Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income


Week 3 Quiz

FIN 428 Week 3 Quiz

Decreasing term insurance is most suited to meeting which of the following needs?

·         Final expenses

·         Retirement income

·         Family income

·         Educational funds


The Internal Revenue Code stipulates that a contract will be considered life insurance for the purpose of taxes

·         as long as both the face amount and the premium are fixed.

·         if it meets both of the tests specified in the code.

·         if it meets either of two tests specified in the code.

·         as long as the vendor is a licensed insurer.


A policy is described as mature when

·         when the face amount is payable to the insured.

·         all premiums due have been paid.

·         when the cash value equals the net single premium for the insured at his attained age.

·         when the premium payment period has ended.


To reinstate a policy that has lapsed, the insured must:

·         pay a $500 non-refundable reinstatement fee.

·         provide tax returns for the past five years for review.

·         make one lump-sum payment to pay the entire balance owing in full.

·         pay or reinstate any indebtedness under the policy.

Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income

Assignment: Quiz Retirement Income


Which of the following factors should be considered the most important in selecting a life insurer?

·         The financial stability of the company

·         Whether the company is a stock or mutual company

·         Whether the company offers innovative policies

·         The company’s interest adjusted cost index


One reason that some employers elect to self-fund health insurance coverages is

·         to obtain the services of a third-party administrator.

·         to avoid the costs associated with state-mandated benefits and small-group reform laws that provide subsidies to small employers and their employees.

·         to obtain benefits for employees that commercial insurers are unwilling to provide.

·         the safety of principal.


A pension plan that provides a retirement benefit equal to 50% of the employee’s terminal salary is an example of

·         a deposit administration plan.

·         a money purchase plan.

·         a defined benefit plan.

·         a defined contribution plan.


Measured in terms of the total amount of protection in force, the largest class of life insurance is

·         individual life insurance.

·         franchise life insurance.

·         credit life insurance.

·         group life insurance.



Ignoring the interest factor, the single premium for a whole life policy would be

·         higher than a 20-year endowment.

·         $1,000 per $1,000 of face amount.

·         $1,000 per $1,000 of face amount.

·         higher or lower than a 20-year endowment, depending on age at issue.


The three primary elements in life insurance ratemaking are

·         costs, profits and taxes.

·         interest, mortality, and loading.

·         mortality, expenses, and profits.

·         mortality, loading, and expenses.


In purchasing life insurance, the first decision that should be addressed is

·         the minimum interest-adjusted cost that will be considered.

·         how much life insurance is needed.

·         the company from which life insurance should be purchased.

·         whether to buy term insurance or cash value insurance.


The factor that has had the greatest influence on the growth of employee benefits has been

·         union negotiation for benefits.

·         the fact that coverage is on a group basis and is therefore less expensive.

·         the favorable tax treatment.

·         employer efforts to improve employee morale.


The Employee Retirement Income Security Act of 1974 established standards for

·         reporting and disclosure requirements.

·         qualifying pension beneficiaries.

·         vesting of term life insurance plans.

·         funding of group life insurance plans.


The most logical classification of the types of life insurance contracts is between

·         those that meet Internal Revenue Code requirements and those that do not.

·         those that receive favorable tax treatment and those that do not.

·         those that insure a single life and those that insure multiple lives.

·         those that offer pure protection and those that combine protection and savings.


The purpose of a retired lives reserve program is used to

·         continue group term life insurance on retired employees.

·         purchase deferred retirement annuities for employees.

·         supplement income payable under social security.

·         accumulate pension benefits for retired employees.


When a separate account is used as the funding instrument for a pension plan, the employer’s contributions

  • are allocated to accounts for individual employees.
  • are segregated from the other assets of an insurer.
  • are invested separately in the name of each employee.
  • are segregated from the contributions of other employers.


Other things being equal, which of the following policies issued at age 25 would have the highest reserve at age 55?

  • A 20 pay life policy with a 3% interest assumption
  • A 30 pay life policy with a 3% interest assumption
  • A 30 pay life policy with a 2.5% interest assumption
  • A single premium life policy with a 3% interest assumption




The least impressive feature cited in support of life insurance as an investment is

  • the safety of principal.
  • the favorable tax treatment.
  • you don’t have to die to collect.
  • the compulsion it entails.


Life insurance which provides for payment only if the insured dies within a specific time period is

  • term insurance.
  • limited pay life insurance.
  • whole life insurance.
  • ordinary life insurance.


The specific requirements regarding evidence of insurability imposed on the insured under the reinstatement clause are

  • necessary to prevent adverse selection.
  • required by the changing investment income over time.
  • intended to avoid a loss of investment income.
  • designed to offset the cost of reissuing the policy.


The 2001 Commissioners Standard Ordinary Mortality Tables

  • use different tables for men and women.
  • are based on statistics compiled by the U.S. Surgeon General.
  • are based on the 2001 Census data.
  • provide mortality data on a unisex basis.


