Question 1

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

Accepted Answer

A) level-term policy. 
B) modified life policy. 
C) limited-payment whole life policy. 
D) variable life policy. 
A) level-term policy. 
B) modified life policy. 
C) limited-payment whole life policy. 
D) variable life policy. B

Question 2

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.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II D

Question 3

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?

Accepted Answer

A) $184,600 
B) $249,200 
C) $360,800 
D) $400,000 
A) $184,600 
B) $249,200 
C) $360,800 
D) $400,000 B

Question 4

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

Accepted Answer

A) funeral costs. 
B) income taxes. 
C) investment income. 
D) pension benefits after retirement. 
A) funeral costs. 
B) income taxes. 
C) investment income. 
D) pension benefits after retirement.

Question 5

All of the following statements about current assumption whole life insurance are true EXCEPT

Accepted Answer

A) It is a form of participating whole life insurance that pays annual dividends. 
B) An accumulation account is credited with an interest rate based on present market conditions and company experience. 
C) Under the low-premium version,the premium is subject to change after an initial guaranteed period. 
D) Under the high-premium version,the premium may be discontinued after a period of time. 
A) It is a form of participating whole life insurance that pays annual dividends. 
B) An accumulation account is credited with an interest rate based on present market conditions and company experience. 
C) Under the low-premium version,the premium is subject to change after an initial guaranteed period. 
D) Under the high-premium version,the premium may be discontinued after a period of time.

Question 6

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?

Accepted Answer

A) $80,000 
B) $130,000 
C) $150,000 
D) $160,000 
A) $80,000 
B) $130,000 
C) $150,000 
D) $160,000

Question 7

A legal reserve in life insurance is a result of

Accepted Answer

A) premium taxes payable by life insurance companies being postponed during the early policy years. 
B) dividends being paid to policyholders. 
C) inadequate premiums in the early policy years being subsidized by investment earnings. 
D) excess premiums in the early policy years being invested at compound interest. 
A) premium taxes payable by life insurance companies being postponed during the early policy years. 
B) dividends being paid to policyholders. 
C) inadequate premiums in the early policy years being subsidized by investment earnings. 
D) excess premiums in the early policy years being invested at compound interest.

Question 8

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

Accepted Answer

A) modified life insurance. 
B) decreasing term insurance. 
C) re-entry term insurance. 
D) current assumption whole life. 
A) modified life insurance. 
B) decreasing term insurance. 
C) re-entry term insurance. 
D) current assumption whole life.

Question 9

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

Accepted Answer

A) It is another name for variable life insurance. 
B) Although a minimum interest rate is guaranteed,the rate credited can be higher if a specified stock index performs well. 
C) The cash value is usually credited with 100 percent of the return on the equity index,including dividends paid on the stocks in the index. 
D) The formula used to determine the additional interest credited to the policy places no limit on the additional interest that can be credited. 
A) It is another name for variable life insurance. 
B) Although a minimum interest rate is guaranteed,the rate credited can be higher if a specified stock index performs well. 
C) The cash value is usually credited with 100 percent of the return on the equity index,including dividends paid on the stocks in the index. 
D) The formula used to determine the additional interest credited to the policy places no limit on the additional interest that can be credited.

Question 10

Which of the following statements about the capital retention approach for determining life insurance needs is (are)true?
I.It assumes that life insurance proceeds will be liquidated to provide income to survivors.
II.It requires the preparation of a personal balance sheet.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 11

Which statement is true concerning the economic problem of premature death in the United States?
I.The economic impact of premature death of the breadwinner varies for different types of families.
II.Increased life expectancy has increased the economic problem of premature death over time.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 12

All of the following statements about the conversion of a term policy are true EXCEPT

Accepted Answer

A) Under an attained age conversion,the premium is based on the insured's attained age at the time of conversion. 
B) Under an original age conversion,the policyowner must pay a financial adjustment in addition to the premium for the new policy. 
C) Most insurers require original age conversion to take place within a specified period (5 years,for example)of the issue of the term policy. 
D) Evidence of insurability is required before a conversion is permitted. 
A) Under an attained age conversion,the premium is based on the insured's attained age at the time of conversion. 
B) Under an original age conversion,the policyowner must pay a financial adjustment in addition to the premium for the new policy. 
C) Most insurers require original age conversion to take place within a specified period (5 years,for example)of the issue of the term policy. 
D) Evidence of insurability is required before a conversion is permitted.

