Paul is shopping for a life insurance policy. An agent asked Paul if he would like to purchase a participating policy. What is a “participating” policy? A) a policy which has a cash value B) a policy which pays dividends C) a policy which invests in common stock D) a policy which provides for an […]
Date: September 19th, 2020
The net premiums collected by a life insurer for a particular block of policies, plus interest income at an assumed rate, less assumed death benefits paid is called the A) cash value. B) retrospective reserve. C) net amount at risk. D) prospective reserve. ANSWER Answer: B
Date: September 19th, 2020
All of the following statements about the income tax treatment of individually-purchased life insurance are true EXCEPT A) policyowner dividends are received tax-free. B) the annual increase in cash value is not taxable while the policy remains in force. C) premiums paid for individual life insurance are a tax deductible expense. D) life insurance proceeds […]
Date: September 19th, 2020
The average annual rate of return on a cash-value policy if it is held a specified number of years is called the policy’s A) net present value. B) interest-adjusted cost. C) benchmark cost. D) Linton yield. ANSWER Answer: D
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
Why might the use of “grades” assigned by a life insurance company rating organization not be a reliable guide for consumers? I. There may be variations in grades given by different rating organizations. II. They ignore factors such as profitability and quality of investments. A) I only B) II only C) both I and II […]
Date: September 19th, 2020
Which of the following statements about the yearly-rate-of-return method (also known as the Belth method) of calculating the yearly rate of return for a life insurance policy is (are) true? I. The formula requires the use of benchmark prices per $1,000 of protection. II. The main drawback of the formula is its complexity, necessitating the […]
Date: September 19th, 2020
Consumer experts typically recommend which of the following rules when purchasing life insurance? I. Avoid policies which pay dividends. II. Purchase life insurance equal to ten times your annual salary. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: D
Date: September 19th, 2020
Marshall is interested in determining the cost per thousand of his life insurance policy. Which of the following will provide Marshall the most meaningful measure of the cost per thousand dollars per year of his life insurance? A) the needs approach B) the traditional net cost method C) the human life value approach D) the […]
Date: September 19th, 2020
Which method of analyzing the cost of life insurance does not consider the cash value of the policy in the analysis? A) traditional net cost method B) net payment cost index C) the Linton Yield D) the surrender cost index ANSWER Answer: B
Date: September 19th, 2020
