Insurance Quiz 1

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Match definitions to the types (life insurance)

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A life insurance cost comparison method that accounts for the various cost factors of a whole life policy, except for interest earned over time, also known as the ‘time value of money,’ making the comparison less accurate. The ‘net payment cost index’ is calculated using the traditional cost comparison method.

A life insurance cost comparison method that has emerged over time as more accurately comparing the true cost of similar life insurance policies because it takes into account the ‘time value of money,’ based on the insurer’s projected rate of return in interest for the policy.

A financial concept that states that receiving a dollar today is more valuable than receiving the same one dollar in the future.

Time Value of Money

Cost Index

Insurable Interest

Family Dependency Cycle

Pre-Retirement Period

According to social security, a surviving spouse is eligible for social security survivor benefits during the years

A time that begins when survivor benefits end after children are no longer depenent or the surviving spouse reaches age 60 or 50 if she/he is disabled.

Survivor Benefits (SS) begin at the age of __ when they have no dependent children

Retirement Period

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Using compounding interest, time increases the value of money exponentially, thus the more time money has to reinvest and grow, the larger its value will be in the future.

He/she is dependent upon his or her children

___charts compare whole life policies based on each $1,000 increment of the policy’s face amount for 10-year and 20-year time periods, using an average annual rate of return in interest of 5%. In determining the cost of a policy, the lower the index number, the less costly it will be to the policyowner.

Blackout Period

Time Value of Money

begins when the youngest child is no longer dependent on support from the parents. The family’s cost-of-living is much lower within this period, than with the previous ‘dependency’ period.

Traditional Cost Comparison Method

The final stage in the family income cycle is when social security benefits begin again at age 60 and all other sources of income typically end.

60

Interest-Adjusted Cost Comparison Method

This is the initial period of time when a couple begins a family. The family’s cost-of-living is at its highest during child bearing years up to the beginning of the youngest child’s adult years and is when the family is in most financial need

occurs between two parties that, upon the loss of one party, the remaining party will have suffered some sort of loss.


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