(Rejda)PrinciplesofRiskManagementandInsurance,11eChapter11LifeInsurance1) WhichofthefollowingtypesoffamiliesislikelytohavetheleastneedforalargeamountoflifeinsuranceA) ablendedfamilyB) atraditionalfamilyC) asinglepersonfamilyD) asandwichedfamilyAnswer:CQuestionStatus:PreviousEdition2) ThehumanlifevalueisdefinedastheA) presentvalueofadeceasedbreadwinnersfuturegrossincome.B) futurevalueofadeceasedbreadwinnerspastearnings.C) presentvalueofthefamilysshareofadeceasedbreadwinnersfutureearnings.D) futurevalueofthefamilysshareofadeceasedbreadwinnersfutureearnings.Answer:CQuestionStatus:PreviousEdition3) AllofthefollowinginformationisneededtocalculateapersonshumanlifevalueEXCEPTA) thepersonsaverageannualearningsoverhisorherproductivelifetime.B) thepersonsestimatedannualSocialSecuritybenefitsafterretirement.C) thepersonscostofself-maintenance.D) thenumberofyearsfromthepersonspresentagetotheexpectedretirementage.Answer:BQuestionStatus:PreviousEdition4) Tocalculateahumanlifevalue,itisnecessarytodeductcertaincostsfromapersonsaverageannualearnings.ThesecostsincludeA) funeralcosts.B) incometaxes.C) investmentincome.D) pensionbenefitsafterretirement.Answer:BQuestionStatus:PreviousEdition5) AllofthefollowingaredefectswhichlimittheusefulnessofthehumanlifevalueapproachindeterminingthecorrectamountoflifeinsurancetopurchaseEXCEPTA) Theeffectsofinflationareignored.B) Othersourcesofincomeforsurvivorsareignored.C) Earningsareassumedtoremainconstant.D) Earningsduringtheindividualsproductivelifetimeareignored.Answer:DQuestionStatus:PreviousEdition6) Whichofthefollowingstatementsabouttheneedsapproachforestimatingtheamountoflifeinsurancetopurchaseis(are)trueI) Itinvolvesananalysisofvariousfamilyneedswhichmustbemetifafamilybreadwinnerdies.J) .Itsuseisappropriateonlyifapersoncurrentlyhasnolifeinsuranceprotection.K) IonlyL) IIonlyM) bothIandIIN) neitherInorIIAnswer:AQuestionStatus:PreviousEdition7) ThepurposeofanestateclearancefundistopayallofthefollowingEXCEPTA) burialexpenses.B) estateadministrationexpenses.C) educationcosts.D) installmentdebts.Answer:CQuestionStatus:PreviousEdition8) WhatisthelengthofthereadjustmentperiodwhichisconsideredwhentheneedsapproachisusedtodeterminetheamountoflifeinsurancetoownA) 3to6monthsB) 1to2yearsC) untiltheyoungestchildreachesage18D) untilthesurvivingspousereachesage65Answer:BQuestionStatus:PreviousEdition9) Undertheneedsapproach,whenisthedependencyperiodofasurvivingspouseassumedtoendA) 1or2yearsafterthebreadwinnersdeathB) whentheyoungestchildreachesage18C) whenthesurvivingspousereachesage65D) whenthesurvivingspousediesAnswer:BQuestionStatus:PreviousEdition10) TheperiodduringwhichasurvivingspouseisineligibleforSocialSecuritybenefitsisreferredtoastheA) emergencyperiod.B) readjustmentperiod.C) dependencyperiod.D) blackoutperiod.Answer:DQuestionStatus:PreviousEdition11) Whichofthefollowingstatementsaboutthecapitalretentionapproachfordetermininglifeinsuranceneedsis(are)trueI. Itassumesthatlifeinsuranceproceedswillbeliquidatedtoprovideincometosurvivors.II. Itrequiresthepreparationofapersonalbalancesheet.A) IonlyB) IIonlyC) bothIandIID) neitherInorIIAnswer:BQuestionStatus:PreviousEdition12) Whenthecapitalretentionapproachisusedtodeterminehowmuchlifeinsurancetopurchase,allofthefollowingaresubtractedfromtotalassetstocalculatethecapitalavailabletoproduceincomeEXCEPTA) investmentsinstocksandbonds.B) non-incomeproducingcapitalsuchasautosandthevalueofthehome.C) theamountofmoneyneededtopayoffthemortgage.D) autoloansandcreditcarddebt.Answer:AQuestionStatus:Revised13) DisadvantagesofthecapitalretentionapproachincludewhichofthefollowingI) Assetsareoftenliquidatedtooquickly.J) .Itunderestimatestheamountoflifeinsuranceneeded.K) IonlyL) IIonlyM) bothIandIIN) neitherInorIIAnswer:DQuestionStatus:PreviousEdition14) TomandNancyBoyleprovidefinancialsupportfortheirtwochildren.Inaddition,theyprovidefinancialsupportforTomsagedfatherandNancysagedmother.TheBoylefamilycanbedescribedasaA) blendedfamily.B) single-parentfamily.C) two-incomeearnerfamily.D) sandwichedfamily.Answer:DQuestionStatus:PreviousEdition15) Julian,age45,wouldliketodeterminehowmuchlifeinsurancetopurchaseusingthehumanlifevalueapproach.Heassumeshisaverageannualearningsoverthenext20yearswillbe$40,000.Ofthisamount,$20,000isavailableannuallyforthesupportofhisfamily.Julianwillgeneratethisincomefor20moreyearsandhebelievesthat5percentistheappropriateinterest(discount)rate.Thepresentvalueofonedollarpayablefor20yearsatadiscountrateof5percentis$.WhatisJulianshumanlifevalueA)$184,600B)$249,200C)$360,800D)$400,000Answer:BQuestionStatus:PreviousEdition16) JessicaisanagentforLMNLifeInsuranceCompany.ShemetwithBrad,whowasinterestedinpurchasinglifeinsurance.Jessicaexplainedthevarioususesoflifeinsurance,includingincomeforBradswifeduringthe1-o