Personal Finance Chapter 8 Gilliam
A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:
31 days
Group life insurance is most likely to be for ___
A term
Which of the following represents a disadvantage of a whole life insurance policy?
A whole life insurance policy often provides lower yields than other investment vehicles
___ can be both an advantage and a disadvantage of universal life insurance
Flexible premiums
Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability
Guaranteed purchase option
___ insurance is a type of insurance that is issued in policies with small face amounts, often $1,000 or less.
Industrial life
A life insurance policy with a small face amount where the premium may be collected weekly by agents is termed ___
Industrial life insurance
___ is any activity that lessens the severity of loss once it occurs
Loss control
The ___ method is the most accurate method of determining the amount of life insurance coverage needed for an individual
Needs analysis
Which of the following is a characteristic of a universal life insurance policy?
No choice in how accumulated amount is invested
Which of the following leads to the payment of a higher insurance premium by the potential insured?
Obesity of the potential insured
A(n) ___ is a common provision in many term policies.
Renewable clause
___ involves abstaining from any activity that will affect an individual financially.
Risk Avoidance
You can learn about the financial strength of an insurance company by checking ___ rating system
Standard & Poor's
Which of the following is true of a good insurance agent?
The agent is recommended by professionals like bankers and attorneys.
Underwriting refers to ___:
The determination of which exposures to insure.
___ 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
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.
by ___ insurance companies decide who will be insured by them.
Underwriting
It can be difficult to evaluate the true cost of a ___ at the time of purchase.
Universal life insurance
it can be difficult to evaluate the true cost of a ___ at the time of purchase
Universal life insurance
Universal life insurance is:
a combined investment plan and insurance policy.
Group Life insurance is:
an insurance that provides a master policy for a group
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.
If a term life insurance is convertible, the policy can be:
changed to a comparable whole life policy.
___ and ___ are both relatively expensive types of decreasing term life insurance.
credit life; mortgage life
While using the needs analysis approach, we ___
deduct an individual's available resources from his or her family's total economic needs to calculate how much life insurance he or she requires
Insurance is a tool that can reduce one's ___ risk
economic
Families faced with the loss of a principal wage earner receive social security benefits ___
from the government that are intended to provide basic, minimum support
an ___ policy is a contract between an individual and a company under which the company agrees to reimburse the individual for losses suffered by him or her according to specified terms.
insurance
In order to predict the number of losses that will occur in a given time accurately, insurance companies must study a ___ number of cases
large
___ Is an activity that reduces the chance that a loss will occur
loss prevention
The settlement option chosen by most policyholders is:
lump sum
It is not possible to avoid ___
most risks in your life
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
the most accurate way to determine how much life insurance you need is to use the ___ method
needs analysis
Insurance companies make profit by:
paying out less than the sum of the premiums and the earnings on them.
Term life insurance is characterized by ___
premium amounts related to the age of the insureds
The basic purpose of insurance is to ___
protect yourself from economic losses
___ is an effective way to handle small exposures to loss when insurance is too expensive.
risk assumption
___ is the choice to accept and bear the risk of loss.
risk assumption
Which of the following is true of risk avoidance?
risk avoidance is any activity that helps evade an act that creates a risk
The purchase of insurance is a common form of ___ by the insured
risk transfer
an ___ 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
the underwriting function of insurance companies is designed to ensure that premiums are based on ___
the chance of losses
While performing needs analysis, when determining the available resources to offset the economic needs, you would generally ignore:
the educational qualifications of the children
Insurance underwriting is best described as:
the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums
insurance companies use actuarial data to measure:
the risk loss for a given population
insurance companies use ___ to determine whom they will insure and what they will charge for the coverage.
underwriting
