Fundamental of Insurance & Risk exam questions and answers 2024

Fundamental of Insurance & Risk exam questions and answers 2024 Which of the following types of families is likely to have the least need for a large amount of life insurance? A) blended family B) traditional family C) single person family D) sandwich family - ANSWERS c The human life value is defined as the A) present value of a deceased breadwinner's future gross income. B) future value of a deceased breadwinner's past earnings. C) present value of the family's share of a deceased breadwinner's future earnings. D) future value of the family's share of a deceased breadwinner's future earnings. - ANSWERS c All of the following information is needed to caclulate a person's human life value Except A) the person's average annual earnings over his or her productive lifetime. B) the person's estimated Social Security Benefits after retirement. C) the person's cost of self-maintenance. D) the number of years from the person's present age to the expected retirement age. - ANSWERS b To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement. - ANSWERS b 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 A) The effects of inflation are ignored B) other sources of income for survivors are ignored. C) Earnings are assumed to remain constant. D) Earnings during the individual's productive lifetime are ignored. - ANSWERS d Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? I. it invoolves an analysis of various family needs which must be met if a family bread winner dies. II. It use is appropriate only if a person currently has no life insurance protection. A) I only B) II only C) Both I and II D) Neither I or II - ANSWERS a The purpose of an estate clearance fund is to pay all of the following Except A) burial expenses B) estate administration expenses C) education costs D) installment debts - ANSWERS c 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? - ANSWERS 1 to 2 years Under the needs approach, when is the dependency period of a surviving spouse assumed to end - ANSWERS when the youngest child reaches 18 The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the - ANSWERS blackout period which of the following statements about the capital retention approach for determinig life insurance needs is (are) true? I. it assumes that life insurance proceeds will be liquidated to provide income to survivors. II. it requires the preparation of a personal balance sheet. A) I only B) II only C) Both I and II D) Neither I or II - ANSWERS b When the capital retention approach is used to determine how much life insurance to purchase, all of the following are subtracted from total assets to calculate the capital available to produce income Except A) investments in stocks and bonds B) non-income producing capital such as autos and the value of the home. C) the amount of money needed to payoff the mortgage. D) auto loans and credit card debt - ANSWERS a disadvantages of the capital retention approach include which of the following I. Assets are often liquidated too quickly. II. It underestimates the amount of life insurance A) I only B) II only C) Both I and II D) Neither I or II - ANSWERS d Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support of Tom's aged father and Nancy's aged mother. The Boyle family can be described as a - ANSWERS sandwiched 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% is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5% is $12.46. What is Julian's human life value? A) 184,600 B) 249,200 C) 360,800 D) 400,000 - ANSWERS b 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 f