Risk Management & Insurance Planning Flashcards

What type of life insurance provides a death benefit for a specified period with no cash value accumulation?

Answer: Term life insurance

Term life insurance provides a death benefit only during the specified coverage period and expires without cash value if the insured outlives the term.

The 'human life value' approach to determining life insurance needs is based on:

Answer: The present value of the insured's future earnings

The human life value method calculates the present value of the insured's projected future earnings that would be lost upon death.

A disability income policy with an 'own-occupation' definition pays benefits when the insured:

Answer: Cannot perform the material duties of their specific occupation

Own-occupation policies pay benefits when the insured cannot perform the duties of their specific occupation, even if they are capable of working in another field.

The elimination period in a disability income policy functions most like which feature in property insurance?

Answer: Deductible

The elimination period is a waiting period before disability benefits begin, analogous to a time-based deductible the insured must 'satisfy' before receiving benefits.

Which type of life insurance allows the policyholder to adjust both the premium payments and the death benefit amount?

Answer: Universal life

Universal life insurance offers flexibility to adjust both premium payment amounts and death benefit levels within policy limits, unlike rigid whole life structures.

In a 'key person' life insurance arrangement, who is the owner and beneficiary of the policy?

Answer: The business entity itself

In key person insurance, the business purchases, owns, and is the beneficiary of the policy on a crucial employee to offset financial losses from that person's death.