Chapter 12 Life Insurance

True/False Questions

1) Consumer awareness of life insurance has changed significantly over the years.

2. Life insurance is still more often sold than bought.

3. Most people buy life insurance to protect someone who depends on them from financial

4. The principle of home insurance can be applied to the lives of persons.

5. Most American families face substantial loss when one spouse dies unexpectedly.

6. Many widows and widowers say their spouse had been adequately insured.

7. Life insurance is one of the most important and expensive purchases you may ever make.

8. Consumer awareness of life insurance has changed little over the years.

9. Life insurance is quite mysterious and hard to understand.

10. Life insurance proceeds may not be used to pay off a home mortgage.

11. Life insurance proceeds may be used to provide an education or income for children.

12. Life insurance proceeds may provide a retirement income.

13. The IRS regulations prohibit the use of life insurance proceeds to make estate and death tax payments.

14. Most insurance companies can determine how long a particular person will live.

15. Life expectancy in the United States has been steadily increasing since 1900.

16. Life expectancy tables indicate the age at which a person has the highest probability of dying.

17. Single persons living alone have little or no need for life insurance.

18. A two-earner couple may have the greatest need for life insurance.

19. Households with small children most often have the greatest need for life insurance.

 20. The easy method of estimating life insurance requirements is remarkably useful.

 21. The first step in buying insurance is to determine whether you really need life insurance.

 22. Everyone needs life insurance.

23. If your death would cause financial stress for your dependents, you should consider purchasing life insurance.

24. Single persons living with their parents usually have a great need for life insurance.

 25. Two-earner couples may have a moderate need for life insurance, especially if they have a mortgage or other large debts.

26. Households with small children usually don't have much need for life insurance.

27. How much insurance one should carry is an important question for anyone who owns or intends to buy life insurance.

 28. Like it or not, an insurance policy puts a price on the life of the insured person.

 29. There is really one method for determining the amount of insurance you may need

30. The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of wage-earner's salary for seven years.

31. The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.

32. If you have no dependents and your wife earns as much as you do, you have very simple insurance needs.

33. The " family need" method of determining life insurance need provides a thorough estimation of life insurance needs.

34. As you determine your life insurance needs, you should ignore the life insurance you may already have

35. A nonparticipating policy has somewhat higher premiums than a participating policy.

 36. Nearly all mutual companies issue only nonparticipating policies.

37. If you wish to pay exactly the same premium each year, you would choose a nonparticipating policy.

 38. A term insurance policy pays a benefit only if you die during the period that the policy covers.

 39. The premium for the whole life policy increases with your age

 40. Universal life, variable life, and adjustable life are types of term life insurance.

 41. Renewable term and decreasing term are types of whole life policies.

42. You can purchase life insurance from two types of insurance companies.

 43. Stock life insurance companies are owned by their policyholders.

 44. Mutual fund life insurance companies are owned by their stockholders.

 45. Most of life insurance companies are mutuals

46. Most of life insurance companies are stock companies.

47. Stock companies generally sell participating (or par) policies.

48. Mutual companies generally sell nonparticipating (or no par) policies.

49. A participating policy has a somewhat higher premium than a non participating policy.

50. In participating policy, a part of the premium is refunded to the policyholder annually.

 51. The premium that is refunded to policy holders of a participating policy is called the policy dividend.

52. If you wish to pay exactly the same premium each year, you would chose a participating policy.

 53. The price should be your only consideration in choosing a life insurance policy.

 54. Two basic types of life insurance are temporary and permanent insurance.

 55. Temporary insurance can be term, renewable term, convertible term, or decreasing term insurance.

56. Term insurance is known as whole life, straight life, ordinary life, and cash value life insurance.

57. Permanent insurance can be limited payment, variable, adjustable, or universal life insurance.

 58. The group life and credit life insurance are generally permanent forms of insurance.

 59. Term insurance is protection for a specified period of time, usually 1, 5, 10, or 20 years.

 60. A term insurance policy pays a benefit only if you die during the period it covers.

 61. Term insurance continues for the entire term even if you stop paying the premiums.

62. Term insurance is basic, "no frills" form of life insurance and is the best value for most customers.

63. You need life insurance coverage most while you are raising young children

 64. Term life insurance premiums decrease as you get older.

 65. The coverage of term insurance ends at the conclusion of the term, but you can continue it if you have a renew ability option.

 66. If you have convertible term insurance, you can exchange it for a whole life policy without a medical examination and at a higher premium.

67. The premium for the whole life policy stays the same for the rest of your life

68. Decreasing term life insurance is generally not available.

69. The most common type of permanent life insurance is the whole life policy.

 70. The whole life policy is also called a straight life policy, cash-valued life policy, or an ordinary life policy.

71. The amount of your life insurance premium depends primarily on the age at which you purchase the insurance.

72. One important feature of term life policy is its cash value

73. Cash value policies may make sense for people who intend to keep the policies for the short term.

 74. The premium for a term life policy remains constant throughout your lifetime, whereas the premium for a whole life policy increases with each renewal.

75. Because the premium payment period for a limited payment policy is shorter than that of a whole life policy, the annual premium is higher

76. A special form of the limited payment plan is the single-premium policy. In this type of contract, you make only one very large premium payment.

 77. The cash values of a variable life insurance policy does not fluctuate.

78. The cash values of a variable life insurance policy fluctuate according to the yields earned by a separate fund.

79. When you purchase a variable life policy, the insurance company assumes the risk of poor investment performance.

 80. The cash value of a variable life policy is guaranteed.

 81. Universal life is a whole life policy that combines term insurance and investment elements.

82. With universal life, you control your outlay and can change your premium without changing your coverage.

83. In recent decades, group life insurance has become quite popula

84. Group life insurance is always a good deal

85. Credit life insurance is used to repay a personal debt should the borrower die before doing so.

86. Credit life insurance is based on the belief that "no person's debts should live after him or her."

 87. Credit life insurance policies for auto loans and home mortgages are usually the best buys for the protection they offer.

88. Some experts claim that credit life insurance policies are the nation's biggest rip- off.

89. Industrial life insurance is the most popular form of insurance today.

 90. Experts recommend that you reevaluate your insurance coverage every two years.

91. An important provision in every life insurance policy is the right to name your beneficiary.

92. A rider is any document attached to the policy that modifies its coverage by adding or excluding specified conditions or altering its benefits.

93. The incontestability clause stipulates that the insurance company can dispute the validity of the policy during the insured's lifetime

94. The policy loan provision permits you to borrow any amount up to the cash value of the policy.

95. Even though it is expensive, you should consider the accidental death benefit in a life insurance policy.

96. The accidental death benefit is often called double indemnity.

97. Your life insurance policy is valuable whether it meets your objectives or not.

98. When your life insurance objectives change, it may be necessary to give up the insurance policy.