Under the traditional net cost method, the net cost of life insurance for a given period (e.g., 20 years) is determined by which of the following formulas? A) the total premiums for the period less the policy reserve at the end of the period B) the total premiums for the period less the sum of […]
Date: September 19th, 2020
The first step in “shopping for life insurance” is to A) estimate the amount of life insurance to purchase. B) decide whether you want a policy which pays dividends. C) determine if you need life insurance. D) decide on the best type of life insurance for you. ANSWER Answer: C
Date: September 19th, 2020
Which of the following statements about the use of interest-adjusted cost data for comparing life insurance policies is (are) true? I. Using interest-adjusted cost data provides a more accurate measure of the cost of life insurance than is provided if the time value of money is ignored. II. Its use is most appropriate in deciding […]
Date: September 19th, 2020
Which of the following statements is (are) true with regard to using interest-adjusted cost data when shopping for life insurance? I. Cost indexes apply to new policies and should not be used to determine whether to replace a policy. II. Cost indexes should only be used to compare similar plans of insurance. A) I only […]
Date: September 19th, 2020
David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent interest for 20 years, the premiums would grow to $79,156. If the dividends were accumulated at […]
Date: September 19th, 2020
Each of the following helps to reduce federal estate taxes EXCEPT A) the marital deduction. B) the applicable unified tax credit amount. C) life insurance policies in which the deceased had an incidents of ownership at the time of death. D) expenses such as the cost of the funeral, estate settlement costs, and probate costs. […]
Date: September 19th, 2020
Which of the following statements describes how the net payment cost index differs from the surrender cost index? A) Dividends are ignored. B) The cash value is ignored. C) Premiums are not accumulated at a specified interest rate. D) Dividends are not accumulated at a specified interest rate. ANSWER Answer: B
Date: September 19th, 2020
Which of the following statements about the surrender cost index for measuring the cost of life insurance is true? A) It is based on the assumption that the policy will be in force indefinitely. B) It takes into account the settlement options available in the policy. C) It does not consider the cash value in […]
Date: September 19th, 2020
Lynn calculated the future value of the first twenty premiums she will pay under her nonparticipating whole life insurance policy. Then she subtracted the cash value after 20 years. Next, she divided this value by the future value annuity due factor for 20 years to arrive at an annual cost of insurance. Finally, she divided […]
Date: September 19th, 2020
Consumer experts typically recommend all of the following rules when buying life insurance EXCEPT A) Consider the financial strength of the insurer. B) Deal with a competent agent. C) Ignore all factors other than cost. D) Shop around for a low-cost policy. ANSWER Answer: C
Date: September 19th, 2020
