Which of the following statements about limited-payment life insurance is true? A) It is a form of term insurance. B) It matures at the end of the premium-payment period. C) The premium decreases each year during the premium-payment period. D) Its use may be appropriate if a person wants paid-up life insurance during retirement. […]
Which of the following statements about endowment insurance policies is (are) true? I. The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive. II. The use of endowment insurance has increased in recent years because of its favorable […]
Which of the following is a cost/expense that an estate clearance fund is designed to pay? A) burial expenses B) retiring the mortgage C) education costs D) income for the widow(er) during the readjustment period ANSWER Answer: A
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 […]
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 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 […]
To calculate a human life value, it is necessary to deduct certain costs from a person’s average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement. ANSWER Answer: B
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? 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 ANSWER […]
Under the needs approach, when is the dependency period of a surviving spouse assumed to end? 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 ANSWER Answer: B
Which of the following is a noneconomic cost associated with premature death? 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 ANSWER Answer: B
Which of the following statements about re-entry term insurance is true? 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 […]
