Module 9

Question 1

can be defined as the death of a family head with outstanding unfulfilled financial obligations, such as dependents to support, children to educate, and a mortgage to pay off.

Answer 1

Premature Death

Question 2

Is the average number of years of life remaining to a person at a particular age.

Answer 2

Life Expectancy

Question 3

Life expectancy in 2010

Answer 3

78.7

Question 4

Life expectancy in 1970

Answer 4

70.8

Question 5

FINANCIAL IMPACT OF PREMATURE DEATH ON DIFFERENT TYPES OF FAMILIES

Answer 5

Single People
Single-Parent Families
Two-Income Earners with Children
Traditional Families
Blended Families
Sandwiched Families

Question 6

is one in which a son or daughter with children provides
financial support or other services to one or both parents.

Answer 6

sandwiched families

Question 7

is one in which a divorced spouse with children remarries, and the new spouse also has children. Also, additional children may be born after the
remarriage.

Answer 7

blended families

Question 8

are families in which only one parent is in the labor force, and
the other parent stays at home to take care of dependent children.

Answer 8

traditional families

Question 9

Families in which both spouses work outside the home have largely replaced the
traditional family in which only one spouse is in the paid labor force.

Answer 9

Two-income earners with children

Question 10

Three approaches can be used to estimate the amount of life insurance to own:

Answer 10

 Human life value approach
 Needs approach
 Capital retention approach

Question 11

The family’s share of the deceased breadwinner’s earnings is lost forever if the
family head dies prematurely.

Answer 11

Human Life Value Approach

Question 12

is needed immediately when the family
head dies. Immediate cash is needed for burial expenses; uninsured medical
bills; installment debts; estate administration expenses; and estate, inheritance,
and income taxes.

Answer 12

estate clearance fund

Question 13

Refers to the period from the time that Social Security survivor
benefits terminate to the time the benefits are resumed.

Answer 13

Blackout Period

Question 14

The most important family needs are the following:

Answer 14

 Estate clearance fund

 Income during the readjustment period
 Income during the dependency period
 Life income to the surviving spouse
 Special needs
-retirement needs

Question 15

FOUR LIFE INSURANCE TO AVOID

Answer 15

-Flight insurance at airports
-credit life insurance
-accidental death and dismemberment insurance
-cash-value policies on children

Question 16

is a type of insurance that provides life insurance on a group of people in a single master contract. Physical examinations are not required, and certificates of insurance are issued as evidence of insuranc

Answer 16

group life insurance

Question 17

was a class of life insurance that was issued in small amounts; premiums were payable weekly or monthly; and an agent of the company collected the premiums at the insured’s home. More than nine out of ten policies were cash value policies.

Answer 17

industrial life insurance

Question 18

is a type of life insurance that was sold originally by savings banks in Massachusetts, New York, and Connecticut. SBLI is now sold in most states and in the District of Columbia to consumers over the phone or through Web sites. The objective of SBLI is to provide low-cost life insurance to consumers by holding down operating costs and payment of high sales commissions

Answer 18

savings bank life insurance

Question 19

(also called survivorship life) is a form of life insurance that insures two or more lives and pays the death benefit upon the death of the second or last insured.

Answer 19

second-to-die life insurance

Question 20

Most life insurers sell policies at lower rates to individuals known as preferred risks. These people are individuals whose mortality experience is expected to be lower than average

Answer 20

preferred risks

Question 21

is a whole life policy in which premiums are lower for the first three to five years and higher thereafter. The initial premium is slightly higher than for term insurance, but considerably lower than for a whole life policy issued at the same age.

Answer 21

modified life insurance

Question 22

these policies typically contain a provision that allows the policyholder to discontinue paying premiums after a certain time period, such as 10 years.

Answer 22

high-premium products

Question 23

he initial premium is substantially lower than the premium paid for a regular, nonparticipating whole life policy. The low premium is initially guaranteed only for a certain period, such as five years

Answer 23

low-premium products

Question 24

VARIATIONS OF WHOLE LIFE INSURANCE

Answer 24

1. Variable Life Insurance
2. Universal Life Insurance
3. Indexed Universal Life Insurance
4. Variable Universal Life Insurance
5. Current Assumption Whole Life Insurance

Question 25

(also called interest sensitive whole life) is a nonparticipating whole life policy in which the cash values are based on the insurer’s current mortality, investment, and expense experience.

Answer 25

current assumption whole life insurance

Question 26

is an important variation of whole life insurance. Most variable universal life policies are sold as investments or tax shelters. Variable universal life insurance is similar to a universal life policy with

Answer 26

variable universal life insurance

Question 27

is a variation of universal life insurance with certain key characteristics.First, there is a minimum interest rate guarantee, which is usually lower than the minimum interest rate guarantee on a regular universal life policy

Answer 27

indexed universal life insurance

Question 28

(also called flexible premium life insurance) can be defined as a flexible premium policy that provides protection under a contract that unbundles the protection and saving components.

Answer 28

universal life insurance

Question 29

Can be defined as a fixed premium policy in which the death benefit and cash values vary according to the investment experience of a separate account maintained by the insurer.

Answer 29

variable life insurance

Question 30

pays the face amount of insurance if the insured dies within a specified period; if the insured survives to the end of the endowment period, the face amount is paid to the policyholder at that time.

Answer 30

endowment insurance

Question 31

A cash value policy that provides lifetime protection

Answer 31

whole life insurance

Question 32

types of life insurance

Answer 32

-Term insurance
-whole life insurance
-endowment insurance

Question 33

A type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified and the policy is active, or “in force,” then a death benefit will be paid.

Answer 33

term insurance

Question 34

preserves the capital needed to provide income to the family. The income-producing assets are then available for distribution later to the heirs.

Answer 34

capital retention approach

Question 35

follows the readjustment period; it is the period until the
youngest child reaches age 18.

Answer 35

dependency period

Question 35

is a one- or two-year period following the breadwinner’s
death.

Answer 35

readjustment period

Question 35

is a type of insurance that provides life insurance on a group of people in a single master contract. Physical examinations are not required,
and certificates of insurance are issued as evidence of insurance.

Answer 35

group life insurance

Question 36

was a class of life insurance that was issued in small amounts; premiums were payable weekly or monthly; and an agent of the company collected the premiums at the insured’s home. More than nine out of ten policies were cash value policies.

Answer 36

industrial life insurance

Question 37

is a type of life insurance that was sold originally by savings banks in Massachusetts, New York, and Connecticut. is now sold in most states and in the District of Columbia to consumers over the
phone or through Web sites. The objective of SBLI is to provide low-cost life
insurance to consumers by holding down operating costs and payment of high
sales commissions.

Answer 37

savings bank life insurance

Question 38

(also called survivorship life) is a form of life insurance that insures two or more lives and
pays the death benefit upon the death of the second or last insured.

Answer 38

second-to-die life insurance

Question 39

Most life insurers sell policies at lower rates to individuals known as. These people are individuals whose mortality experience is expected to be
lower than average

Answer 39

preferred risk

Question 40

is a whole life policy in which premiums are lower for the first three to five years and higher thereafter. The initial premium is slightly higher than for term insurance, but considerably lower than for a whole life policy issued at the same age.

Answer 40

modified life insurance

Question 41

Although premiums are higher under the second category, these policies typically
contain a provision that allows the policyholder to discontinue paying premiums
after a certain time period, such as 10 years.

Answer 41

high-premium products

Question 42

the initial premium is substantially lower than the premium paid for a regular, nonparticipating whole life policy. The low premium is initially guaranteed only for a certain period, such as five years.

Answer 42

low-premium products