Chapter 11

Chapter 11 - Chapter11 LifeInsurance 1) Which of the...

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Chapter 11 Life Insurance 1) Which of the following types of families is likely to have the least need for a large amount of life insurance? A) a blended family B) a traditional family C) a single person family D) a sandwiched family Answer: C Question Status: Revised 2) The human life value is defined as the A) present value of a deceased breadwinner ʹ s future gross income. B) future value of a deceased breadwinner ʹ s past earnings. C) present value of the family ʹ s share of a deceased breadwinner ʹ s future earnings. D) future value of the family ʹ s share of a deceased breadwinner ʹ s future earnings. Answer: C Question Status: Previous Edition 3) All of the following information is needed to calculate a person ʹ s human life value EXCEPT A) the person ʹ s average annual earnings over his or her productive lifetime. B) the person ʹ s estimated annual Social Security benefits after retirement. C) the person ʹ s cost of self-maintenance. D) the number of years from the person ʹ s present age to the expected retirement age. Answer: B Question Status: Previous Edition 4) To calculate a human life value, it is necessary to deduct certain costs from a person ʹ s average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement. Answer: B Question Status: Previous Edition Chapter 11 Life Insurance 123 5) 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 A) The effects of inflation are ignored. B) Other sources of income for survivors are ignored. C) Earnings are assumed to remain constant. D) Earnings during the individual ʹ s productive lifetime are ignored. Answer: D Question Status: Revised 6) Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? I. It involves an analysis of various family needs which must be met if a family breadwinner dies. II. Its use is appropriate only if a person currently has no life insurance protection. A) I only B) II only
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C) both I and II D) neither I nor II Answer: A Question Status: Revised 7) The purpose of an estate clearance fund is to pay all of the following EXCEPT A) burial expenses. B) estate administration expenses. C) education costs. D) installment debts. Answer: C Question Status: Previous Edition 8) What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own? A) 3 to 6 months B) 1 to 2 years C) until the youngest child reaches age 18 D) until the surviving spouse reaches age 65 Answer: B Question Status: Revised 124 Rejda · Principles of Risk Management and Insurance , Tenth Edition 9) Under the needs approach, when is the dependency period of a surviving spouse assumed to end? A) 1 or 2 years after the breadwinner
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This note was uploaded on 06/15/2011 for the course RIM 3331 taught by Professor Papp during the Spring '11 term at Troy.

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Chapter 11 - Chapter11 LifeInsurance 1) Which of the...

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