Question 1

Most people buy life insurance to

Accepted Answer

A)   Pay off a loan on an automobile.
B)   Protect the people who depend on the insured from financial losses caused by his or her death.
C)   Pay for a vacation.
D)   Spend money.
E)   Pay taxes.

Question 2

Fred bought life insurance five years ago. He forgot to tell them that he had a heart condition, and, as a result of that condition, he recently died. Which of the following provisions prevents the life insurance company from refusing to pay his beneficiaries because of his original fraudulent misrepresentation?

Accepted Answer

A)   Incontestability clause
B)   Misstatement of age provision
C)   Naming a beneficiary
D)   Policy reinstatement
E)   The grace period

Question 3

Annuities are more attractive for people who expect to live only a short time.

Accepted Answer

A) True 
 B)False

Question 4

The policy loan provision means that

Accepted Answer

A)   An individual can take out a loan on his or her term policy.
B)   The death benefit will be increased by the amount of an outstanding policy loan.
C)   The policy owner can borrow any amount up to the cash value of the policy.
D)   The beneficiary can borrow any amount up to the total benefit.
E)   No interest will accumulate for any loans related to life insurance.

Question 5

The sooner a person is likely to die, the lower the premiums he or she will pay.

Accepted Answer

A) True 
 B)False

Question 6

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Accepted Answer

A)   Adjustable life
B)   Group life
C)   Limited life
D)   Universal life
E)   Variable life

Question 7

Frank, age 38, was killed in a car accident. Which of the following riders provided an additional benefit for his heirs?

Accepted Answer

A)   Waiver of premium disability benefit
B)   Accidental death benefit
C)   Guaranteed insurability option
D)   Cost-of-living protection
E)   Accelerated benefits

Question 8

This life insurance is used to pay off certain debts, such as auto loans, in the event that you die before the debts are paid in full. Which of the following is not the best buy for the amount of protection offered for an individual?

Accepted Answer

A)   Group life
B)   Term
C)   Credit life
D)   Endowment life
E)   Adjustable life

Question 9

The lower the interest-adjusted index, the lower the cost of a life insurance policy.

Accepted Answer

A) True 
 B)False

Question 10

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Accepted Answer

A)   Lump-sum payment.
B)   Limited installment payment.
C)   Final life payment.
D)   Life income option.
E)   Proceeds left with the company.

Question 11

If you want to purchase term insurance, you will receive all of the following except

Accepted Answer

A)   Protection against loss of life for only a specified term.
B)   Cash value.
C)   Temporary insurance.
D)   A benefit during the period it covers, such as 1, 5, 10, or 20 years.
E)   A policy whose coverage continues if you stop paying premiums.

Question 12

Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the "nonworking" spouse method?

Accepted Answer

A)   $140,000
B)   $343,000
C)   $490,000
D)   $700,000
E)   $750,000

Question 13

After you purchase a life insurance contract, you have a "free look" period that lasts

Accepted Answer

A)   3 days.
B)   5 days.
C)   10 days.
D)   30 days.
E)   60 days.

Question 14

If you have a conversion term policy,

Accepted Answer

A)   Your premium will not increase when you renew it.
B)   You can convert your policy from permanent to term at any time.
C)   You can convert your term policy to a permanent policy.
D)   Your policy will have the same premium as other term policies.
E)   Your benefit to your beneficiary will be less as time passes.

Question 15

Marianne and Roger are in good health and have reasonably secure careers. Each earns $45,000 annually. They own a home with a $125,000 mortgage; they owe $25,000 for their car loans and have $22,000 in student loans. If one should die, they think that funeral expenses would be $12,000. What is their total insurance need using the DINK method?

Accepted Answer

A)   $12,000
B)   $86,000
C)   $98,000
D)   $172,000
E)   $217,000

Question 16

Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

Accepted Answer

A)   $40,000
B)   $196,000
C)   $280,000
D)   $400,000
E)   $430,000

Question 17

An administrative fee of $150 per year may be deducted to cover recordkeeping and other administrative expenses related to a variable annuity.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following annuities is purchased with a lump-sum payment and allows an individual to receive income payments beginning now?

