Principles of Risk Management and
Insurance Exam 2025 | Principles of Risk
Management and Insurance Actual Exam
2025 Questions and Correct Answers Rated
A+
Which of the following types of families is likely to have the least need
for a large amount of life insurance? -ANSWER-A single person family
The human life value is defined as the -ANSWER-present value of the
family's share of a deceased breadwinner's future earnings
Which of the following pieces of information is needed to calculate a
person's human life? -ANSWER-the person's cost of shelf-
maintenance
To calculate a human life value, it is necessary to deduct certain costs
from a person's average annual earnings. These costs include... -
ANSWER-income taxes
All of the following are defects which limit the usefulness of the human
life value approach in determining the correct amount of life insurance
to purchase EXCEPT -ANSWER-earnings during the individual's
productive lifetime are ignored
Which of the following statements about the needs approach for
estimating the amount of life insurance to purchase is (are) true?
1. it involves an analysis of various family needs which must be met if
a family breadwinner dies
, 2. it's use is appropriate only if a person currently has no life
insurance protection. -ANSWER-only 1
Which of the following is a cost/expense that an estate clearance fund
is designed to pay? -ANSWER-burial expenses
What is the length of the readjustment period which is considered
when the needs approach is used to determine the amount of life
insurance to own? -ANSWER-1 to 2 years
Under the needs approach, when is the dependency period of a
surviving spouse assumed to end? -ANSWER-when the youngest
child reaches age 18
The period during which a surviving spouse in ineligible for Social
Security benefits is referred to as the -ANSWER-blackout period
Which of the following statements about premature death is (are)
true?
1. From an economic standpoint, premature means death before a
specified age, such as 65
2. The economic problem of problem of premature death in the U.S
has declined substantially over time -ANSWER-only 2
Which of the following statements about re-entry term insurance is
true? -ANSWER-It permits a lower renewal premium if the insured
demonstrates insurability
Which of the following is a noneconomic cost associated with
premature death? -ANSWER-loss of a parental role model
,Tom and Nancy Boyle provide financial support for their two children.
In addition, they provide financial support for Tom's aged father and
Nancy's aged mother. The Boyle family can be described as a... -
ANSWER-sandwich family
Julian, age 45, would like to determine how much life insurance to
purchase using the human life value approach. He assumes his
average annual earnings over the next 20 years will be $40,000. Of
this amount, $20,000 is available annually for the support of his family.
Julian will generate this income for 20 more years and he believes that
5 percent is the appropriate interest (discount) rate. The present value
of one dollar payable for 20 years at a discount rate of 5 percent is
$12.46. What is Julian's human life value? -ANSWER-$249,200
Jessica is an agent for LMN Life Insurance Company. She met with
Brad, who was interested in purchasing life insurance. Jessica
explained the various uses of life insurance, including income for
Brad's wife during the 1- or 2-year period following Brad's death. This
period is known as the... -ANSWER-readjustment period
Sarah is using the needs approach to determine how much life
insurance to buy. Her cash needs are $30,000; her income needs are
$140,000; and special needs are $100,000. Sarah has the following
assets: $20,000 in bank accounts, $30,000 in retirement plans, and
$40,000 in investment accounts. Sarah owns no individual life
insurance. She is covered by a $50,000 group life insurance policy
through her employer. Based on this information, how much additional
life insurance should Sarah purchase? -ANSWER-$130,000
Which of the following statements regarding convertible term
insurance is true? -ANSWER-the annual premium for the cash value
, coverage is lower if an original-age conversion is used than if an
attained-age conversion
Bill is attempting to determine how much life insurance to purchase.
He has two dependent children and his wife does not work outside of
the home. An advisor suggested that Bill should consider Social
Security benefits when doing his life insurance planning. One concern
in this regard is the period after Social Security benefits to a widow
terminate until they resume again. This period is called the... -
ANSWER-blackout period
When using the needs approach, several "special needs" should be
considered. One special need is money to cover unexpected events,
such as major car repairs, dental bills, or home repairs. Money set
aside for this purpose is called a(n)... -ANSWER-emergency fund
Most family heads need substantial amounts of life insurance.
However, with limited income, money spent on life insurance reduces
the amount of discretionary income available for other high-priority
needs. What an insured person gives up when he or she purchases
life insurance instead of using the premium dollars for other purposes
is called the... -ANSWER-opportunity cost of buying life insurance
Which of the following statements about yearly renewable term
insurance is (are) true?
