FFC Insurance and Protection Planning 1 — Questions and Answers
Question 1: A client wants pure death benefit protection for a set number of years at the lowest cost. Which type of life insurance is most appropriate?
- Whole life insurance
- Term life insurance (Correct answer)
- Universal life insurance
- Variable life insurance
Correct answer: Term life insurance
Term life insurance provides a death benefit for a specified period and has the lowest premiums because it has no cash value component.
Question 2: Which of the following best describes the underwriting process in insurance?
- Processing and paying out claims to policyholders
- Evaluating applicants to determine insurability and premium rates (Correct answer)
- Investing policyholder premiums in the financial markets
- Setting regulatory standards for insurance products
Correct answer: Evaluating applicants to determine insurability and premium rates
Underwriting is the process insurers use to assess risk, determine eligibility, and set appropriate premium rates for applicants.
Question 3: A client has a $1,000 deductible on their health insurance plan. They incur $4,500 in covered medical expenses. How much does the insurer pay (assuming 100% coverage after deductible)?
- $1,000
- $4,500
- $3,500 (Correct answer)
- $5,500
Correct answer: $3,500
The client pays the first $1,000 (the deductible), and the insurer covers the remaining $3,500.
Question 4: Which life insurance product builds cash value on a guaranteed basis and has fixed premiums?
- Term life
- Whole life (Correct answer)
- Variable universal life
- Decreasing term
Correct answer: Whole life
Whole life insurance offers a guaranteed cash value accumulation, fixed premiums, and a permanent death benefit.
Question 5: Disability income insurance is primarily designed to replace what percentage of a worker's pre-disability earned income?
- 25–40%
- 50–70% (Correct answer)
- 80–90%
- 100%
Correct answer: 50–70%
Most disability income policies are designed to replace 50–70% of pre-disability income to encourage return to work and remain cost-effective.
Question 6: In a life insurance policy, who is the 'beneficiary'?
- The person whose life is insured under the policy
- The insurance company collecting premiums
- The person or entity designated to receive the death benefit (Correct answer)
- The agent who sold the policy
Correct answer: The person or entity designated to receive the death benefit
The beneficiary is the individual or entity named to receive the policy's death benefit upon the insured's death.
Question 7: Which type of insurance provides coverage for expenses related to custodial and skilled nursing care that health insurance typically excludes?
- Medigap insurance
- Long-term care insurance (Correct answer)
- Critical illness insurance
- Hospital indemnity insurance
Correct answer: Long-term care insurance
Long-term care insurance specifically covers the costs of custodial care, assisted living, and nursing home care not covered by standard health or Medicare plans.
FFC Insurance and Protection Planning 1
A client wants pure death benefit protection for a set number of years at the lowest cost.
Which type of life insurance is most appropriate?