Chapter 8—Insuring Your Life
b.
loss prevention.
c.
risk assumption.
d.
risk retention.
e.
insurance.
Moderate
PFIN.BILL.17.8-1 – LO: 8-1
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
73. Through insurance, society is able to
a.
reduce costs.
b.
increase rewards.
c.
reduce financial risks and share losses.
d.
change financial risks and reduce losses.
e.
anticipate risks.
c
Easy
PFIN.BILL.17.8-1 – LO: 8-1
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
74. The best way to handle risk is to
a.
b.
c.
d.
e.
e
Easy
PFIN.BILL.17.8-1 – LO: 8-1
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
75. The underwriting function is designed to be sure that premiums are based on
Chapter 8—Insuring Your Life
a.
income levels.
b.
the value of the loss.
c.
the value of the gain.
d.
the chance of loss.
e.
expense levels.
PFIN.BILL.17.8-1 – LO: 8-1
United States – BUSPROG: Reflective Thinking
Bloom’s: Understanding
76. The primary purpose of life insurance is to provide
a.
financial security for dependents in the event of death.
b.
protection from creditors and lawsuits.
c.
tax-advantaged investments.
d.
high-yield investments.
e.
all of the above.
PFIN.BILL.17.8-1 – LO: 8-1
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
77.
Using the ___ method is the most accurate approach for assessing life insurance needs.
a.
human life value
b.
multiple earnings
c.
risk assessment
d.
economic identification
e.
needs analysis
PFIN.BILL.17.8-3 – LO: 8-3
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
Chapter 8—Insuring Your Life
78. The needs analysis method of determining the amount of life insurance considers
a.
needed income.
b.
debt liquidation.
c.
extra expenses if income producer dies.
d.
special needs of dependents.
e.
all of these.
e
Moderate
PFIN.BILL.17.8-3 – LO: 8-3
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
79. In determining available resources that would be available after death, you would generally not consider
a.
social security benefits.
b.
earning potential of surviving children.
c.
earning potential of surviving spouse.
d.
savings.
e.
market value of home in which survivors will reside.
e
Moderate
PFIN.BILL.17.8-3 – LO: 8-3
United States – BUSPROG: Reflective Thinking
Bloom’s: Applying
80. Term life insurance is characterized by
a.
level annual premiums throughout life.
b.
premium amounts related to age.
c.
inappropriateness for most person’s life insurance needs.
d.
non-convertibility.
e.
cash value.
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Understanding
Chapter 8—Insuring Your Life
81. ____ is not descriptive of an option of term life insurance.
a.
Limited payment
b.
Decreasing
c.
Convertible
d.
Renewable
e.
Annual
a
Easy
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
82. The settlement option chosen by most beneficiaries is
a.
lump sum.
b.
interest only.
c.
fixed amount.
d.
fixed time.
e.
life income.
a
Easy
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
83. ____ is a common provision in many term policies.
a.
A reward clause
b.
A renewable clause
c.
Cash value
d.
A limited clause
e.
An arbitration clause
Moderate
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
Chapter 8—Insuring Your Life
84. If life insurance is convertible, the policy can be
a.
transferred to the life of another person.
b.
exchanged for cash.
c.
changed to health or disability protection
d.
changed to another type of life insurance.
e.
revised as needed.
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
85. Decreasing term insurance usually has a decreasing face value and
a.
a decreasing premium.
b.
a level premium.
c.
an increasing premium.
d.
a fluctuating premium.
e.
none of the above.
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
86. Rodney and Toni are a young couple with two small children. They are doing well financially but their life insurance
needs are high and their budget is tight. What type of life insurance will give them the most protection for their money?
a.
continuous premium
b.
universal life
c.
paid up life
d.
term life
e.
variable life
PFIN.BILL.17.8-4 – LO: 8-4
United States – KS – DISC: Risk and Return
Chapter 8—Insuring Your Life
Bloom’s: Applying
87. The least expensive form of whole life insurance protection is
a.
term.
b.
straight life.
c.
limited payment.
d.
universal.
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
88. If the objective of your life insurance program is to get the greatest death protection now for your insurance dollars,
you should choose ____ insurance.
a.
term
b.
universal
c.
limited pay
d.
industrial
e.
whole life
a
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
89. Whole life insurance is designed to provide
a.
protection only.
b.
savings only.
c.
savings and loan value.
d.
protection and savings.
e.
loan value only.
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Chapter 8—Insuring Your Life
90. You want to pay premiums for 20 years and have your insurance premium obligations finished at that time, but you
feel you will need life insurance for the rest of your life. You should choose ____ insurance.
a.
continuous premium
b.
limited pay
c.
single premium
d.
multiple premium
e.
universal
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Applying
91. Which of the following is not characteristic of universal life insurance?
a.
flexible premiums
b.
choice of how the accumulation account is invested
c.