Under the grace period clause used in life insurance

  • any premium in default will be waived if the insured should die during the period.
  • any premium in default will be deducted from the face amount of the policy if the insured should die during the period.
  • the policy is continued for 60 days after a premium due is in default.
  • the policy is continued for 30 days under the extended term option.


Life insurance contracts receive favorable tax treatment in that

  • the investment earnings on the cash value of insurance policies are not considered a taxable gain.
  • in computing taxable gain, the insured may deduct all premiums paid, including the element that paid for protection.
  • the investment earnings on the cash value are only taxed during the period of accumulation.
  • although proceeds to a beneficiary are usually taxable as income, it is at a reduced rate.


The initial cash outlay on participating life insurance policies

  • is normally about the same as on nonparticipating policies.
  • is normally lower than on nonparticipating policies.
  • is precisely the same as on nonparticipating policies.
  • is normally higher than on nonparticipating policies.


In evaluating universal life policies, the factors that should be considered in judging costs include

  • the total cost paid out in insurance claims over the last twelve months.
  • fees associated with state-mandated benefits.
  • the expense loadings charged by the insurer.
  • the insurer’s projected advertising costs based on current market share.


The net single premium is

  • the gross premium less dividends.
  • the difference between gross premium and the cost of death claims per year.
  • interest, mortality, and loading.
  • the present value of future claims divided by persons alive at computation age.


An administrative services only (ASO) contract is an arrangement between

  • an employer that self-funds benefits and an insurer that administers the program.
  • a third-party administrator and an insurance company.
  • a third-party administrator and a reinsurance company.
  • a pension fiduciary and a pension trustee.


A misstatement of age by an applicant for life insurance

  • changes the amount of insurance to the amount that the premium paid would have purchased at the correct age.
  • makes the policy voidable at the option of the company if discovered during the contestability period.
  • has no effect on the policy unless it is discovered during the contestability period.
  • voids the policy if discovered during the contestability period.


In purchasing life insurance, the selection of the type of policy

  • logically follows determination of the amount to be purchased.
  • logically precedes determination of the amount to be purchased.
  • is the most important decision in the buying process.
  • is basically a risk management decision.


The normal length of the suicide exclusion in life insurance policies is

  • five years from date of issue.
  • two years from date of issue.
  • six months from the date of issue.
  • one month from the date of issue.


Which of the following is one of the standard settlement options?

  • Installments for an indefinite period
  • Stock options
  • Cash value
  • Installments for a fixed period


Assuming the same face amounts and issue at age 35, which of the following would have the highest premium?

  • A whole life policy
  • A 20 pay life policy
  • A 30 pay life policy
  • A paid-up at age 65 whole life policy


In comparing the differences in cost between two life insurance contracts

  • participating policies are always cheaper in the long run.
  • dividends cannot be guaranteed and should be disregarded.
  • dividends are an important consideration in the buying decision.
  • nonparticipating policies are always cheaper in the long run.


The rate of return on the investment element in cash value life insurance policies

  • is typically the same among life insurance companies.
  • varies widely among life insurance companies.
  • is readily apparent and relatively easy for the layperson to compute.
  • is guaranteed in the policy to always be a positive return.


The interest option is best suited to a situation

  • where the need for monthly income is great.
  • where the proceeds will not be needed until a later time.
  • where immediate needs are of greatest importance.
  • where a surviving spouse needs a monthly income for the rest of their life.


Assuming the same face amount and age at issue, which of the following would have the highest cash value at the end of 10 years?

  • 10-year term
  • Whole life
  • 20 pay life policy
  • 20-year term


Mr. Jones dies leaving a $100,000 life insurance policy to his wife. The wife elects to take the $100,000 over a ten year period and receives $11,130 per year.  What part of this payment is taxable as income to the wife?

  • Only the $100,000, which may be spread over the ten year period during which it is received
  • None of it
  • $11,130 per year
  • $1,130 per year


  • The interest-adjusted method of comparing life insurance policies
  • usually requires the use of a microcomputer for the comparison.
  • is especially useful since it can be used to compare noncomparable policies.
  • has the same defects as the traditional method of comparing life insurance costs.
  • was sanctioned by the NAIC in its Life Insurance Solicitation Model Regulation.


Loading is

  • the difference between a net premium and its insurance deductible.
  • a method of providing a safety margin.
  • the difference between gross and net premiums.
  • a method of covering operating expenses.


In general, contributions by an employer on behalf of employees for qualified employee benefits

  • are tax deductible by the employer, and are not taxable as income to employees.
  • are not tax deductible by the employer, and are not taxable income to employee.
  • may not exceed 10% of the employee’s other compensation.
  • are tax deductible by the employer, but are taxable as income to employees.


