Quiz #03 - Results

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Old Dominion University *

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Finance

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Apr 3, 2024

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Uploaded by DoctorMaskRam311

Results 12 Out of 12 points Time for this attempt This assessment is locked. Your Answers: 1 / 1 point All of the following statements concerning term life insurance are correct EXCEPT: 1 / 1 point All of the following statements concerning whole life insurance are correct EXCEPT: Attempt History Results Points Score (Highest score is kept) Term-insurance policies tend to be used by older individuals more frequently than younger individuals. Unlike other forms of life insurance, term insurance policies do not have cash accumulation features. An annual renewable term policy (ART) permits the policyholder to purchase term insurance in subsequent years without evidence of insurability. An individual’s mortality risk affects the price of the term insurance premiums. The cash value can be accessed during the insured’s lifetime via policy loans. The premium on a limited-pay policy will be less than the premium on an ordinary (straight) life policy. 100% 1 2

1 / 1 point Benson, a ±nancial planner, is working with his clients to determine their life insurance needs. Benson is determining the life insurance need by estimating the cash needs of the family during and after the insured’s death. Some of the ±nancial needs that Benson is considering are the payment of ±nal expenses, medical care, and eliminating debts. Which of the following models is Benson using to determine the life insurance needs? 1 / 1 point Which of the following is not a type of permanent life insurance? 1 / 1 point Alexa is a 35-year-old accountant who earns $70,000 per year. She is married and has 3 children. She expects her salary to increase at an annual rate of 5% until her retirement at age 70 and anticipates that in²ation will average 3% per year. During this time period, Alexa expects to earn 6% on her investments. Alexa and her husband’s income places them in the 25% average tax bracket (including state and federal), and she uses 20% of her after-tax income for personal consumption. Using the Human-Life Value Approach, how much life insurance should Alexa purchase for herself? Policy dividends are a non-guaranteed “return of premium.” The insurer retains the investment risk on a whole ordinary life policy. Capitalized-Earnings Approach. Needs Approach. Human-Life Value Approach. Discretionary Cash Flow Approach. Modi±ed Endowment Contract (MEC). Variable Life Insurance. Universal Life Insurance. Term Life Insurance. ($687,716) ($1,245,109) ($1,059,598) ($608,926) 3 4 5

1 / 1 point Consuelo has purchased a life insurance policy with a $1 million death bene±t and named her spouse as the bene±ciary. She is concerned about her spouse’s spendthrift tendencies and would like to ensure that the death bene±t proceeds will last throughout her spouse’s lifetime. Which of the following settlement options should she select? 1 / 1 point Caesar, age 33, is married and has a newborn son. Caesar is concerned about providing for his family in the event of his premature death. He is concerned about the long-term affordability of life insurance but is able to budget a ±xed amount for a period of time. Which of the following policies would you recommend? 1 / 1 point Which of the following life insurance policies has a ±xed premium, a cash value and a death bene±t that can ²uctuate based on investment performance? Feedback Based on answering correctly Variable whole life has ±xed premium, death bene±t can ²uctuate based on investment performance. There is no such thing as variable renewable term. Variable universal life has a ²exible premium, not a ±xed premium. Lump sum payment. Life annuity. Fixed amount. Joint and last survivor annuity. Whole life insurance. Single-premium universal life insurance. Annually renewable term. Level-premium term. Annually renewable term. Variable whole life. Variable universal life. Variable renewable term. 6 7 8

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1 / 1 point Which of the following statements concerning participating life insurance is (are) correct? 1. Participating policies may pay dividends as a result of better than expected mortality experience or investment earnings, or as a result of lower than expected expenses. 2. Companies selling participating life insurance are so con±dent of their dividend-paying capacity that many companies are now guaranteeing their dividends. 1 / 1 point Rosie, age 30, would like to purchase a life insurance policy that will accumulate a cash value which will be paid to her bene±ciaries in addition to the death bene±t, and that will allow her to access the cash value during her lifetime via withdrawals. Which of the following policies is most likely to meet her needs? 1 / 1 point Terry has been advised by his insurance agent to purchase a variable universal life insurance policy. He has sought your advice regarding this purchase. All of the following are characteristics of a variable universal policy, except: 1 / 1 point 1 only. 2 only. Both 1 and 2. Neither 1 nor 2. 20-year term with a double indemnity rider. Ordinary whole life. Universal life option A. Universal life option B. The death bene±t is guaranteed to be equal to the face value. The cash value of a variable universal life policy is dependent on premiums and investment returns. The policy owner has exclusive investment control over the cash value of the policy. The policy features increasing or decreasing death bene±ts and ²exibility of variable premium payments. 9 10 11 12

Which of the following is a test to determine whether or not a life insurance contract meets the de±nition of a modi±ed endowment contract (MEC)? Both of the above. 7-pay test. Neither of the above. Guideline premium and corridor test.