Question 13

Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are)true?
I.It involves an analysis of various family needs which must be met if a family breadwinner dies.
II.Its use is appropriate only if a person currently has no life insurance protection.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 14

Gwen purchased an interesting life insurance policy.A minimum interest rate is guaranteed on the cash value,but additional interest may be credited based on the investment performance of a group of common stocks.There is also a cap on the additional interest credited to the policy.Based on this information,what type of life insurance did Gwen purchase?

Accepted Answer

A) variable life insurance 
B) indexed universal life insurance 
C) current assumption whole life insurance 
D) variable universal life insurance 
A) variable life insurance 
B) indexed universal life insurance 
C) current assumption whole life insurance 
D) variable universal life insurance

Question 15

Which of the following statements about term insurance is true?

Accepted Answer

A) The coverage is appropriate if the goal is permanent lifetime protection. 
B) Most policies can be renewed for additional periods without evidence of insurability. 
C) Premiums increase at a constant rate each time the policy is renewed. 
D) Most policies have a cash value that is refunded when coverage ceases. 
A) The coverage is appropriate if the goal is permanent lifetime protection. 
B) Most policies can be renewed for additional periods without evidence of insurability. 
C) Premiums increase at a constant rate each time the policy is renewed. 
D) Most policies have a cash value that is refunded when coverage ceases.

Question 16

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

Accepted Answer

A) the marital status of the person. 
B) the person's estimated annual Social Security benefits after retirement. 
C) the person's cost of self-maintenance. 
D) current outstanding debts,including mortgage debt. 
A) the marital status of the person. 
B) the person's estimated annual Social Security benefits after retirement. 
C) the person's cost of self-maintenance. 
D) current outstanding debts,including mortgage debt.

Question 17

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

Accepted Answer

A) insuring children. 
B) insuring "double income with kids" families. 
C) estate planning. 
D) insuring key employees of a business. 
A) insuring children. 
B) insuring "double income with kids" families. 
C) estate planning. 
D) insuring key employees of a business.

Question 18

Which of the following statements about variable universal life insurance is (are)true?
I Variable universal life insurance has fixed premium payments.
II.Variable universal life insurance allows the policyowner to decide where the premiums are invested.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 19

Which of the following statements about universal life insurance is (are)true?
I.The current interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy.
II.A monthly deduction is made from the policy's cash value for the cost of insurance protection.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 20

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

Accepted Answer

A) emergency period. 
B) readjustment period. 
C) dependency period. 
D) blackout period. 
A) emergency period. 
B) readjustment period. 
C) dependency period. 
D) blackout period.

Exam 11: Life Insurance

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 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.

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

All of the following statements about current assumption whole life insurance are true EXCEPT

A legal reserve in life insurance is a result of

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

Which of the following statements about the capital retention approach for determining life insurance needs is (are)true? I.It assumes that life insurance proceeds will be liquidated to provide income to survivors. II.It requires the preparation of a personal balance sheet.

Which statement is true concerning the economic problem of premature death in the United States? I.The economic impact of premature death of the breadwinner varies for different types of families. II.Increased life expectancy has increased the economic problem of premature death over time.

All of the following statements about the conversion of a term policy are true EXCEPT

Which of the following statements about term insurance is true?

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

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

Which of the following statements about variable universal life insurance is (are)true? I Variable universal life insurance has fixed premium payments. II.Variable universal life insurance allows the policyowner to decide where the premiums are invested.

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

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Advanced Topics in Risk Management

Types of Insurers and Marketing Systems

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Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

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