Exam 4: Life Insurance: Structure, Concepts, and Planning Strategies

Describe the essential features of cash value insurance.

Your clients, a young married couple with two children, just purchased a new home and would like to ensure that the mortgage will be paid in the event either of their deaths. Your recommendation is for them to purchase?

Comment on the following statement: "Life insurance is a method of transferring risk."

Based on the human value approach, what death benefit amount would you suggest to your client given the following facts: 20 years until retirement, projected average annual income of $125,000, average projected work-related expenses, taxes and self-maintenance of $36,000, and a discount rate of 5 percent?

Describe briefly the capital needs method of determining the life insurance needs.

Contrast the net-cost method, interest-adjusted cost index, and the benchmark method used for comparing costs of insurance policies.

A potential client brings to you tear sheets from an old text in which the author argues that the best thing to do is to buy term insurance and invest the difference. The person wants to buy $200,000 of term insurance from you and would like to pay the minimum amount of premium. What would you advise him or her?

Which of the following statements regarding the different types of life insurance is true?

One of your clients, Roy Rogers, just came in for an annual review. You believe that the old insurance policy Roy has should be switched to a more economical and efficient policy. You present an alternative illustration to Roy, but he is extremely uncomfortable with your suggestion. Do you think it is wise to press this issue?

Assume you are 28 years old and wish to buy term insurance terminating at the age of 50. Which type of policy will charge you a constant premium until the age of 50?

Which of the following represent valid reasons for business use of life insurance?

List life insurance planning techniques that are available to businesses.

Which of the following can be treated as if it is only a death insurance?

Which of the following statements is true regarding a beneficiary of proceeds under a life insurance policy?

Whole life insurance may be appropriate for people who:

A "waiver-of-premium" clause:

What are insurance company rating agencies and what role do they play?

Which of the following situations does not provide a valid reason for replacing the client's current life insurance policy?

Explain the types of term insurance.

Karen is a young, single parent who realizes the need for life insurance. Unfortunately, she is struggling with budgeting because she is still in a low-paying job and supporting a young son. Which of the following policies would be the best choice given the duration of the need, the amount of the need and the cash flow situation?