The grace period clause

  • provides that any premium in default will be paid out of the existing cash values.
  • must be taken out by the insured at the time the policy is taken out or it is not applicable.
  • is designed to avoid unintentional lapses.
  • permits the insured to purchase insurance which he or she could not otherwise afford.


A policy paying dividend is known as

  • a non-participating policy.
  • an investment policy.
  • an endowment policy.
  • a participating policy.

Group life insurance premiums paid by an employer are deductible by the employer and nontaxable to the employee

  • for up to $50,000 in group permanent life insurance.
  • for up to $50,000 in term life insurance.
  • up to 10% of the employee’s salary.
  • when included as a part of a pension plan.


Whole life insurance

  • may be purchased under several premium paying options.
  • guarantees protection of the insured for a specified period.
  • develops cash values which may not be used for retirement.
  • may not be purchased under several premium paying options.


Cash value life insurance is more expensive than term insurance because

  • whole life is subject to adverse selection.
  • it is usually sold to older people who have higher mortality.
  • the whole life contracts include both a protection element and a savings or investment element.
  • higher rates of interest are earned on term policy investments.


Mr. Jones purchased a $50,000 whole life policy with double indemnity on May 1, 2000.  On May 25, 2002, he committed suicide.  The insurer will be required to pay

  • $100,000.
  • $50,000.
  • only the premiums which Jones has paid to the company.
  • the company will not be required to pay anything.


Group insurance is a less expensive form of protection than individual policies because

  • commissions to agents are higher.
  • commissions to agents are lower.
  • mortality experience has been better under individual policies.
  • the insurance company performs certain administrative functions on behalf of the employer.


The traditional net cost system of comparing life insurance companies is considered defective by many authorities because

  • it can be used to compare term policies only.
  • it ignores the differences in types of policies being compared.
  • it ignores the time value of money.
  • it requires complex and involved computations.


In a trust fund approach to funding qualified retirement plans

  • the employer in effect self-insures the plan.
  • the plan is exempt from the requirements of the PBGC.
  • the program is usually administered by a licensed insurance company.
  • the trustee usually guarantees the adequacy of the funding.


The cash value in a whole life insurance policy

  • is similar in value as compared to a term insurance policy.
  • increases until it meets the face of the contract at the end of the policy period.
  • raises or lowers depending on its fair market value at the end of the policy period.

lowers because the premium paid in the early years is less than the cost of protection.

Assignment Policies



Please read all of the information about the assignments below:


The assignments are to be done in Microsoft Word with Times New Roman 12- point font. Each assignment should use the modified APA 6th edition format. The assignment templates are set up in this modified format. The reference page should be in the APA format for every reference. The word requirement for the assignments are specifically stated in the guidelines of the assignment. The word count is from the first word of the introductory paragraph to the last word of the conclusion paragraph. FYI.


1- There should be a cited reference for each section of a paper as there are conclusion statements in each section (to meet the grading criteria) so the conclusion should be supported by a reference as the assignments are evidence-based research, clinical papers.

2- Word Count- The word count is done from the first word of the introductory paragraph to the last word of the conclusion. The word count must be within the minimum and maximum word limit stated in the assignment instructions. A 10% – point reduction will be made in the total points for the assignment.

Week 1 and 5 assignments should have SIX studies. Week 5 assignment is a compilation of sections from the week 1, 2 & 3 assignments.

Weeks 2 and 3 need to have at least THREE studies in the form of research studies. Please make sure that you look at the instructions for the assignment as well as the grading rubric. I have also provided templates for ALL assignments. It is in your best interest to use these as it will guide you so that you do not make common formatting errors.


Please utilize the resources in the STUDENT SUCCESS CENTER if you have difficulty with APA 6th Edition format, grammar, sentence structure, punctuation or tense structure.


Always submit the assignment in the drop box for that assignment. I cannot accept any assignment as an attachment to an email sent to my college email. Attaching it to a posting to the Questions to Instructor Forum or the Individual Forum is also not accepted.

I cannot grade any assignment unless it is placed into the drop box by the student per university policy.

Turn-It-In / Lopes Write

This is to be used for the assignments for these three weeks (2, 3 & 5) and it is NOT required for Week 1. All assignments will be placed through Turn It In first and then submitted in the drop box on the course shell. No assignments will be accepted as attachments to emails as this is not the university policy.

Grading Rubric-

The rubric for each assignment is found in the upper right- hand corner of the assignment page under the Forum Tab. Compare the requirements of the rubric with your paper prior to submission into the drop box so you will receive full credit for all graded criteria of the paper.

Late Assignment-

Any assignment that is late will have 10% deducted each day it is late. This is a 5- week class. It is imperative that you ask for help if you are having difficulty with an assignment.

You need to contact me as soon as possible if an assignment will be late prior to the submission deadline.