INSR 310 TEST #2 FERGUSON QUESTIONS AND ANSWERS | INSR 310
TEST 2 STUDY GUIDE & PRACTICE TEST 2026/2027
Human Life Valuation Technique - correct answer ✔✔- Rules of thumb
- needs analysis
- capitalization of income approach
- discount earnings for relative probabilities
- net present value
- business continuation
Rules of Thumbs - correct answer ✔✔Not everyone's thumb is the same size so these techniques are not
always particularly accurate
Needs analysis - correct answer ✔✔"Terminal Needs"(Clean up Fund)
Medical Expenses, Funeral/ Burial Costs,
Personal Debts
"Other Needs"
Readjustment income, special needs,
mortgage
Capitalization of Income Approach - correct answer ✔✔Estimate Earnings Stream using:
Inflation
Productivity
Discount earnings for relative probabilities of: - correct answer ✔✔Mortality- Death
Morbidity-Disabled
Unemployment
Net Present Value - correct answer ✔✔is the difference between the present value of cash inflows and
the present value of cash outflows.
Examples of business continuation: - correct answer ✔✔- Key employee, key person insurance
- Buy-sell agreements
Key employee, key person insurance - correct answer ✔✔Used for indemnity and credit protection
buy-sell agreements - correct answer ✔✔contract between 2 people that deals with death or injury of
another person and get insurance on one another. Once something happens to one of them the
insurance company pays them the money, other person pays them, and earns interest so other person
can continue the business and possibly go find another partner.
How mortality and other tables work - correct answer ✔✔P(living) + P(dying) =1
Important concepts of life insurance - correct answer ✔✔Actual(present) vs. Potential(future) estate
Basic needs of life insurance: - correct answer ✔✔- Protection vs. savings for future cash value
, "Term Insurance vs. Annuities"
- Temporary vs. Permanent
Protection of life insurance vs. savings for future(cash value) - correct answer ✔✔- protect earning
stream
"Aflac, Supplemental Income"
- 2 things you can do with money: spend it now or spend it later
- savings is postponing of your spending
Temporary vs Permanent Needs - correct answer ✔✔Temporary- Kids doctor visit
Permanent- Disabled person
2 Impacts of taxation: - correct answer ✔✔- income taxes
- estate (death) taxes
income taxes - correct answer ✔✔virtually all sources of "income" taxed on current (as earned) basis
once income has been taxed, it cant be. - correct answer ✔✔taxed again
Estate (Death) Taxes - correct answer ✔✔protection of life insurance also given preferential treatment
Two Basic Forms of Life Insurance - correct answer ✔✔"Term Insurance"[Protection Only] temporary
coverage.
Insured pays to transfer risk must pay overhead,
Insco holds money. Out flows are loading+
[LAE],Investment returns which may be positive
or negative, Contingencies+Moral
Hazard+Adverse Selection.
"Cash Value" or "Endowment" or "Permanent" Insurance[Protection+Savings]
Cash-value life insurance is a type of life insurance policy that pays out upon the policyholder's death,
and also accumulates value during the policyholder's lifetime. The policyholder can use the cash value as
a tax-sheltered investment (the interest and earnings on the policy are not taxable), as a fund from
which to borrow and as a means to pay policy premiums later in life, or they can pass it on to their heirs.
Types of ordinary life insurance: - correct answer ✔✔1. level
2. decreasing
3. increasing
4. newer variations
5. reentry term
6. return of premium term(if live past term)
types of life insurance: - correct answer ✔✔- ordinary life
- industrial life
coverage for industrial workers, people who are
unable to afford bigger amounts, fixed amount
is given in case of accident or death
- credit life
TEST 2 STUDY GUIDE & PRACTICE TEST 2026/2027
Human Life Valuation Technique - correct answer ✔✔- Rules of thumb
- needs analysis
- capitalization of income approach
- discount earnings for relative probabilities
- net present value
- business continuation
Rules of Thumbs - correct answer ✔✔Not everyone's thumb is the same size so these techniques are not
always particularly accurate
Needs analysis - correct answer ✔✔"Terminal Needs"(Clean up Fund)
Medical Expenses, Funeral/ Burial Costs,
Personal Debts
"Other Needs"
Readjustment income, special needs,
mortgage
Capitalization of Income Approach - correct answer ✔✔Estimate Earnings Stream using:
Inflation
Productivity
Discount earnings for relative probabilities of: - correct answer ✔✔Mortality- Death
Morbidity-Disabled
Unemployment
Net Present Value - correct answer ✔✔is the difference between the present value of cash inflows and
the present value of cash outflows.
Examples of business continuation: - correct answer ✔✔- Key employee, key person insurance
- Buy-sell agreements
Key employee, key person insurance - correct answer ✔✔Used for indemnity and credit protection
buy-sell agreements - correct answer ✔✔contract between 2 people that deals with death or injury of
another person and get insurance on one another. Once something happens to one of them the
insurance company pays them the money, other person pays them, and earns interest so other person
can continue the business and possibly go find another partner.
How mortality and other tables work - correct answer ✔✔P(living) + P(dying) =1
Important concepts of life insurance - correct answer ✔✔Actual(present) vs. Potential(future) estate
Basic needs of life insurance: - correct answer ✔✔- Protection vs. savings for future cash value
, "Term Insurance vs. Annuities"
- Temporary vs. Permanent
Protection of life insurance vs. savings for future(cash value) - correct answer ✔✔- protect earning
stream
"Aflac, Supplemental Income"
- 2 things you can do with money: spend it now or spend it later
- savings is postponing of your spending
Temporary vs Permanent Needs - correct answer ✔✔Temporary- Kids doctor visit
Permanent- Disabled person
2 Impacts of taxation: - correct answer ✔✔- income taxes
- estate (death) taxes
income taxes - correct answer ✔✔virtually all sources of "income" taxed on current (as earned) basis
once income has been taxed, it cant be. - correct answer ✔✔taxed again
Estate (Death) Taxes - correct answer ✔✔protection of life insurance also given preferential treatment
Two Basic Forms of Life Insurance - correct answer ✔✔"Term Insurance"[Protection Only] temporary
coverage.
Insured pays to transfer risk must pay overhead,
Insco holds money. Out flows are loading+
[LAE],Investment returns which may be positive
or negative, Contingencies+Moral
Hazard+Adverse Selection.
"Cash Value" or "Endowment" or "Permanent" Insurance[Protection+Savings]
Cash-value life insurance is a type of life insurance policy that pays out upon the policyholder's death,
and also accumulates value during the policyholder's lifetime. The policyholder can use the cash value as
a tax-sheltered investment (the interest and earnings on the policy are not taxable), as a fund from
which to borrow and as a means to pay policy premiums later in life, or they can pass it on to their heirs.
Types of ordinary life insurance: - correct answer ✔✔1. level
2. decreasing
3. increasing
4. newer variations
5. reentry term
6. return of premium term(if live past term)
types of life insurance: - correct answer ✔✔- ordinary life
- industrial life
coverage for industrial workers, people who are
unable to afford bigger amounts, fixed amount
is given in case of accident or death
- credit life
