judgments. D) faulty construction of your home. E) contested title to your property.

Lawsuits and judgements

Brenda's husband Bob died last week. Her agent told her she could receive the death proceeds tax-free and a monthly check until her death. He is talking about the ________ settlement option. A) lump-sum B) life annuity C) interest-only D) installment-payments E) tax-free

Life annuity

Cash value policies include a ________ clause that allows you to borrow against the cash value of the policy. A) reinstatement B) liquidity C) loan D) grace period

Loan

Which of the following are not discounts for PAP coverage? A) Good student discount B) Anti-theft equipment discount C) Low miles per gallon discount D) Accident free discount E) All of the above are discounts for PAP.

Low miles per gallon discount

Which of the following is not a consideration in determining the amount of homeowner's insurance a person needs? A) Cover the entire replacement cost in the event of a complete loss. B) Match the insurance coverage of similar homes in your neighborhood. C) Protect against the effect of inflation eroding away your coverage. D) Purchase flood or earthquake coverage if you are in an area prone to these occurrences. E) Determine if detached structures are adequately covered under standard policies.

Match the insurance coverage of similar homes in your neighborhood

Supplemental coverage for homeowner's insurance is available through endorsements. Which one of the following is not a common form of additional coverage? A) Personal articles floaters B) Earthquake coverage C) Flood protection D) Medical payments E) Inflation guard

Medical payments

Which of the following does not offer some form of disability insurance? A) Employer benefit package B) Individual health policy C) Medicare D) Worker's Comp E) Social Security

Medicare

A method of determining how much life insurance you require based on funds your family would require to maintain its lifestyle after your death is called the A) earnings multiple approach. B) needs approach. C) cash liquidity approach. D) funds analysis approach. E) none of the above.

Needs approach

Lisa and Eric want to keep the cost down on the homeowner's insurance they will need. After talking to their parents they developed a list of ways to do so. Identify the one mistake on it. A) Take as high a deductible as you can afford to self insure. B) Install an adequate security system. C) Pay your insurance premiums quarterly. D) Install adequate smoke detectors. E) Insure your cars with the homeowner's company.

Pay your insurance premiums quarterly

Fire, theft, and windstorm damage are examples of A) perils. B) hazards. C) miscellaneous mishaps. D) liabilities.

Perils

) When you purchase a(n) ________, you are obtaining an extension to a homeowner's insurance policy that provides coverage for all personal property regardless of where it is located. A) uninsured property addendum B) property addendum C) personal rider D) personal articles floater E) none of the above

Personal articles floater

Reggie was hosting a BBQ when the deck fell off his house. Several of his friends were hurt in the accident. Luckily for Reggie he has ________ coverage on his home owner's insurance. A) personal articles B) loss of use C) personal liability D) none of the above

Personal liability

Riley knows her ex-husband would not think about taking out a life insurance policy on himself to protect their two children in the event of his untimely death. As a result, Riley is taking out a policy on him and paying for it herself. That makes Riley the ________ and her children are the ________. A) insured, policy holders B) policy owner, beneficiaries C) beneficiary, policy holders D) insured, policy owners E) none of the above

Policy owner, beneficiaries

Wayne and Sarah are trying to manage the risk they face in life a best as they can. They are following Principle 7 which states A) the best protection is knowledge. B) protect yourself against major catastrophes. C) nothing happens without a plan. D) diversification reduces risk. E) the best insurance is prevention.

Protect yourself against major catastrophes

You have the most popular house on the block for the neighborhood children to play at. You have a trampoline, tree fort and jungle gym. Your family also has two large German shepherd dogs. What should you consider given the described situation? A) Purchasing personal property replacement cost coverage B) Purchasing earthquake coverage C) Purchasing an umbrella policy D) None of the above

Purchasing an umbrella policy

Which of the following statements best describes the 80 percent rule? A) Your home is covered for 80 percent of its original value, regardless of replacement cost. B) Your home is covered for replacement cost, provided the total premiums paid are less than 80 percent of the outstanding premiums due. C) Replacement cost coverage is only effective if your home is insured for at least 80 percent of its replacement cost. D) Your house cannot be replaced if its replacement cost is less than 80 percent of assessed market value. E) none of the above

Replacement cost coverage is only effective if your home is insured fro at least 80 percent of its replacement cost.

