Life Insurance

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Question 1
Free
Multiple Choice

Which of the following types of families is likely to have the least need for a large amount of life insurance?

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A

a blended family

B

a traditional family

C

a single person family

D

a sandwiched family

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Question 2
Free
Multiple Choice

The human life value is defined as the

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A

present value of a deceased breadwinner's future gross income.

B

future value of a deceased breadwinner's past earnings.

C

present value of the family's share of a deceased breadwinner's future earnings.

D

future value of the family's share of a deceased breadwinner's future earnings.

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Question 3
Free
Multiple Choice

Which of the following pieces of information is needed to calculate a person's human life value?

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A

the marital status of the person.

B

the person's estimated annual Social Security benefits after retirement.

C

the person's cost of self-maintenance.

D

current outstanding debts, including mortgage debt.

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Question 4
Free
Multiple Choice

To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include

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A

funeral costs.

B

income taxes.

C

investment income.

D

pension benefits after retirement.

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Question 5
Free
Multiple Choice

All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT

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A

The effects of inflation are ignored.

B

Other sources of income for survivors are ignored.

C

Earnings are assumed to remain constant.

D

Earnings during the individual's productive lifetime are ignored.

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Question 6
Multiple Choice

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.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 7
Multiple Choice

Which of the following is a cost/expense that an estate clearance fund is designed to pay?

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A
burial expenses
B
retiring the mortgage
C
education costs
D
income for the widow(er) during the readjustment period
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Question 8
Multiple Choice

What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own?

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A
3 to 6 months
B
1 to 2 years
C
until the youngest child reaches age 18
D
until the surviving spouse reaches age 65
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Question 9
Multiple Choice

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

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A
1 or 2 years after the breadwinner's death
B
when the youngest child reaches age 18
C
when the surviving spouse reaches age 65
D
when the surviving spouse dies
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Question 10
Multiple Choice

The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the

Choose correct answer/s
A
emergency period.
B
readjustment period.
C
dependency period.
D
blackout period.
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Question 11
Multiple Choice

Which of the following statements about premature death is (are) true?
I)From an economic standpoint, premature means death before a specified age, such as 65.
II)The economic problem of problem of premature death in the U.S. has declined substantially over time.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 12
Multiple Choice

Which of the following statements about re-entry term insurance is true?

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A
It permits the coverage to be renewed an unlimited number of times as long as insurability is demonstrated.
B
It permits a refund of premiums paid if the term insurance is renewed a specified number of times.
C
It permits a lower renewal premium if the insured demonstrates insurability.
D
It permits a lapsed whole life policy to be reinstated as term insurance.
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Question 13
Multiple Choice

Which of the following is a noneconomic cost associated with premature death?

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A
reduction in the standard of living
B
loss of a parental role model
C
additional expenses, such as uninsured medical bills
D
loss of the deceased breadwinner's future earnings
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Question 14
Multiple Choice

Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a

Choose correct answer/s
A
blended family.
B
single-parent family.
C
two-income earner family.
D
sandwiched family.
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Question 15
Multiple Choice

Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian's human life value?

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A
$184,600
B
$249,200
C
$360,800
D
$400,000
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Question 16
Multiple Choice

Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was interested in purchasing life insurance. Jessica explained the various uses of life insurance, including income for Brad's wife during the 1- or 2-year period following Brad's death. This period is known as the

Choose correct answer/s
A
dependency period.
B
estate clearance period.
C
blackout period.
D
readjustment period.
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Question 17
Multiple Choice

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?

Choose correct answer/s
A
$80,000
B
$130,000
C
$150,000
D
$160,000
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Question 18
Multiple Choice

Which of the following statements regarding convertible term insurance is true?

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A
Evidence of insurability must be provided to convert the policy.
B
More term policies are converted using the original-age method than using the attained-age method.
C
The converted coverage has a lower face amount than the term coverage.
D
The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.
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Question 19
Multiple Choice

Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning. One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again. This period is called the

Choose correct answer/s
A
blackout period.
B
dependency period.
C
emergency period.
D
readjustment period.
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Question 20
Multiple Choice

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)

Choose correct answer/s
A
estate clearance fund.
B
emergency fund.
C
readjustment period fund.
D
mortgage redemption fund.
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