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Chapter Bonus D - Managing Personal Finances
200. Which of the following is a new form of term insurance that guarantees fixed
premiums for the life of the policy?
A. Universal life insurance
B. Planned annuity life insurance
C. Declining coverage, fixed payment insurance
D. Multiyear level-premium insurance
201. According to Newsweek magazine, a young couple with a new baby should have life
insurance coverage equal to:
A. $500,000.
B. three times their annual income.
C. five times their annual income.
D. seven times their annual income plus $100,000 to cover the cost of college.
202. _________ is a form of life insurance that provides both a savings plan and pure
insurance coverage.
A. Term life insurance
B. Growth-centered life insurance
C. Whole life insurance
D. Multiyear level-premium insurance
BonusD-65
212. Many insurance providers offer __________ policies that give a discount to families
who buy several types of insurance coverage from them.
A. umbrella
B. universal
C. multi-use
D. rider-enhanced
213. Stan and Heidi are married and both have careers in business. If one of the two were to
die, there would be a sudden drop in income. To provide protection from this risk the
couple should purchase:
A. disability insurance.
B. life insurance.
C. health insurance.
D. car insurance.
Feedback: Life insurance is used to protect a family or business from the sudden loss of
income that occurs as the result of the death of an income earner.
214.
Chapter Bonus D - Managing Personal Finances
A comparison of variable life insurance to a standard whole life plan would reveal that:
A. they are essentially identical.
B. variable life offers only pure insurance but does so at a very low cost, while a standard
whole life plan costs more but offers both insurance and a savings plan.
C. both a standard whole life and variable life insurance offer both life insurance and
savings, but variable life invests the savings more aggressively than whole life.
D. variable life is only available to people who want at least $1 million in coverage—and
are willing to pay for it.
Feedback: Variable life is a variation of whole life that invests savings more aggressively
than do ordinary whole life plans. This can lead to higher returns on saving, but is a riskier
strategy that could result in a variation in the death benefit.
215. A common purpose of a rider added to a homeowner's policy is to:
A. provide coverage for items that the standard policy does not cover.
B. limit the insurance company's liability for certain types of losses.
C. waive the provision that requires the owners to get a health exam.
D. allow the policy holder to obtain health, disability, and auto insurance under their
homeowner's plan.
Feedback: Most homeowner's policies do not automatically cover things like expensive
jewelry or silverware. However, insurance companies offer riders to their standard policies
which provide additional protection for these types of items at a reasonable cost.
BonusD-72
228. A Roth IRA offers employees an incentive to save for their retirement by:
A. deferring taxes on income contributed to the IRA.
B. eliminating taxes on the withdrawals from the IRA.
C. eliminating taxes on the income contributed to the IRA.
D. allowing employers to match the employee's contribution to the IRA.
229. Investments in IRA accounts:
A. are limited to money market funds and government bonds.
B. can be in stocks, bonds, mutual funds, or even precious metals.
C. are matched by the employer.
D. are taxed at the lowest individual tax rate regardless of the actual tax bracket of the
investor.
230. One benefit of a simple IRA is that it allows:
A. employees of small companies to save more than a regular IRA.
B. employees to invest in the corporate bonds of their employers.
C. business owners to use employee retirement funds to help finance their small business.
D. employees to withdraw funds from the IRA prior to retirement without penalty.
231.
Chapter Bonus D - Managing Personal Finances
A retirement plan where employers often match part of an employee's contribution is
known as a:
A. simple IRA.
B. Roth IRA.
C. Keogh plan.
D. 401(k) plan.
232. Withdrawals from a traditional IRA prior to the age of 59½ are:
A. tax deferred until you reach 65 years of age.
B. tax-free.
C. normally subject to a penalty and taxes on the income that is withdrawn from the IRA.
D. subject to a possible denial after review by the Internal Revenue Service.
233. The new simple IRA plans allow employees of ________ companies to contribute
larger amounts than the traditional IRA.
A. non-profit
B. small
C. big
D. international
