9.4 Life Insurance: Do you really need it?

The __ receives the policy death benefit when the insured dies, whereas the __ is the person who makes premium payments.

• policy owner; beneficiary

• beneficiary; policy owner

• policy owner; policy owner

• beneficiary; insured

Tags

CCSS.RI.11-12.3

CCSS.RI.11-12.5

CCSS.RI.8.3

CCSS.RI.9-10.3

CCSS.RI.9-10.5

Insurance policy owners can list contingent beneficiaries. Contingent beneficiaries:

• will receive the death benefit if the primary beneficiary dies before the policy owner

• are usually family members, business partners, and employers that can show an insurable interest

• receive the policy death benefit when the insured dies

• most often are the policy owner and spouse, but not always

Most consumer advocates recommend the purchase of:

• term-life insurance

• variable universal life insurance

• universal life insurance

• whole life insurance

Which of the following are forms of cash-value life insurance?

• variable universal life insurance

• universal life insurance

• variable life insurance

• universal, variable, and variable universal

Which of the following statements regarding cash-value life insurance is INCORRECT?

• costs much more than term policies

• blends pure term insurance with a savings option

• allows policy owners to borrow from the policy

• only provides pure insurance against unexpected death

Which of the following insurance products allows for investments in mutual funds and the possibility to skip future premium payments?

• variable universal life insurance

• whole life insurance

• universal life insurance

• variable life insurance

Under which of the following circumstances could you forego purchasing life insurance?

I. you have a spouse or children

II. you are single with no dependents

III. you have sufficient assets to pay all debts at your death

• I only

• I and III only

• II and III only

• I, II, and III

Under which of the following circumstances may life insurance be unnecessary?

• you have a spouse or children

• you want to leave a legacy or inheritance to someone else

• you will have a large tax liability (very wealthy) when you die

• you and your fiancee are getting married in 1 year and both of you work full-time

There are numerous ways to calculate life insurance needs, among them:

• taking a ballpark guess

• calculating present values of future cash flows

• letting group insurance decide

• multiplying current income by 2

Using the income multiplier estimation method, how much life insurance would you need if your current income is $45,000?

• $500,000

• $250,000

• $450,000

• $900,000

Answer explanation

Income Multiplier Method multiplies current income by 10

Tags

CCSS.5.NBT.B.7