Question 1

Which of the following statements about home service life insurance,which evolved over time from a type of life insurance called industrial life insurance,is true?

Accepted Answer

A) Most policies have a face value exceeding $100,000. 
B) Premiums are usually not collected at the insured's home and are remitted directly to the agent or the insurer. 
C) Industrial life insurance is group term insurance coverage marketed to employees at the work site. 
D) This popular product accounts for over 40 percent of the life insurance sold today. 
A) Most policies have a face value exceeding $100,000. 
B) Premiums are usually not collected at the insured's home and are remitted directly to the agent or the insurer. 
C) Industrial life insurance is group term insurance coverage marketed to employees at the work site. 
D) This popular product accounts for over 40 percent of the life insurance sold today.

Question 2

Jessica is an agent for LMN Life Insurance Company.She met with Brad,who was interested in purchasing life insurance.Jessica explained the various uses of life insurance,including income for Brad's wife during the 1- or 2-year period following Brad's death.This period is known as the

Accepted Answer

A) dependency period. 
B) estate clearance period. 
C) blackout period. 
D) readjustment period. 
A) dependency period. 
B) estate clearance period. 
C) blackout period. 
D) readjustment period.

Question 3

Which of the following is a noneconomic cost associated with premature death?

Accepted Answer

A) reduction in the standard of living 
B) loss of a parental role model 
C) additional expenses,such as uninsured medical bills 
D) loss of the deceased breadwinner's future earnings 
A) reduction in the standard of living 
B) loss of a parental role model 
C) additional expenses,such as uninsured medical bills 
D) loss of the deceased breadwinner's future earnings

Question 4

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 5

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

Accepted Answer

A) Evidence of insurability must be provided to convert the policy. 
B) More term policies are converted using the original-age method than using the attained-age method. 
C) The converted coverage has a lower face amount than the term coverage. 
D) The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used. 
A) Evidence of insurability must be provided to convert the policy. 
B) More term policies are converted using the original-age method than using the attained-age method. 
C) The converted coverage has a lower face amount than the term coverage. 
D) The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.

Question 6

Bill is attempting to determine how much life insurance to purchase.He has two dependent children and his wife does not work outside of the home.An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning.One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again.This period is called the

Accepted Answer

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

Question 7

Which of the following statements about variable universal life insurance is (are)true?
I Variable universal life insurance guarantees a minimum interest rate or case value.
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 8

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 9

Which of the following statements about re-entry term insurance is true?

Accepted Answer

A) It permits substandard risks to purchase insurance at standard rates. 
B) It permits a refund of premiums paid if the term insurance is renewed a specified number of times. 
C) It permits a lower renewal premium if the insured demonstrates insurability. 
D) It permits a lapsed whole life policy to be reinstated as term insurance. 
A) It permits substandard risks to purchase insurance at standard rates. 
B) It permits a refund of premiums paid if the term insurance is renewed a specified number of times. 
C) It permits a lower renewal premium if the insured demonstrates insurability. 
D) It permits a lapsed whole life policy to be reinstated as term insurance.

Question 10

Tom and Nancy Boyle provide financial support for their two children.In addition,they provide financial support for Tom's aged father and Nancy's aged mother.The Boyle family can be described as a

Accepted Answer

A) blended family. 
B) single-parent family. 
C) two-income earner family. 
D) sandwiched family. 
A) blended family. 
B) single-parent family. 
C) two-income earner family. 
D) sandwiched family.

Question 11

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

Accepted Answer

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 amount returned is only the base premium and does include the cost of any riders. 
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 amount returned is only the base premium and does include the cost of any riders.

Question 12

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 13

Which of the following statements about endowment insurance policies is (are)true?
I.The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive.
II.The use of endowment insurance has increased in recent years because of its favorable tax treatment.

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

Under the needs approach,when is the dependency period of a surviving spouse assumed to end?

Accepted Answer

A) 1 or 2 years after the breadwinner's death 
B) when the youngest child reaches age 18 
C) when the surviving spouse reaches age 65 
D) when the surviving spouse dies 
A) 1 or 2 years after the breadwinner's death 
B) when the youngest child reaches age 18 
C) when the surviving spouse reaches age 65 
D) when the surviving spouse dies

Question 15

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 16

Which of the following statements about savings bank life insurance is true?

Accepted Answer

A) The maximum amount that a depositor can purchase is $50,000. 
B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit in his or her savings account with the savings bank. 
C) The objective of savings bank life insurance is to provide protection to the bank in case a borrower dies before a loan is repaid. 
D) The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses. 
A) The maximum amount that a depositor can purchase is $50,000. 
B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit in his or her savings account with the savings bank. 
C) The objective of savings bank life insurance is to provide protection to the bank in case a borrower dies before a loan is repaid. 
D) The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses.

Question 17

The human life value is defined as the

Accepted Answer

A) present value of a deceased breadwinner's future gross income. 
B) future value of a deceased breadwinner's past earnings. 
C) present value of the family's share of a deceased breadwinner's future earnings. 
D) future value of the family's share of a deceased breadwinner's future earnings. 
A) present value of a deceased breadwinner's future gross income. 
B) future value of a deceased breadwinner's past earnings. 
C) present value of the family's share of a deceased breadwinner's future earnings. 
D) future value of the family's share of a deceased breadwinner's future earnings.

Question 18

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 19

When using the needs approach,several "special needs" should be considered.One special need is money to cover unexpected events,such as major car repairs,dental bills,or home repairs.Money set aside for this purpose is called a(n)

Accepted Answer

A) estate clearance fund. 
B) emergency fund. 
C) readjustment period fund. 
D) mortgage redemption fund. 
A) estate clearance fund. 
B) emergency fund. 
C) readjustment period fund. 
D) mortgage redemption fund.

Question 20

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

Exam 11: Life Insurance

Which of the following statements about home service life insurance,which evolved over time from a type of life insurance called industrial life insurance,is true?

Jessica is an agent for LMN Life Insurance Company.She met with Brad,who was interested in purchasing life insurance.Jessica explained the various uses of life insurance,including income for Brad's wife during the 1- or 2-year period following Brad's death.This period is known as the

Which of the following is a noneconomic cost associated with premature death?

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

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

Which of the following statements about variable universal life insurance is (are)true? I Variable universal life insurance guarantees a minimum interest rate or case value. II)Variable universal life insurance allows the policyowner to decide where the premiums are invested.

Which of the following statements about re-entry term insurance is true?

Tom and Nancy Boyle provide financial support for their two children.In addition,they provide financial support for Tom's aged father and Nancy's aged mother.The Boyle family can be described as a

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

Under the needs approach,when is the dependency period of a surviving spouse assumed to end?

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

Which of the following statements about savings bank life insurance is true?

The human life value is defined as the

When using the needs approach,several "special needs" should be considered.One special need is money to cover unexpected events,such as major car repairs,dental bills,or home repairs.Money set aside for this purpose is called a(n)

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Enterprise Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance and 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

The Liability Risk

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Auto Insurance Continued

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Homeowners Insurance,section II

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