Insurance MCQ

Which one of the following statements about whole life insurance is true? A. It provides protection for a fixed period of time. B. It has an annual premium that is usually less than the premium for a comparable amount of term insurance. C. It is a form of term insurance that is convertible to universal life insurance. D. It develops a cash value that, with some limitations, is available to the insured during the life of the policy. Answer: D. It develops a cash value that, with some limitations, is available to the insured during the life of the policy.

Malvern Life provides ordinary life insurance at the following premiums: Age Premium 25 $10 per $1,000 of insurance 26 $11 per $1,000 of insurance Lee purchases $110,000 of insurance for $1,100 per year, stating her age as twenty-five rather than her correct age of twenty-six. How much will Malvern Life pay if Lee dies? A. $0 B. $89,000 C. $100,000 D. $110,000 Answer: C. $100,000

Under the needs approach, the amount of life insurance needed is determined by subtracting which one of the following from total estimated needs? A. Current life insurance amount B. Total assets C. Estate clearance fund D. Total income needs Answer: B

All of the following are necessary to determine a person's human life value, EXCEPT: A. The person's cost of self-maintenance B. A present value factor C. The needs of survivors D. An estimation of Social Security benefits Answer: C

Although the basis for the amount of insurance can differ, most group term life insurance plans provide an amount of insurance A. Based on the employee's position. B. Based on the employee's length of service. C. Equal to some multiple of the employee's annual earnings. D. Equal to a flat amount for all employees. Answer: C

Which one of the following is a characteristic of universal life insurance? A. The cash value of the policy will always keep the coverage in force. B. The cash value is guaranteed to earn at least a minimum interest rate. C. If the policyholder becomes unemployed, premiums will be waived. D. Policyholders are locked in to regular premium payment. Answer: B

Costs associated with premature death include all of the following, EXCEPT: A. Funeral expenses, probate and estate settlement costs, and childcare expenses for young dependent children B. Social Security and income taxes for any IRA, 401(k), or similar retirement investments C. Unpaid college tuition for children D. Outstanding financial payments to debtors for unsecured loans Answer: B

Regarding the premature death loss exposure, which one of the following statements is true? A. In sandwiched families, life insurance is generally not needed. B. In single-parent families, the need for life insurance is not great since there is no surviving spouse. C. In a traditional family structure, the need for life insurance on the spouse that stays at home can be as important as the need for life insurance on the spouse in the labor force. D. In two-income families with children, life insurance is generally needed only on the spouse with the higher income. Answer: C

Universal life insurance is A. A life insurance policy that separately states the protection, savings, and expense components. B. A savings account that provides for life insurance payments from the interest on the savings. C. A type of term life insurance without cash values. D. An insurance and savings account that requires disciplined adherence to monthly payments. Answer: A. A life insurance policy that separately states the protection, savings, and expense components.

Anna is a single mother of two small children and earns an annual salary of $65,000. She has been advised to evaluate the amount of life insurance she currently owns to see if it is adequate. She estimates her final expenses needs at $35,000, and estimates family living expenses needs to be $300,000. She also estimates special needs of $200,000 for her children's education fund and any unexpected events. Anna's total financial assets are $350,000, including $200,000 of life insurance. Using the needs approach, how much additional life insurance does Anna need? A. $150,000 B. $185,000 C. $300,000 D. $335,000 Answer: B. $185,000

An insured with an accelerated death benefits rider attached to his life insurance policy has the right to receive some or all of the available life insurance proceeds before death occurs if A. He or she becomes seriously injured as a result of an accident. B. He or she becomes unemployed for a period that exceeds one year. C. He or she becomes totally disabled before a certain age. D. He or she contracts a catastrophic or terminal illness. Answer: D

Which one of the following statements about whole life insurance is true? A. It provides protection for a fixed period of time. B. It has an annual premium that is usually less than the premium for a comparable amount of term insurance. C. It is a form of term insurance that is convertible to universal life insurance. D. It develops a cash value that, with some limitations, is available to the insured during the life of the policy. Answer: D

Under the needs approach, the amount of life insurance needed is determined by subtracting which one of the following from total estimated needs? A. Current life insurance amount B. Total assets C. Estate clearance fund D. Total income needs Answer: B

The assignment clause of a life insurance policy provides which one of the following? A. Ownership rights in the policy can be transferred to another party. B. Dividends are assigned in accordance with the option selected. C. If the policyowner and the insured are not the same person, policy rights are assigned to the insured. D. The order of beneficiaries is assigned by a formula. Answer: A

Melissa and her husband Herb are in their early 40s. Each is employed and has a good income. An analysis of their financial situation shows that their current life insurance would enable the other to live adequately if one of them should die prematurely. However, there is one gap that they need to fill in case one or both of them die within the next 12 years. It is how to finance their children's college education. The children should all graduate from college within this 12-year period.Which one of the following products will best address this concern? A. A Roth IRA B. An annuity C. A term life insurance policy D. A universal life insurance policy Answer: C

Which one of the following is a characteristic of universal life insurance? A. The cash value of the policy will always keep the coverage in force. B. The cash value is guaranteed to earn at least a minimum interest rate. C. If the policyholder becomes unemployed, premiums will be waived. D. Policyholders are locked in to regular premium payment. Answer: B

In which one of the following family structures is the risk of incurring child-care costs over a prolonged period a unique consideration in establishing life insurance needs? A. Sandwiched family B. Traditional family C. Blended family D. Single-parent family Answer: C

Term life insurance provides A. Lifetime protection that builds cash value. B. Lifetime protection that builds cash value and is usually renewable and convertible. C. Temporary protection with cash value. D. Temporary protection with no cash value and is usually renewable and convertible. Answer: D

All of the following are necessary to determine a person's human life value, EXCEPT: A. The person's cost of self-maintenance B. A present value factor C. The needs of survivors D. An estimation of Social Security benefits Answer: C

Martha recently determined that she should buy an additional $150,000 of life insurance to protect her family if she should die prematurely. Martha does not have a large emergency fund, and she is concerned about paying the life insurance premium if she is unable to work because of a disabling condition.Which one of the following riders to or provisions in her new life insusurance policy would best address this concern? A. Assignment clause B. Extended term insurance nonforfeiture option C. Accelerated death benefit provision D. Waiver of premium rider Answer: D