Exam (elaborations)
TEXAS (LIFE & HEALTH) CHAPTER #3 EXAM QUESTIONS WITH CORRECT ANSWERS
- Course
- Institution
TEXAS (LIFE & HEALTH) CHAPTER #3 EXAM QUESTIONS WITH CORRECT ANSWERS
[Show more]
Content preview
TEXAS (LIFE & HEALTH) CHAPTER #3EXAM QUESTIONS WITH CORRECT
ANSWERS
Insurable Interest - Answer-A financial interest in the life of another person; possibility of
losing something if that person dies.
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)
Needs Approach - Answer-This method based on the predicted immediate needs of a
family after premature death of the insured.
Debt Cancellation - Answer-(Needs Approach) Insurance may be used to create a fund
to pay off debt
Emergency Reserve Funds - Answer-(Needs Approach) Insurance may be used to pay
for sudden expenses during funeral, such as travel expenses and lodging for traveling
family
, Education Funds - Answer-(Needs Approach) Insurance used to continue paying for
children's school. Could also be to pay for widow to go back to school.
Retirement Fund - Answer-(Needs Approach) Cash values of matured life insurance
can be source of retirement income.
Bequests - Answer-(Needs Approach) Leave funds to their church, organization, school,
etc
Blackout Period - Answer-The time during which the surviving spouse and/or children
do not receive social security survivor benefits. Begins when last child reaches 16 until
widow reaches 60.
Liquidation vs Retention - Answer-Selling assets to raise capital is liquidation. Under
retention approach, insured purchases enough insurance to pay income benefits w/out
having to liquefy your assets.
Buy-Sell Agreement - Answer-A legal contract that determines what will be done with a
business in the event that an owner dies or becomes disabled.
Stock Redemption Plan - Answer-Under corporate ownership the business owns the
policy and will buy the deceased % of the business and increase the interest of
surviving partners. (Called "entity plan" for partnerships)
Entity Plan - Answer-The same as the stock redemption plan, except it's a partnership
and not corporate ownership
Cross Purchase Plan - Answer-Each partner agrees to sell his/her business interest to
the surviving partners, and each surviving partner agrees to buy
Key Person Insurance - Answer-The business would use the money for additional costs
of running business and replacing employee
Executive Bonus - Answer-Is an arrangement where the employer offers to give the
employee a wage increase in the amount of the premium on a new life policy
Group vs Individual Life - Answer-Individual is written on a single life. Group Life is
issued to the sponsoring organization. Each individual receives certificate instead of a
policy
Permanent Life Insurance - Answer-Permanent Life is a whole life policy that remains in
effect to the age of 100. They also can include a savings or investment element
Term Life Insurance - Answer-Temporary life insurance for a specific period of time.
Provides pure life and nothing else
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller biggdreamer. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $11.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79223 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now