Arizona Life Insurance Exam - Life
Insurance Basics | Questions and
answers with 100% correct solutions |
Graded A+
Human Life Value Approach ✔✔This approach gives the insured an estimate of what would be lost to
the family in the event of the premature death of the insured. It calculates an individual's life value by
looking at the insured's wage, inflation, the number of years to retirement, and the time value of
money.
Needs Approach ✔✔This approach is based on the predicted needs of a family after the premature
death of the insured. It includes income, the amount of debt (including mortgage), investments, and
other ongoing expenses.
Lump-Sum Needs ✔✔1. Costs associated with Death
2. Debt Cancellation
3. Emergency Reserve Funds
4. Education Funds
5. Retirement Fund
, 6. Bequests
Costs associated with Death ✔✔The final medical expenses of the insured, funeral expenses, and day-
to-day expenses family maintenance (also called Post Mortem)
Debt Cancellation ✔✔Paying off debts of the insured, such as home mortgage or auto loans
Emergency Reserve Funds ✔✔Paying for unexpected expenses following the death of the insured,
such as travel and lodging for family members
Education Funds ✔✔Paying for children's education expenses so they can remain in school, or for
a surviving spouse to train for a skill to re-enter the workforce
Retirement Funds ✔✔Using life insurance as a source of retirement income
Bequests ✔✔Leaving funds to the insured's church, school, or charity
Social Security Income Blackout Period ✔✔This is the time when the surviving spouse is younger than
60 and the surviving youngest child is older than 16
Retention of Capital Approach ✔✔This approach offers enough insurance so that when added to
other liquidated assets, there is enough to pay income benefits without jeopardizing the insured's
principal asset (to avoid having to sell a home, for example)
Insurance Basics | Questions and
answers with 100% correct solutions |
Graded A+
Human Life Value Approach ✔✔This approach gives the insured an estimate of what would be lost to
the family in the event of the premature death of the insured. It calculates an individual's life value by
looking at the insured's wage, inflation, the number of years to retirement, and the time value of
money.
Needs Approach ✔✔This approach is based on the predicted needs of a family after the premature
death of the insured. It includes income, the amount of debt (including mortgage), investments, and
other ongoing expenses.
Lump-Sum Needs ✔✔1. Costs associated with Death
2. Debt Cancellation
3. Emergency Reserve Funds
4. Education Funds
5. Retirement Fund
, 6. Bequests
Costs associated with Death ✔✔The final medical expenses of the insured, funeral expenses, and day-
to-day expenses family maintenance (also called Post Mortem)
Debt Cancellation ✔✔Paying off debts of the insured, such as home mortgage or auto loans
Emergency Reserve Funds ✔✔Paying for unexpected expenses following the death of the insured,
such as travel and lodging for family members
Education Funds ✔✔Paying for children's education expenses so they can remain in school, or for
a surviving spouse to train for a skill to re-enter the workforce
Retirement Funds ✔✔Using life insurance as a source of retirement income
Bequests ✔✔Leaving funds to the insured's church, school, or charity
Social Security Income Blackout Period ✔✔This is the time when the surviving spouse is younger than
60 and the surviving youngest child is older than 16
Retention of Capital Approach ✔✔This approach offers enough insurance so that when added to
other liquidated assets, there is enough to pay income benefits without jeopardizing the insured's
principal asset (to avoid having to sell a home, for example)