Special provisions that may be added to your policy which either provide extra benefits to the beneficiary or limit the company's liability under certain conditions are known as A) alternative provisions. B) secondary provisions. C) riders. D) attachments. E) none of the above.

Riders

Suppose burglars trashed your apartment and stole your personal property. Your rent is $350 per month and you had to live in another apartment house for two months while the landlord had the apartment put back into livable condition. Under which section of an HO policy would you be covered and how much would you recover because of the move? A) Section I coverage C, $350 B) Section I coverage C, $700 C) Section I coverage D, $350 D) Section I coverage D, $700 E) Section II coverage, $350

Section I Coverage D, $700

Wilber Robinson found out that his homeowner's coverage comes in handy when a neighbor steps on a garden rake and it flips up and causes a concussion. Josh did just that and spent two weeks in the hospital running up a $23,000 bill. Josh was covered under A) section II medical payments. B) section II personal liability. C) section I loss of use. D) added liability insurance. E) the 80 percent rule.

Section II personal liability

Some disability insurance policies offer residual or partial payments when returning to work part-time. These payments are especially desirable for those who are A) under the age of 40. B) over the age of 50. C) one year away from retirement. D) self-employed. E) none of the above.

Self-employed

Short-term disability insurance generally provides benefits on disabilities from ________ after a short wait of ________ days. A) one day to three months; zero B) 30 days to three months; 7 C) three month to six months; 8 to 10 D) six months to two years; 8 to 30 E) none of the above

Six months to two years; 8 to 30

Which of the following is not an insurance rating service? A) Weiss B) Moody's C) Standards & Fitch D) A.M. Best

Standards & Fitch

You might consider another insurance agent if your agent uses the ________ method to analyze the costs of a policy. A) TNC B) IANC C) NCO D) TLC E) none of the above

TNC

Of the following life insurance policies — term, whole life, universal life, variable life — two have fixed death benefits. Which are they? A) Term and variable life B) Term and universal life C) Term and whole life D) Whole life and universal life E) Whole life and variable life

Term and whole life

What is the name of the insurance policy that pays your beneficiary a specific amount of money if you die while covered by the policy, and this coverage is for a set number of years and must be renewed when it expires? A) Term insurance B) Fixed premium insurance C) Cash-value insurance D) Universal life insurance

Term insurance

Which of the following is not a cash-value life insurance plan? A) Whole life B) Universal life C) Term life D) Variable life

Term life

The waiting or elimination period on one's disability insurance refers to the period after the disability during which no benefits can occur. The waiting period is equivalent to A) the cost of one's total premium. B) one's annual salary. C) one's median income. D) 6 months of one's salary. E) the deductible for one's health care policy.

The deductible for one's health care policy

A teenage driver crashes her parents' minivan into an office building, causing $85,000 in damage to the building. The automobile liability insurance limits are 100/250/75. How will the damages be allocated between the driver and the insurance company? A) The driver will be responsible for $85,000. B) The driver will be responsible for $75,000, the insurance company for $10,000. C) The driver will be responsible for $10,000, the insurance company for $75,000. D) The insurance company will be responsible for $85,000.

The driver will be responsible for $10,000, the insurance company for $75,000

You had several of your son's friends over last night for a sleepover. While dropping off their child, one of the parents did not see your basketball hoop and smashed it beyond repair with her car. Where would you look for damage payment? A) The driver's homeowner's insurance B) Section II of the driver's homeowner's insurance C) The driver's automobile liability coverage D) The driver's automobile comprehensive insurance E) The driver's automobile collision insurance

The driver's automobile liability coverage

Your agent has told you to think about immediate needs at the time of death, debt elimination funds, immediate transitional funds, dependency expenses, spousal life income, educational expenses for the children, and retirement income. What has he described? A) The multiple earnings need approach B) The needs approach C) The standard approach D) The combination approach E) The long-term approach

The needs approach

Which of the following is not a determinant of the cost of your automobile insurance rates? A) Your age B) Your credit score C) Your driving record D) Your marital status E) The number of children that you have

The number of children you have

With decreasing term insurance A) the premiums remain constant, but the face amount of the policy declines. B) the premiums decline, and the face amount of the policy declines. C) the premiums remain constant, and the face amount of the policy remains constant. D) the premiums decline, and the face amount of the policy increases.