Accepted Answer

A)   Term insurance
B)   Deferred annuity
C)   Whole life insurance
D)   Immediate annuity
E)   Universal life insurance

Question 19

The "nonworking" spouse method of estimating life insurance includes factors such as Social Security and liquid assets.

Accepted Answer

A) True 
 B)False

Question 20

If you switch life insurance policies, you will automatically still be insurable.

Accepted Answer

A) True 
 B)False

Exam 10: Financial Planning With Life Insurance

This life insurance is used to pay off certain debts, such as auto loans, in the event that you die before the debts are paid in full. Which of the following is not the best buy for the amount of protection offered for an individual?

Correct Answer
verified

The lower the interest-adjusted index, the lower the cost of a life insurance policy.

Correct Answer
verified

An administrative fee of $150 per year may be deducted to cover recordkeeping and other administrative expenses related to a variable annuity.

Correct Answer
verified

Correct Answer
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Most people buy life insurance to

Correct Answer
verified

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Correct Answer
verified

The policy loan provision means that

Correct Answer
verified

Correct Answer
verified

Which of the following annuities is purchased with a lump-sum payment and allows an individual to receive income payments beginning now?

Correct Answer
verified

Annuities are more attractive for people who expect to live only a short time.

Correct Answer
verified

The "nonworking" spouse method of estimating life insurance includes factors such as Social Security and liquid assets.

Correct Answer
verified

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Correct Answer
verified

The sooner a person is likely to die, the lower the premiums he or she will pay.

Correct Answer
verified

After you purchase a life insurance contract, you have a "free look" period that lasts

Correct Answer
verified

If you want to purchase term insurance, you will receive all of the following except

Correct Answer
verified

If you have a conversion term policy,

Correct Answer
verified

Correct Answer
verified

If you switch life insurance policies, you will automatically still be insurable.

Correct Answer
verified

Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

Correct Answer
verified

Frank, age 38, was killed in a car accident. Which of the following riders provided an additional benefit for his heirs?

Correct Answer
verified

Exam 10: Financial Planning With Life Insurance

This life insurance is used to pay off certain debts, such as auto loans, in the event that you die before the debts are paid in full. Which of the following is not the best buy for the amount of protection offered for an individual?

Correct AnswerverifiedShow Answer

The lower the interest-adjusted index, the lower the cost of a life insurance policy.

Correct AnswerverifiedShow Answer

An administrative fee of $150 per year may be deducted to cover recordkeeping and other administrative expenses related to a variable annuity.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most people buy life insurance to

Correct AnswerverifiedShow Answer

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Correct AnswerverifiedShow Answer

The policy loan provision means that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following annuities is purchased with a lump-sum payment and allows an individual to receive income payments beginning now?

Correct AnswerverifiedShow Answer

Annuities are more attractive for people who expect to live only a short time.

Correct AnswerverifiedShow Answer

The "nonworking" spouse method of estimating life insurance includes factors such as Social Security and liquid assets.

Correct AnswerverifiedShow Answer

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Correct AnswerverifiedShow Answer

The sooner a person is likely to die, the lower the premiums he or she will pay.

Correct AnswerverifiedShow Answer

After you purchase a life insurance contract, you have a "free look" period that lasts

Correct AnswerverifiedShow Answer

If you want to purchase term insurance, you will receive all of the following except

Correct AnswerverifiedShow Answer

If you have a conversion term policy,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If you switch life insurance policies, you will automatically still be insurable.

Correct AnswerverifiedShow Answer

Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

Correct AnswerverifiedShow Answer

Frank, age 38, was killed in a car accident. Which of the following riders provided an additional benefit for his heirs?

Correct AnswerverifiedShow Answer

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