Final Exam Quizzes Flashcards
(31 cards)
Which of the following types of families is likely to have the least need for a large amount of life insurance?
a blended family
a traditional family
a single person family
a sandwiched family
a single person family
All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT
The effects of inflation are ignored
Other sources of income for survivors are ignored
Earnings are assumed to remain constant
Earnings during the individual’s productive lifetime are ignored
Earnings during the individual’s productive lifetime are ignored
The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the
blackout period
Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian’s human life value?
$249,200
When using the needs approach, several “special needs” should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n)
emergency fund
All of the following statements about the conversion of a term policy are true EXCEPT
Under an attained age conversion, the premium is based on the insured’s attained age at the time of conversion
Under an original age conversion, the policyowner must pay a financial adjustment in addition to the premium for the new policy
Most insurers require original age conversion to take place within a specified period (5 years, for example) of the issue of the term policy
Evidence of insurability is required before a conversion is permitted
Evidence of insurability is required before a conversion is permitted
Which of the following statements about life insurance cash values is (are) true?
I. Cash values are a result of the level premium method of purchasing life insurance.
II. The cash value of a policy must always exceed the policy’s legal reserve.
I only
All of the following statements about universal life insurance are true EXCEPT
Interest is credited to the policy’s cash value each month
Any withdrawal of a policy’s cash value reduces the amount of the death benefit
Interest credited to a policy’s cash value is taxable for the policyowner in the year credited
The policyowner can add to a policy’s cash value at any time subject to policy guidelines
Interest credited to a policy’s cash value is taxable for the policyowner in the year credited
A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 years) and are higher thereafter is an example of a
modified life policy
Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balance gradually declines. This type of life insurance is called
decreasing term insurance
Major defects in the health care system in the United States health care system include
I. Rising healthcare expenditures
II. Considerable waste and inefficiency in the healthcare system
both I and II
One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to
remain covered under their parents’ health insurance policies
Purposes of the coinsurance provision in medical expense insurance policies include which of the following?
I. to reduce premiums
II. to prevent overutilization of policy benefits
both
Which of the following statements about long-term care insurance is (are) true?
I. Long-term care insurance is inexpensive, especially if purchased at older ages.
II. Purchasers have a choice of daily benefits and benefit periods.
2 only
All of the following statements about individual disability income policies are true EXCEPT
Premiums are often waived while a person is disabled but must be resumed if the insured recovers
At the time of purchase, the insured can choose the length of the benefit period from among several available options
In order to encourage rehabilitation, benefits may be continued during periods of vocational training
Most disability income insurance policies contain an elimination period of 10 or fewer days
Most disability income insurance policies contain an elimination period of 10 or fewer days
Which of the following statements about mandatory provisions in individual health insurance policies is true?
Insurers are not permitted to place time limits on filing claims or providing proof of loss
The time limit on certain defenses provision prohibits the insurance company from denying a claim based on a fraudulent misstatement by the applicant after the policy has been in force three months
The usual length of the grace period is 180 days
Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force
Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force
Ellen purchased a health insurance policy. Under the provisions of the Affordable Care Act, which of the following renewal provisions must the insurer use in the policy?
cancellable
guaranteed issue
renewable at the insurer’s option
conditionally renewable
guaranteed issue
One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n)
activities of daily living trigger
medical necessity trigger
needs test trigger
severe cognitive impairment trigger
Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true?
I. Only individuals who are eligible for Medicare benefits can establish a qualified HSA.
II. Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA.
2 only
The Affordable Care Act has a provision that expands a public assistance program designed to make health coverage available to low-income individuals by increasing the maximum amount of income that can be earned and still qualify for benefits. As a result, millions of individuals are eligible for coverage under this program. This public assistance program is called
Medicaid
Which of the following statements about the tax implications of qualified pension plans is true?
Investment income on plan assets is taxable in the year the investment income is earned
Employer contributions are deductible up to certain limits as an ordinary business expense
Employer contributions are considered taxable income to employees but are taxed at capital gains rates
Distributions from qualified pension plans are received tax-free by the retiree
Employer contributions are deductible up to certain limits as an ordinary business expense
Which of the following statements concerning defined-benefit pension plans is (are) true?
I. The contribution rate by the employer varies depending on the amount needed to fund the desired benefit.
II. The retirement benefit is not known in advance
1 only
Vesting refers to
the employer’s right to terminate contributions if a pension plan is adequately funded
the employer’s right to recapture employee contributions to a pension plan if employment terminates prior to retirement
the employee’s right to the employer’s contributions or benefits attributable to the contributions if employment terminates prior to retirement
the employer’s right to discriminate against non-highly compensated employees when determining pension benefit levels
the employee’s right to the employer’s contributions or benefits attributable to the contributions if employment terminates prior to retirement