1. it requires evidence of insurability for renewal
2. it is most appropriate when an insured needs lifetime protection -
ANSWER-neither 1 or 2
What happens to the premiums for yearly renewable term insurance
as an insured gets older? -ANSWER-they increase at an increasing
rate
Insurance Exam 2025 | Principles of Risk
Management and Insurance Actual Exam
2025 Questions and Correct Answers Rated
A+
Which of the following types of families is likely to have the least need
for a large amount of life insurance? -ANSWER-A single person family
The human life value is defined as the -ANSWER-present value of the
family's share of a deceased breadwinner's future earnings
Which of the following pieces of information is needed to calculate a
person's human life? -ANSWER-the person's cost of shelf-
maintenance
To calculate a human life value, it is necessary to deduct certain costs
from a person's average annual earnings. These costs include... -
ANSWER-income taxes
All of the following are defects which limit the usefulness of the human
life value approach in determining the correct amount of life insurance
to purchase EXCEPT -ANSWER-earnings during the individual's
productive lifetime are ignored
Which of the following statements about the needs approach for
estimating the amount of life insurance to purchase is (are) true?
1. it involves an analysis of various family needs which must be met if
a family breadwinner dies
, 2. it's use is appropriate only if a person currently has no life
insurance protection. -ANSWER-only 1
Which of the following is a cost/expense that an estate clearance fund
is designed to pay? -ANSWER-burial expenses
What is the length of the readjustment period which is considered
when the needs approach is used to determine the amount of life
insurance to own? -ANSWER-1 to 2 years
Under the needs approach, when is the dependency period of a
surviving spouse assumed to end? -ANSWER-when the youngest
child reaches age 18
The period during which a surviving spouse in ineligible for Social
Security benefits is referred to as the -ANSWER-blackout period
Which of the following statements about premature death is (are)
true?
1. From an economic standpoint, premature means death before a
specified age, such as 65
2. The economic problem of problem of premature death in the U.S
has declined substantially over time -ANSWER-only 2
Which of the following statements about re-entry term insurance is
true? -ANSWER-It permits a lower renewal premium if the insured
demonstrates insurability
Which of the following is a noneconomic cost associated with
premature death? -ANSWER-loss of a parental role model
,Tom and Nancy Boyle provide financial support for their two children.
In addition, they provide financial support for Tom's aged father and
Nancy's aged mother. The Boyle family can be described as a... -
ANSWER-sandwich family
Julian, age 45, would like to determine how much life insurance to
purchase using the human life value approach. He assumes his
average annual earnings over the next 20 years will be $40,000. Of
this amount, $20,000 is available annually for the support of his family.
Julian will generate this income for 20 more years and he believes that
5 percent is the appropriate interest (discount) rate. The present value
of one dollar payable for 20 years at a discount rate of 5 percent is
$12.46. What is Julian's human life value? -ANSWER-$249,200
Jessica is an agent for LMN Life Insurance Company. She met with
Brad, who was interested in purchasing life insurance. Jessica
explained the various uses of life insurance, including income for
Brad's wife during the 1- or 2-year period following Brad's death. This
period is known as the... -ANSWER-readjustment period
Sarah is using the needs approach to determine how much life
insurance to buy. Her cash needs are $30,000; her income needs are
$140,000; and special needs are $100,000. Sarah has the following
assets: $20,000 in bank accounts, $30,000 in retirement plans, and
$40,000 in investment accounts. Sarah owns no individual life
insurance. She is covered by a $50,000 group life insurance policy
through her employer. Based on this information, how much additional
life insurance should Sarah purchase? -ANSWER-$130,000
Which of the following statements regarding convertible term
insurance is true? -ANSWER-the annual premium for the cash value
, coverage is lower if an original-age conversion is used than if an
attained-age conversion
Bill is attempting to determine how much life insurance to purchase.
He has two dependent children and his wife does not work outside of
the home. An advisor suggested that Bill should consider Social
Security benefits when doing his life insurance planning. One concern
in this regard is the period after Social Security benefits to a widow
terminate until they resume again. This period is called the... -
ANSWER-blackout period
When using the needs approach, several "special needs" should be
considered. One special need is money to cover unexpected events,
such as major car repairs, dental bills, or home repairs. Money set
aside for this purpose is called a(n)... -ANSWER-emergency fund
Most family heads need substantial amounts of life insurance.
However, with limited income, money spent on life insurance reduces
the amount of discretionary income available for other high-priority
needs. What an insured person gives up when he or she purchases
life insurance instead of using the premium dollars for other purposes
is called the... -ANSWER-opportunity cost of buying life insurance
Which of the following statements about yearly renewable term
insurance is (are) true?
1. it requires evidence of insurability for renewal
2. it is most appropriate when an insured needs lifetime protection -
ANSWER-neither 1 or 2
What happens to the premiums for yearly renewable term insurance
as an insured gets older? -ANSWER-they increase at an increasing
rate
