Chapter 11 RSM Exam Questions and
Answers with Verified Solutions | Latest
Updated 2026
Premature death Death of a family head with outstanding
financial
obligations, causing loss of income, added
expenses, and financial hardship for
dependents
Economic impact of premature Loss of future earnings, funeral/estate
death costs,
reduced standard of living, and financial
instability
for surviving family
Noneconomic costs of premature Emotional suffering such as grief
death experienced by
surviving family members
Why premature death is less Increased life expectancy has reduced the
severe overall
today economic impact
Reasons U.S. life expectancy lags Obesity and sedentary lifestyle
When life insurance is financially When the insured has earned income and
justified dependents rely on that income
, Life insurance needs by family Vary based on structure (single,
type single-parent,
dual-income, traditional, blended,
sandwiched
families)
Human life value approach Estimates life insurance need as the
present value
of future earnings lost due to premature
death
Steps in human life value Estimate earnings → subtract taxes and
approach expenses
→ discount future income to present value
Needs approach Determines life insurance need based on
financial
obligations that must be met after death
Estate clearance fund Funds needed for funeral costs, debts, and
estate
settlement
Readjustment period income Income needed for 1-2 years after death
for family
adjustment
Dependency period income Income required until youngest child
reaches age
18
Answers with Verified Solutions | Latest
Updated 2026
Premature death Death of a family head with outstanding
financial
obligations, causing loss of income, added
expenses, and financial hardship for
dependents
Economic impact of premature Loss of future earnings, funeral/estate
death costs,
reduced standard of living, and financial
instability
for surviving family
Noneconomic costs of premature Emotional suffering such as grief
death experienced by
surviving family members
Why premature death is less Increased life expectancy has reduced the
severe overall
today economic impact
Reasons U.S. life expectancy lags Obesity and sedentary lifestyle
When life insurance is financially When the insured has earned income and
justified dependents rely on that income
, Life insurance needs by family Vary based on structure (single,
type single-parent,
dual-income, traditional, blended,
sandwiched
families)
Human life value approach Estimates life insurance need as the
present value
of future earnings lost due to premature
death
Steps in human life value Estimate earnings → subtract taxes and
approach expenses
→ discount future income to present value
Needs approach Determines life insurance need based on
financial
obligations that must be met after death
Estate clearance fund Funds needed for funeral costs, debts, and
estate
settlement
Readjustment period income Income needed for 1-2 years after death
for family
adjustment
Dependency period income Income required until youngest child
reaches age
18