The premiums remain constant, but the face amount of the policy decline

Why are so many people without disability insurance? A) Employers don't supply it. B) People don't know about it. C) The price is prohibitive for most people. D) They cannot qualify for it. E) It may not be available in their state.

The price is prohibitive for most people

Life insurance buying is a new experience for many people. Which of the following is not a basic consideration when determining life insurance needs? A) Whether or not you need life insurance at this time B) The amount of coverage you need now and in the future C) The settlement options D) The type of life insurance that fits your needs E) Shopping around for the best agent and price

The settlement options

A.M. Best, Standard & Poor's, Moody's, and Weiss perform a vital service for the insurance industry. What do they do? A) They rate the quality level and performance of each company. B) They tell you the best price deals. C) They provide information on the best policies. D) They provide a listing of all agents. E) They provide a listing of all agents who have violated insurance laws.

They rate the quality level and performance of each company

The incontestability clause states that the insurance company cannot dispute the validity of the contract after a specified period of time, usually A) one year. B) two years. C) five years. D) 10 years

Two years

Young ________ generally pay the most for their insurance, because they have a statistically greater chance of having an accident. A) married females B) unmarried males C) married males D) unmarried females

Unmarried Males

) All of the following are types of life insurance annuity settlements except A) straight life annuity. B) period certain annuity. C) refund annuity. D) joint life and survivorship annuity. E) variable annuity.

Variable annuity

________ is insurance that provides permanent insurance coverage as whole life does; however the policyholder, not the insurance company, takes on the investment risk. A) Variable life insurance B) Universal life insurance C) Convertible life insurance D) None of the above

Variable life insurance

) The disadvantage of actual cash value coverage of personal property compared to replacement cost coverage is that it A) will reimburse you for replacement cost minus estimated depreciation. B) will reimburse you for the cash value of a new item. C) must be reported as a loss on your tax return. D) does not have to be reported as a loss on your tax return. E) none of the above

Will reimburse you for replacement cost minus estimated depreciation

Your apartment building burned down while you were on vacation. Fortunately, you have renter's insurance. What will your policy cover? A) Any damages to the building structure B) Your neighbor's personal property C) Your hotel and additional expenses based on a percentage of your property coverage D) All of the above are correct. E) None of the above are correct.

Your hotel and additional expenses based on a percentage of your property coverage

The ________ rider increases your death benefits at the same rate as inflation without forcing you to complete a new medical exam. A) waiver of premium for disability B) living benefits C) cost-of-living adjustment (COLA) D) guaranteed insurability E) accidental death benefit

cost of living adjustment (COLA)

Which of these life insurance plans holds the annual premium constant but decreases the face value of the policy each year? A) Decreasing term B) Credit life C) Mortgage life D) Universal life E) All of the above

decreasing term

You have liability only coverage on your car. It was damaged in the parking lot by a hit-and-run driver. What coverage do you have for your damages? A) Their collision coverage B) Their liability coverage C) Your liability coverage D) None of the above

none of the above

John purchases a life insurance policy on his wife Betty where he pays the premium and he will receive the life insurance money when she dies. John is both the ________ and the ________ who will receive the ________ upon the death of Betty, the ________. A) insured; beneficiary; money; policyholder B) policy owner; beneficiary; face amount; insured C) policy owner; insured; face amount; beneficiary D) beneficiary; premium payer; face amount; policy holder E) none of the above

policy owner; beneficiary; face amount; insured

) Upon examining her life insurance policy, Sylvia found the cash value amount to be fixed rather than dependent upon other variables. Sylvia has a ________ insurance policy. A) whole life B) term life C) decreasing term D) variable life E) universal life

whole life

You are considering the need for insurance. You desire a policy that provides permanent protection, has a fixed premium, and provides a fixed death benefit. What type of policy would you purchase? A) Term insurance B) Fixed premium insurance C) Whole life insurance D) Universal life insurance E) None of the above

whole life insurance