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Exam 11: Life Insurance

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Question 31

Multiple Choice

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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 productive lifetime are ignored.

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Question 32

Multiple Choice

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Which of the following statements is true regarding return of premium term insurance?

A) The insurance is free because premiums are refunded at the end of the coverage period.
B) Life insurers charge less for this coverage than for regular term insurance that does not include a refund provision.
C) The return of premium is only offered on one-year term insurance policies.
D) The coverage is expensive and is not free when time value of money is considered.

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Question 33

Multiple Choice

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All of the following statements about employer-provided group life insurance are true EXCEPT

All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT

Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balance gradually declines. This type of life insurance is called

The purchase of term insurance is justified by which of the following circumstances? I.The insured wants to save money through the policy for a specific need. II. The insured has a temporary need for life insurance protection.

Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian's human life value?

A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 years) and are higher thereafter is an example of a

Which of the following statements about term insurance is true?

Which of the following statements regarding convertible term insurance is true?

The human life value is defined as the

The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the

Which of the following statements about indexed universal life insurance is true?

Which of the following pieces of information is needed to calculate a person's human life value?

To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include

What happens to the premiums for yearly renewable term insurance as an insured gets older?

Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group life insurance policy through her employer. Based on this information, how much additional life insurance should Sarah purchase?

A common use of second-to-die life insurance is

Which of the following statements about second-to-die life insurance is (are) true? I.The insurance is a form of endowment coverage. II. The premium is lower than the combined cost of purchasing a life insurance policy on each insured.

Which of the following statements about yearly renewable term insurance is (are) true? I.It requires evidence of insurability for renewal. II.It is most appropriate when an insured needs lifetime protection.