Question 1

A(n) _____ provision enables you to purchase the policy again at its expiration.

Accepted Answer

A)  reward
B)  renewable
C)  loss prevention
D)  limited risk
E)  arbitration

Question 2

Employers often provide _____ life insurance as a fringe benefit for their full-time employees.

Accepted Answer

A)  group
B)  credit
C)  mortgage
D)  standard
E)  home service

Question 3

Alice is 40 years old and earns $35,000 annually. The multiple-of-earnings method used to determine the amount of life insurance coverage needed for an individual shows that she should have 6.5 times her earnings. How much insurance should Alice have? (Show all work.)

Accepted Answer

In the multiple-of-earnings method, Alic...

Question 4

Group life insurance is most likely to be for:

Accepted Answer

A)  variable life.
B)  a special purpose.
C)  whole life.
D)  a term.
E)  a family.

Question 5

_____ is a relatively   expensive type of decreasing term life insurance.

Accepted Answer

A)  Group life
B)  Credit life
C)  Industrial life
D)  Home service life
E)  Whole life

Question 6

Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.

Accepted Answer

A)  term life insurance
B)  whole life insurance
C)  universal life insurance
D)  variable life insurance
E)  mortgage life insurance

Question 7

Risk avoidance is attractive when the cost of avoidance is less than the cost of handling it some other way.

Accepted Answer

A) True 
 B)False

Question 8

A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary, which means that:

Accepted Answer

A)  the life insurance proceeds are paid directly to named beneficiaries after payment of state or federal income taxes.
B)  the cash benefits from your life insurance policy cannot be claimed by creditors.
C)  the life insurance proceeds are invested for the beneficiary.
D)  the cash benefits are remitted to the beneficiary only after the beneficiary pays estate taxes.
E)  the life insurance company makes additional payments to the family of the insured so that they continue to live comfortably.

Question 9

The policy owner assumes the investment risk with a _____  insurance policy.

Accepted Answer

A)  whole life
B)  term life
C)  variable life
D)  viatical life
E)  group life

Question 10

Insurance is a tool that can reduce your _____ risk.

Accepted Answer

A)  social
B)  mental
C)  economic
D)  accident
E)  exposure

Question 11

Underwriters can predict whether or not you will suffer a loss this year.

Accepted Answer

A) True 
 B)False

Question 12

Underwriters use life expectancy figures to look at overall longevity for various age groups and also consider specific factors related to an applicant's health, habits, and experiences.

Accepted Answer

A) True 
 B)False

Question 13

It can be difficult to evaluate the true cost of a _____ policy at the time of purchase.

Accepted Answer

A)  term life insurance
B)  whole life insurance
C)  universal life insurance
D)  variable life insurance
E)  mortgage life insurance

Question 14

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

Accepted Answer

A) True 
 B)False

Question 15

Your need for additional life insurance can be determined by looking at the difference between your family's available financial resources after your death and your family's total economic needs.

Accepted Answer

A) True 
 B)False

Question 16

_____ determines the amount of life insurance coverage required for an individual by considering his or her financial obligations and available financial resources in addition to life insurance.

Accepted Answer

A)  The savings analysis method
B)  The needs analysis method
C)  The earnings analysis method
D)  The liabilities analysis method
E)  The borrowings analysis method

Question 17

The primary purpose of life insurance is to provide:

Accepted Answer

A)  financial security for your dependents after your death.
B)  protection from creditors and lawsuits before your death.
C)  tax-advantaged investments for your family.
D)  high-yield investments for you and your family.
E)  liquidity to expand your business operations.

Question 18

Which of the following is a characteristic of a universal life insurance policy?

Accepted Answer

A)  No flexible premiums
B)  Cash value lower than the death benefit
C)  Absence of a savings feature
D)  Fixed premiums and protection levels
E)  Lighter fees than other insurance policies

Question 19

_____ can be both an advantage and a disadvantage of universal life insurance.

Accepted Answer

A)  Flexible premiums
B)  Tax features
C)  High returns
D)  Unbundling premiums
E)  Underwriting

Question 20

The primary purpose of life insurance is to provide a tax-advantaged investment plan.

Accepted Answer

A) True 
 B)False

Exam 8: Insuring Your Life

Alice is 40 years old and earns $35,000 annually. The multiple-of-earnings method used to determine the amount of life insurance coverage needed for an individual shows that she should have 6.5 times her earnings. How much insurance should Alice have? (Show all work.)

Correct AnswerverifiedIn the multiple-of-earnings method, Alic...View AnswerShow Answer

A(n) _____ provision enables you to purchase the policy again at its expiration.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a universal life insurance policy?

Correct AnswerverifiedShow Answer

Underwriters use life expectancy figures to look at overall longevity for various age groups and also consider specific factors related to an applicant's health, habits, and experiences.

Correct AnswerverifiedShow Answer

The primary purpose of life insurance is to provide a tax-advantaged investment plan.

Correct AnswerverifiedShow Answer

Employers often provide _____ life insurance as a fringe benefit for their full-time employees.

Correct AnswerverifiedShow Answer

_____ determines the amount of life insurance coverage required for an individual by considering his or her financial obligations and available financial resources in addition to life insurance.

Correct AnswerverifiedShow Answer

Risk avoidance is attractive when the cost of avoidance is less than the cost of handling it some other way.

Correct AnswerverifiedShow Answer

_____ can be both an advantage and a disadvantage of universal life insurance.

Correct AnswerverifiedShow Answer

Your need for additional life insurance can be determined by looking at the difference between your family's available financial resources after your death and your family's total economic needs.

Correct AnswerverifiedShow Answer

Insurance is a tool that can reduce your _____ risk.

Correct AnswerverifiedShow Answer

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

Correct AnswerverifiedShow Answer

Group life insurance is most likely to be for:

Correct AnswerverifiedShow Answer

The policy owner assumes the investment risk with a _____ insurance policy.

Correct AnswerverifiedShow Answer

Underwriters can predict whether or not you will suffer a loss this year.

Correct AnswerverifiedShow Answer

_____ is a relatively expensive type of decreasing term life insurance.

Correct AnswerverifiedShow Answer

A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary, which means that:

Correct AnswerverifiedShow Answer

The primary purpose of life insurance is to provide:

Correct AnswerverifiedShow Answer

It can be difficult to evaluate the true cost of a _____ policy at the time of purchase.

Correct AnswerverifiedShow Answer

Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.

Correct AnswerverifiedShow Answer

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In the multiple-of-earnings method, Alic...
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