Option A level death benefit
d.
Option B stated coverage plus accumulated cash value
e.
separate identification of death protection and savings portions
Challenging
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Analyzing
92. Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy he will
receive the cash value. His plan is a ____ life policy.
a.
term
b.
whole life
c.
limited payment
d.
universal
e.
none of the above
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
Chapter 8—Insuring Your Life
93. The insurance portion of a universal life policy is most analogous to
a.
mortgage insurance.
b.
group insurance.
c.
whole life insurance.
d.
term insurance.
e.
variable insurance.
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Creating
94. Universal life insurance is
a.
a deferred premium payment policy.
b.
primarily sold to college students.
c.
a combined investment plan and insurance policy.
d.
a provision for a secondary beneficiary.
e.
all of the above.
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
95. An insured usually chooses variable life insurance in order to
a.
provide more flexible coverage.
b.
emphasize the savings portion while still having death protection.
c.
lessen the savings feature of life insurance.
d.
substitute for fixed-dollar insurance protection.
e.
reduce insurance premiums.
PFIN.BILL.17.8-4 – LO: 8-4
Bloom’s: Applying
Chapter 8—Insuring Your Life
96. ____ can be both an advantage and a disadvantage of universal life insurance.
a.
Flexible premiums
b.
Tax features
c.
High returns
d.
Unbundling
e.
Fixed returns
a
Challenging
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Analyzing
97. The death benefit of ____ life insurance may go down due to poor investment returns.
a.
limited pay
b.
whole
c.
universal
d.
variable
e.
c and d
e
Moderate
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
98. ____ and ____ are both relatively expensive types of decreasing-term life insurance.
a.
Group life; credit life
b.
Credit life; mortgage life
c.
Mortgage life; industrial life
d.
Industrial life; special-purpose policies
e.
Special-purpose policies; group life
Moderate
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
Chapter 8—Insuring Your Life
99. Life insurance policies with small face amounts where the premium may be collected weekly by agents is
a.
credit life insurance.
b.
mortgage life insurance.
c.
industrial life insurance.
d.
special purpose insurance.
e.
group life insurance.
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
100. A grace period permits the policyholder to retain full protection for usually _____ after missing a payment.
a.
31 days
b.
65 days
c.
90 days
d.
120 days
e.
180 days
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
101. Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, was the primary beneficiary and their
children, Mimi (age 24) and Ann (age 30), were the contingent beneficiaries. All three survived Marilyn. How would the
policy proceeds be distributed?
a.
$200,000 to Jack
b.
$100,000 each to Mimi and Ann
c.
$100,000 to Jack and $50,000 each to Mimi and Ann
d.
$66,666 each to Jack, Mimi, and Ann
e.
$150,000 to Jack and $25,000 each to Mimi and Ann
PFIN.BILL.17.8-4 – LO: 8-4
United States – BUSPROG: Reflective Thinking
Bloom’s: Understanding
Chapter 8—Insuring Your Life
Moderate
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Applying
102. Which of the following policy features allow the insured to increase coverage periodically without showing proof of
insurability?
a.
multiple indemnity clause
b.
guaranteed purchase options
c.
disability clause
d.
paid-up insurance option
e.
extended-term option
Moderate
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
103. The _________ option allows a terminally ill insured to receive a percentage of the death benefit for immediate use.
a.
multiple indemnity
b.
living benefits
c.
viatical settlement
d.
needs analysis
e.
b and c
e
Challenging
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Analyzing
104. Key features found in most life insurance contracts include
a.
settlement options.
b.
policy reinstatement.
c.
change of policy.
d.
all of the above.
e.
none of the above.
Chapter 8—Insuring Your Life
Moderate
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Remembering
105. Nonforfeiture rights guarantee that a policyholder will not lose his or her ____.
a.
face value.
b.
death benefits for survivors.
c.
cash value.
d.
premium refunds.
e.
premium reductions.
c
Moderate
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
106. A participating policy
a.
has no incontestability clause.
b.
is a form of endowment insurance.
c.
may pay dividends.
d.
requires a savings function.
e.
contains no tax benefits.
c
Challenging
PFIN.BILL.17.8-6 – LO: 8-6
United States – BUSPROG: Reflective Thinking
Bloom’s: Understanding
107. With most insurers, paying life insurance premiums on a(n) ____ basis will allow you to avoid a fee.
a.
annual
b.
semiannual
c.
quarterly
d.
monthly