Question 1

Employers often provide _____ life insurance as a fringe benefit for their employees.

Accepted Answer

A)  group
B)  credit
C)  mortgage
D)  standard
E)  home service

Question 2

Which of the following is true of risk avoidance?

Accepted Answer

A)  Risk avoidance is any activity that helps evade an act that creates a risk.
B)  Risk avoidance is any activity that increases the chance that a loss will occur.
C)  Risk avoidance is any activity that lessens the severity of loss once it occurs.
D)  Risk avoidance is an act that reduces the probability that a loss will occur.
E)  Risk avoidance is an effective way to handle small exposures to loss when insurance is too expensive.

Question 3

Underwriting refers to _____:

Accepted Answer

A)  selling insurance at a premium less than that of the competitors.
B)  the payment of a claim.
C)  a method for developing policy wording.
D)  the determination of which exposures to insure.
E)  restoring the claimant to the financial condition prior to loss.

Question 4

If a term life insurance is convertible,the policy can be:

Accepted Answer

A)  transferred to the life of another person.
B)  exchanged for cash.
C)  changed to health or disability protection.
D)  changed to a comparable whole life policy.
E)  revised as needed by the insurer.

Question 5

Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death.What is the amount of insurance,as per the needs analysis method,that Jonathan should purchase if he has current financial resources worth $1,000,000?

Accepted Answer

A)  $1,000,000
B)  $2,000,000
C)  $2,500,000
D)  $1,500,000
E)  $500,000

Question 6

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following represents a disadvantage of a whole life insurance policy?

Accepted Answer

A)  It is difficult to evaluate the true cost of a whole life insurance policy at the time of purchase.
B)  A whole life insurance policy provides only temporary coverage for a set period.
C)  A whole life insurance policy may require a policyholder to pay higher premiums when the policy is renewed.
D)  A whole life insurance policy often provides lower yields than other investment vehicles.
E)  A whole life insurance policy does not provide any tax advantages on accumulated earnings.

Question 8

It is not possible to avoid ___________. ​

Accepted Answer

A)  loss control
B)  most risks in your life
C)  accumulating savings
D)  making investments

Question 9

Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?

Accepted Answer

A)  Multiple indemnity clause
B)  Guaranteed purchase option
C)  Disability clause
D)  Paid-up insurance option
E)  Extended-term option

Question 10

A(n) _____ policy is a type of term insurance.

Accepted Answer

A)  straight term
B)  whole life
C)  increasing term
D)  variable term
E)  risk assumption

Question 11

The settlement option chosen by most policyholders is:

Accepted Answer

A)  lump sum.
B)  interest only.
C)  fixed amount.
D)  fixed time.
E)  life income.

Question 12

It can be difficult to evaluate the true cost of a _____ at the time of purchase.

Accepted Answer

A)  term life insurance
B)  whole life insurance
C)  universal life insurance
D)  variable life insurance
E)  mortgage life insurance

Question 13

___________ is the choice to accept and bear the risk of loss. ​

Accepted Answer

A)  Loss assumption
B)  Risk assumption
C)  Risk avoidance
D)  Loss avoidance

Question 14

The primary purpose of life insurance is to provide:

Accepted Answer

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)  liquidity to expand business operations.

Question 15

Which of the following is true of a good insurance agent?

Accepted Answer

A)  The agent is aggressive while pursuing business from the potential insured.
B)  The agent is recommended by professionals like bankers and attorneys.
C)  The agent charges high commissions for providing insurance coverage.
D)  The agent replies with fancy buzzwords and generic answers to questions.
E)  The agent is the first one to solicit the potential insured's patronage.

Question 16

A life insurance policy can be structured so that death benefits are paid directly to a(n) ___________,which means that creditors cannot claim the cash benefits from the life insurance policy. ​

Accepted Answer

A)  insurance agent
B)  named beneficiary
C)  underwriter
D)  insurance broker

Question 17

_____ and _____ are both relatively expensive types of decreasing term life insurance.

Accepted Answer

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

Question 18

The basic purpose of insurance is to _____.

Accepted Answer

A)  protect your health
B)  protect yourself from economic losses
C)  supplement your income
D)  shield you from bad decisions
E)  protect yourself from non-financial losses

Question 19

___________ is any activity that lessens the severity of loss once it occurs. ​

Accepted Answer

A)  Loss control
B)  Loss prevention
C)  Risk control
D)  Risk avoidance

Question 20

_____ can be both an advantage and a disadvantage of universal life insurance.

Accepted Answer

A)  Flexible premiums
B)  Tax features
C)  High returns
D)  Unbundling premiums
E)  Underwriting

Exam 8: Insuring Your Life

Which of the following is true of risk avoidance?

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Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.

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The primary purpose of life insurance is to provide:

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_____ can be both an advantage and a disadvantage of universal life insurance.

Correct AnswerverifiedShow Answer

___________ is the choice to accept and bear the risk of loss. ​

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Employers often provide _____ life insurance as a fringe benefit for their employees.

Correct AnswerverifiedShow Answer

Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?

Correct AnswerverifiedShow Answer

It is not possible to avoid ___________. ​

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A(n) _____ policy is a type of term insurance.

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Which of the following represents a disadvantage of a whole life insurance policy?

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If a term life insurance is convertible,the policy can be:

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It can be difficult to evaluate the true cost of a _____ at the time of purchase.

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___________ is any activity that lessens the severity of loss once it occurs. ​

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Which of the following is true of a good insurance agent?

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The settlement option chosen by most policyholders is:

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Underwriting refers to _____:

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Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death.What is the amount of insurance,as per the needs analysis method,that Jonathan should purchase if he has current financial resources worth $1,000,000?

Correct AnswerverifiedShow Answer

The basic purpose of insurance is to _____.

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_____ and _____ are both relatively expensive types of decreasing term life insurance.

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A life insurance policy can be structured so that death benefits are paid directly to a(n) ___________,which means that creditors cannot claim the cash benefits from the life insurance policy. ​

Correct AnswerverifiedShow Answer

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___________ is the choice to accept and bear the risk of loss.

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It is not possible to avoid ___________.

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___________ is any activity that lessens the severity of loss once it occurs.

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_ and _ are both relatively expensive types of decreasing term life insurance.

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A life insurance policy can be structured so that death benefits are paid directly to a(n) ___________,which means that creditors cannot claim the cash benefits from the life insurance policy.

Correct Answer
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