Life Insurance Basics

Question 1

Family dependency period

Answer 1

The period when, should the insured die prematurely, the surviving spouse will have dependent children to support. The family’s income need will be greatest during this period.

Question 2

Pre-retirement period

Answer 2

The period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for Social Security survivor benefits. The income needs of the surviving spouse lesson during this period; however, until the surviving spouse reaches the age of 60, Social Security benefits are not available.

Question 3

Retirement. Period

Answer 3

The surviving spouse is working income ceases and his or her Social Security benefits begin. Since the surviving spouse is standard of living does not listen, he or she will require an income comparable to the pre-retirement During this time

Question 4

Types of information that needs to be gathered falls under four categories

Answer 4

Debt, income, mortgage, expenses.

Question 5

Debt cancellation

Answer 5

Insurance maybe use to create a fund to pay off Debts of the insured such as home mortgage or auto loans

Question 6

Emergency reserve funds

Answer 6

Insurance proceeds maybe used to assist in paying for sudden expenses allowing the death of the insured, such as travel expenses and lodging for family members coming from a distance.

Question 7

Retirement funds

Answer 7

Insurance proceeds maybe use a source of retirement income

Question 8

Bequests

Answer 8

And insured may wish to the funds to their church, school, or other organization at the time of their death.

Question 9

Creates an immediate Estate

Answer 9

The purchase of life insurance creates an immediate estate.

Question 10

Liquidity

Answer 10

The policies cash values can be borrowed against at any time and used for immediate needs.

Question 11

Human life value approach

Answer 11

Gives insured in the estimate of what would be lost to the family in the events of the premature death of the insured. It calculates and then visuals life value by looking at the insured’s wages, inflation, the number of years to retirement, and the time value of money.

Question 12

Needs approach

Answer 12

Based on the projected needs of a family after the premature death of the insured. Some of the factors considered by the needs approach our income, the amount of debt, investments, and other ongoing expenses.

Question 13

Business uses of life insurance

Answer 13

Key person insurance, Buy sell agreements, other uses. It creates an immediate payment upon the death of the insured.

Question 14

Key person insurance

Answer 14

The key employee is the insured and the business is the: applicant, policy owner, premium pay year, and beneficiary.

Question 15

Buy sell insurance

Answer 15

Agreements is a legal contract that determines what will be done with a business in the event that an owner does or becomes disabled.

Question 16

Cross purchase

Answer 16

Partnerships with each partner buys a policy on the other

Question 17

Entity purchase

Answer 17

When the partnership buys the policies on the partners

Question 18

Stock purchase

Answer 18

Used by privately owned corporations with each stockholder buys a policy on each of the others

Question 19

Stock redemption

Answer 19

The corporation buys one policy on each shareholder

Question 20

Business overhead expense BOE

Answer 20

Sold to small business owners. The business overhead expense policy reimburses the business owner for the actual overhead expenses that are incurred while the business owner is totally disabled.

Question 21

Executive bonuses

Answer 21

And the arrangements were the employer offers to give the employee a wage increase in the amount of the premium of a new life insurance policy on the employee. The employee owns the policy and therefore has all control.

Question 22

Business continuation

Answer 22

In the arrangement between business owners that provides for shares owned by any one of them dies or becomes disabled to be sold to, and purchased by, the other co owners or the businesses.