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Exam 11: Life Insurance

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Question 1

Multiple Choice

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Which statement is true concerning the economic problem of premature death in the United States? I.The economic impact of premature death of the breadwinner varies for different types of families. II.Increased life expectancy has increased the economic problem of premature death over time.

A) I only
B) II only
C) both I and II
D) neither I nor II

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A

Question 2

Multiple Choice

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Most family heads need substantial amounts of life insurance.However,with limited income,money spent on life insurance reduces the amount of discretionary income available for other high-priority needs.What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the

A) estimated cost of life insurance.
B) net cost of life insurance.
C) real (inflation-adjusted) cost of life insurance.
D) opportunity cost of buying life insurance.

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Question 3

Multiple Choice

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The human life value is defined as the

What happens to the premiums for yearly renewable term insurance as an insured gets older?

Alex,age 26,purchased a 20-payment whole life insurance policy.After Alex has made 20 premium payments,his life insurance policy is considered

When using the needs approach,several "special needs" should be considered.One special need is money to cover unexpected events,such as major car repairs,dental bills,or home repairs.Money set aside for this purpose is called a(n)

All of the following statements about current assumption whole life insurance are true EXCEPT

Which of the following statements is true regarding the results of studies by LIMRA and New York Life Insurance Company on the adequacy of life insurance owned by households in the United States? I.The average household is adequately insured against the risk of premature death. II.The average household is significantly underinsured against the risk of premature death.

Which of the following statements about variable universal life insurance is (are) true? I Variable universal life insurance has fixed premium payments. II.Variable universal life insurance allows the policyowner to decide where the premiums are invested.

A whole life insurance policy in which premiums are reduced for an initial period (e.g.3 years) and are higher thereafter is an example of a

When the capital retention approach is used to determine how much life insurance to purchase,all of the following are subtracted from total assets to calculate the capital available to produce income EXCEPT

Under the needs approach,when is the dependency period of a surviving spouse assumed to end?

Tamara purchased a term insurance policy when she had high life insurance needs and limited income.Now Tamara can afford whole life insurance.What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance without having to show that she is still insurable?

Richard is using the capital retention approach to determine how much life insurance to purchase.Richard would like to provide $35,000 per year to his family,forever,if he dies.The assets that he has today will provide $25,000 in annual income without the liquidation of these assets.If life insurance proceeds can be invested to earn a 5 percent annual return,how much life insurance should Richard purchase to fund the additional income needed to meet the $35,000 annual income goal?

Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? I.It involves an analysis of various family needs which must be met if a family breadwinner dies. II.Its use is appropriate only if a person currently has no life insurance protection.

All of the following information is needed to calculate a person's human life value EXCEPT

All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT

The purchase of term insurance is justified by which of the following circumstances? I.The insured wants to save money through the policy for a specific need. II.The insured has a temporary need for life insurance protection.

All of the following statements about the conversion of a term policy are true EXCEPT

Sarah is using the needs approach to determine how much life insurance to buy.Her cash needs are $30,000;her income needs are $140,000;and special needs are $100,000.Sarah has the following assets: $20,000 in bank accounts,$30,000 in retirement plans,and $40,000 in investment accounts.Sarah owns no individual life insurance.She is covered by a $50,000 group life insurance policy through her employer.Based on this information,how much additional life insurance should Sarah purchase?