1.

Which of the following institutions are unlikely to offer life insurance

policies?


o Subsidiaries of financial conglomerates
o Independent firms
o Financial institutions providing banking and brokerage services
o All of the above may offer life insurance policies.


2. _________ insurance is not a type of life insurance.


o Term
o Universal life
o Mortgage
o Wholesale



3. In __________ insurance, the insurance benefits to the beneficiary are reduced
over time.


o whole life
o universal life
o decreasing-term
o mortgage



4. A conversion option of a term insurance policy allows you to convert your
term insurance policy into a


o mortgage life policy.
o whole life policy.
o decreasing-term insurance.
o None of the above



5. In decreasing-term insurance, the premiums paid ____________ over time.


o increase
o decrease
o remain constant
o None of the above


6. The premium paid for whole life insurance is __________ the premium paid
for term insurance.


o lower than
o equal to
o higher than
o None of the above


7. __________ life insurance allows policyholders to alter their payments over
time.


o Whole
o Mortgage
o Term
o Universal


8. __________ life insurance pays off a policyholder's mortgage in the event of
the person's death.


o Universal
o Term
o Whole
o Mortgage


9. In the __________ method, the life insurance amount is determined as a
multiple of your annual income.


o budget
o income
o asset allocation
o None of the above



10. The __________ savings your household has accumulated, the ________ life
insurance will be needed.


o more; less
o less; more
o more; more
o Answers (a) and (b) are correct.

The following information applies to questions 11 and 12.
Otto Klein would like to purchase a life insurance policy that generates an
income of at least $40,000 per year for the next 15 years to cover various
expenses for his household in the event that he dies. Otto believes that his wife
Emma could earn a return of about 7 percent annually.

11. How much insurance does Otto need?



o $14,497.
o $82,770.
o $144,978.
o $364,320



12. Now assume that Otto would like to set aside $70,000 to pay off his mortgage
in the event that he dies. How much insurance does Otto need?


o $434,320.
o $389,687.
o $84,497.
o $1,001,870.


13. The premium you pay for life insurance does not depend on which of the
following?


o Cash value
o Amount of insurance
o Personal characteristics, such as age
o The premium depends on all of the above.


14. In general, life insurance premiums for males are __________ those for
females.


o higher than
o lower than
o the same as
o None of the above


15. The ____________ the amount that a life insurance company must pay your
beneficiary in the event that you die, the _________ the premium that the
company will charge you.


o larger; lower
o smaller; higher
o larger; higher
o Answers (a) and (b) are correct.

16. The premium for a life insurance policy that has a cash value is ________ the
premium for a policy that does not have a cash value.


o higher than
o lower than
o the same as
o None of the above


17. You would like to purchase life insurance that will provide your beneficiaries
with $20,000 annually for 25 years. You expect your beneficiaries will invest
the money at an interest rate of 9 percent. You should purchase __________ in
life insurance.


o $196,460.
o $231,935.
o $172,461.
o None of the above


18. Which of the following agencies does not assign ratings to insurance
companies?


o M. Best
o Standard & Poor's
o Moody's
o Dow Jones Company


19. The __________ settlement option is appropriate only if the beneficiary has
sufficient discipline to use the proceeds wisely.


o interest payments
o lump-sum
o installment payments
o None of the above


20. In the _____________ settlement option, the beneficiary receives a stream of
equal payments over a specified number of years.


o installment payments
o lump-sum
o interest payments
o None of the above


21. The insurance premium is _____________ related to one's age.


o inversely
o rarely
o positively.
o never


22. Mortgage insurance is a form of __________ insurance.


o whole life
o increasing-term
o decreasing-term
o universal life