Reference no: EM131209203

QUESTION 1  A cost of living rider that you purchase as part of your insurance life insurance policy gives you the option to buy additional insurance coverage to compensate for inflation.

True
False

QUESTION 2  Riders that are part of your life insurance policy are free. They are marketing devices used by insurance companies.

True
False

QUESTION 3  If you purchase a variable life insurance policy, then amount of the death benefit depends on the returns of earned by the funds where your premiums are invested.

True
False

QUESTION 4  All variable life insurance policies guarantee a minimum death benefit.

True
False

QUESTION 5  Smoking increases your risk of mortality within a specified period and this is why smokers pay higher life insurance premiums.

True
False

QUESTION 6  If managers of an insurance company consistently underestimate mortality rates of the people, they insure they will charge premiums that are too low and the company's earnings will be depressed.

True
False

QUESTION 7  The death benefits an insurance company pays out are financed from returns on the company's investments. If the returns an insurance company can earn on its investments is expected to be relatively low, then managers of the firm will have to charge higher insurance premiums to compensate for the lower expected returns.

True
False

QUESTION 8  The expenses of a life insurance company have no bearing on the premiums the company charges.

True
False

QUESTION 9  I have a $300,000 mortgage. I am paying for two college tuitions. My salary is the only source of family income. It would not make sense for me to buy life insurance because this will only increase my expenses.

True
False

QUESTION 10  I have a $300,000 mortgage. I have two young children who go to school in the neighborhood. My salary is the only source of family income. It would not make sense for me to buy a million-dollar life insurance policy because if I die, my wife can sell our house and move to a smaller apartment and go back to working as a corporate lawyer.

True
False

QUESTION 11  Life insurance helps bridge the gap between the financial needs of your dependents and the amount available from other sources, is the amount to be provided by life insurance.

True
False

QUESTION 12  A 401(K) plan is a good substitute for a life insurance policy.

True
False

QUESTION 13  Life insurance provides a generally income tax-free lump sum of money for your survivors in the event of your death. The appropriate amount of insurance depends only depends on your age.

True
False

QUESTION 14  The beneficiary of a life insurance policy is responsible for making the premium payments.

True
False

QUESTION 15  If you buy a life insurance policy that insures your life for $1,000,000 you are the "Insured".

True
False

QUESTION 16  An insurance premium is a fee paid to an insurance company in exchange for risk protection.

True
False

QUESTION 17  If you stop paying the premiums on a term life insurance policy, the insurance company will pay you the value of all premiums paid plus interest.

True
False

QUESTION 18  Premiums for permanent insurance are often higher when compared to term; however, permanent policies have the potential to build cash value that you can withdraw or borrow from if the need arises. Unpaid loans and withdrawals will reduce the death benefit and there may be tax consequences.

True
False

QUESTION 19  In general, level term life insurance is high-benefit coverage you buy for a set period of time. Premiums are typically lower than for permanent insurance such as universal life policies.

True
False

QUESTION 20  Universal Life is permanent insurance. Premiums are usually higher for universal life insurance than for term insurance because a universal life policy accumulates cash value. The cash value grows and is accessible while you're alive, should you need it. Unpaid loans and withdrawals will reduce policy cash values and the death benefit and may have tax consequences.

True
False

QUESTION 21  Variable universal life (VUL) insurance combines elements of investing in risky assets with that of a life insurance product.

True
False