FINN 3003 (CH 13)
22) ________ life insurance can only by used to pay off a home in the event of the policyholder's death.
A) Mortgage
11) Which of the following does not represent a financial goal related to life insurance?
A) Provide funds for retirement
15) ________ insurance is life insurance that is provided over a specified time period and does not build cash value.
A) Term
16) The least expensive form of life insurance is
A) Term
24) The best substitute for mortgage insurance would be ________ insurance.
A) decreasing term
17) A disadvantage of term insurance is that
A) it becomes more expensive when you renew it.
12) Life insurance would be necessary in all of the following situations except
A) you are single and have no dependents.
31) Which of the following will not affect the premiums on a term life insurance policy?
B) Percentage earned on savings portion of premium
10) Which of the following best explains the reason that approximately 1/3 of households in the U.S. do not have life insurance?
B) There is no immediate benefit
34) Which of the following insurance is intended to provide a limited choice of investments and an insurance component in the event of death?
B) Universal life
35) Your need for life insurance will last for 20 years. You also wish to save some money over that same time period. What kind of life insurance would fill this requirement?
B) Universal life
20) If you wanted to provide more coverage to your family early in life when they need it the most and decrease this amount of coverage in later years, yet continue to pay the same premiums, you should buy a(n) ________ policy.
B) decreasing term
14) Which of the following is not a type of life insurance covered in the text?
B) dependent life
25) Term insurance provided to a designated group of people with a common bond is called
B) group term insurance.
33) A universal life policy gives policyholders the right to select their ________ that whole life policyholders do not have.
B) investments
27) A disadvantage of whole life policies is that
B) they are much more expensive than term policies.
28) One advantage of whole life insurance over term life insurance is
B) whole life insurance forces people to save money.
19) Which of the following is false concerning term life insurance?
C) Has a cash value or savings feature as long as you keep the policy active
30) Which of the following is not an option as a way to use the cash value of your whole life policy?
C) Have the insurance company invest your cash value in stocks or mutual funds of your choosing
23) In comparison to an equivalent amount of term insurance, mortgage life insurance
C) costs more.
21) You are putting $100 a month into a passbook savings account to pay for your child's college education. You worry that if you die before you get enough saved, your child will not be able to get a college education. Which of the following types of life insurance would best fit your needs at the lowest cost?
C) decreasing term
26) Whole life insurance has a ________ premium and has ________ cash value build up over the life of the policy.
C) fixed; a
9) Life insurance proceeds are not used to
C) fund the policyholder's retirement.
18) Term life insurance is
C) pure insurance with no savings feature. A) A) often available in group policies through employers.
8) Life insurance may be obtained through all of the following except
C) the federal government.
32) If a policyholder with a universal life insurance policy skips a payment, then the policy
C) uses an amount from savings to pay the premium.
29) Whole life insurance is also referred to as
D) permanent insurance.
36) Life insurance that provides insurance over a specified term and allows policyholders to invest residual funds is known as
D) variable life insurance.
1) During the time the policy is in effect, term life insurance has a good savings and investment component.
F
1) Life insurance is an indication of good financial planning, since it provides a payment to the policyholder upon his or her death.
F
1) The constitutional beneficiary is the person who will receive the death benefits if the primary beneficiary is no longer living when the policyholder dies.
F
1) The income method, basing life insurance needs on multiples of current income, is the easiest and most accurate method of determining how much life insurance a person should buy.
F
1) The services that insurance companies provide should not be a factor in selecting a life insurance company.
F
11) Universal life insurance is the same from one insurance company to another and is, therefore, the most common and popular form of life insurance.
F
2) A lump sum settlement option is usually the best choice, even if a beneficiary is not very good at managing sums of money.
F
5) The problem with the cash value build up of a whole life insurance policy is that the money can only be used to pay off the policy or buy additional insurance.
F
6) The beneficiaries of life insurance policies can only be family members or those directly impacted by a person's death.
F
6) Whole life policies are the least expensive way to meet your life insurance needs.
F
7) The only reason a person would buy life insurance is to eliminate or substantially reduce the financial consequences of that person's death by providing income to his or her dependents.
F
8) If you want to borrow money from the cash value of your whole life policy, the interest rates are relatively high and the terms of the loan are quite strict.
F
9) A limited payment option on a whole life policy pays a smaller share of the policy face value to beneficiaries during the first five years of the policy.
F
10) Whole life policies can be structured to provide a higher level of death benefits to beneficiaries in the early years of the policies or for the policies to be paid off in a certain time period, for example twenty years.
T
12) Universal life insurance is similar to whole life, but allows the policyholder more choices of how the savings portion of their premiums are invested.
T
13) A disadvantage of variable life policies is that the cash value may actually decrease in value if stocks or other investments decline.
T
2) Life insurance is critical to protect a family's financial situation in the event that a breadwinner dies.
T
2) Term life insurance is considered temporary insurance, since the policy is only in effect for a relatively short period of time.
T
2) The more savings a household has accumulated, the less life insurance they will need.
T
3) If no one else relies on your income, life insurance may not be necessary.
T
3) Term insurance will provide most of a young family's life insurance coverage due to its affordable cost.
T
3) Using the budget method of determining life insurance needs, a family's future expected expenses is considered.
T
4) Disadvantages of term insurance are that it increases in cost when you renew it and that it has no value when it matures or you discontinue your policy.
T
4) Life insurance may not be that important for a couple who both work full-time and who could each be self-sufficient without the other person's income.
T
5) A person's need for life insurance varies quite a bit over his or her lifetime.
T
7) Advantages of whole life insurance policies are that they provide long-term coverage, the rates are fixed, and they have a savings or cash value feature.
T