Texas (Life & Health) Chapter 3 Questions & Answers with complete solutions

3 Factors determine insurable interest? ANSWER- Insuring his/her own life. Insuring the life of family member. Insuring the life of business partner, key employee Survivor Protection ANSWER- (Personal Life Insurance) One way to provide funds to keep up with current lifestyle if primary income earner dies. Requires careful examination of current assets and liabilities. Estate Creation ANSWER- (Personal Life Insurance) Can create an immediate estate. Important to young families who haven't had time accumulate assets. Cash Accumulation ANSWER- (Personal Life Insurance) Used to accumulate specific amounts of monies for specific needs. An example would be whole life policy. Liquidity ANSWER- (Personal Life Insurance) Refers to availability of cash to be the insured. Can often be borrowed against at any time. Estate Conservation ANSWER- (Personal Life Insurance) Proceeds may be used to pay state inheritance taxes and federal estate tax so not necessary to sell off assets. Viatical Settlements ANSWER- Allows someone living with a life threatening condition to sell their existing life policy to someone else. The seller of the policy to a broker is called the "viators" Human Life Value Approach ANSWER- This method will give the insured an estimate of what would be lost to the family in the invent of premature death. (wages, inflation, retirement)