The Need For Life Insurance

Question 0

As a result of the cash accumulation feature, some life insurance policies provide __________ to the policy owner. That means the policy’s cash values can be borrowed against at anytime band used for immediate needs.

Answer 0

Liquidity

Question 1

Life insurance creates an ____________ estate.

Answer 1

Immediate

Question 2

What are the two basic approaches to determining the amount of life insurance needed?

Answer 2

Human life approach

Needs approach

Question 3

This type of approach gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured. It calculates an individual’s life value by looking a the insured’s wages, inflation, the number of years to retirement, and the time value of money.

Answer 3

Human life value approach

Question 4

This type of approach is based on the predicted needs of a family after the premature death of the insured. Some of the factors considered by the needs approach are income, the amount of debt (including mortgage), investments, and other ongoing expenses.

Answer 4

Needs approach

Question 5

The three different income periods

Answer 5

Family dependency period
Preretirement period
Retirement period

Question 6

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

Answer 6

Family dependency period

Question 7

This is the period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for social security benefits (blackout period). The income needs of the surviving spouse lessen during this period.

Answer 7

Preretirement period

Question 8

During this period, the surviving spouse’s working income ceases and his or her social security benefits begin. Since the surviving spouse’s standard of living does not lessen, he or she will require an income comparable to the preretirement period during this time.

Answer 8

Retirement period

Question 9

Which of the following is the income 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?
  A Post provider period
  B family income dependency period 
  C Preretirement period 
  D Retirement period

Answer 9

C preretirement period

Question 10

Life insurance may be used to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell off assets from the estate to pay these costs. This is called_________

Answer 10

Estate conservation

Question 11

What are the personal uses of life insurance?

Answer 11

Survivor protection
Estate creation and conservation
Cash accumulation and liquidity

Question 12

What are liquid resources in a life insurance contract?

Answer 12

The cash value available to the insured

Question 13

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as __________.

Answer 13

Needs Approach. Needs method determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely.

Question 14

What is the term used when a person sells his assets as a way to gain money?

Answer 14

Liquidation

Question 15

Based in the Human Life Value approach, which of the following is a NOT used to calculate an individual’s life value?
A Effect of inflation on income over time
B Predicted needs of the family after the insured’s death
C Insured’s current and future income
D Insured’s annual expenses

Answer 15

B Predicted needs of the family after the insured’s death

The HLV approach to determining the value of an individual’s life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirements and the time value of money. Predicted needs of the family after the insured’s death are used in the Needs approach,

Question 16

An insurer is helping a married couple determine their children’s needs, assets, and liabilities, in the event that one or both of the spouses should die. What is the term most closely associated with this?

Answer 16

Survivor Protection

The death of a primary wage earner(s) in a family can be devastating. Survivor Protection planning helps to assess the needs, assets, and liabilities of the survivors in order to determine how to best care for them in the event of the primary wage earner’s death.