LIfe

According to the law of large numbers, events, which happen seemingly by chance, will actually be bound to follow a predictable pattern, if enough such happenings are observed.

• True

• False

How does the law of probability help life insurance companies?

• Predicts when an individual insured will die

• Estimated future death rates among members of a given group

• Determines the experienced death rate among the insured persons

• Develops statistics of past deaths among the general population

Life insurance companies make use of the laws of probability in order to

• estimate future death rates among members of a given group

• predict when an individual insured will die

• develop statistics of past deaths among the general population

• determine the experienced death rate among insured persons

"Critical years" in the programming of life insurance means

• Period during which children are small and cannot provide for themselves

• Retirement years

• Years between the time the youngest child is 15 years old and the mother is 62 years old

• Years immediately following the insured's death

Insurance provides protection against economic loss by enabling the policyowner to

• transfer responsibility for the loss to others

• take speculative risk to compensate for the loss

• reduce the possibility of the occurrence of the event causing the loss

• share the loss with others exposed to a similar risk

Life insurance guarantees cash benefits for all of the following except

• clean-up fund

• family dependency period income

• educational fund

• mortgage

Brandon advised his friend to get a policy that accumulates cash value because it is beneficial in the long run. Which of the following is false about cash value?

• The cash value in a permanent policy is guaranteed by the company

• Because of its very short duration the cash value of a yearly renewable term policy grows very fast

• The cash value of a whole life policy builds up at a slower rate than a 20-year endowment

• The cash value of an endowment builds up faster than a limited pay life policy.

The guaranteed cash value is

• The amount that the company will pay if the policy is surrendered

• The amount which can be borrowed at any one time

• The paid-up value of the policy

• The face amount

A whole life policy provides

• the highest level of savings for the insured within a specified term of years

• protection for life of the policyholder with premiums payable for a limited term of years

• low-cost protection only for a limited term of years with no savings

• protection with premiums payable for life and a low level of savings as an alternative to continued protection in old age

A policy requiring the payment of premiums through life, or until the cash value equals its face value at age 100 is called

• an income endowment policy

• a limited pay life policy

• an unlimited payment life

• an ordinary life policy