Chapter 1 Review Questions

Historically, the major benefits life insurance provides the policyholder is/are:

a.  death benefits
b.  tax advantaged growth
*c.  both a and b
d.  neither a not b

A marketplace with only one buyer is known as a:

a.  monopoly
*b.  monopsony
c.  monogomy
d.  monobloc

The development of a true secondary market in life insurance has led to:

a.  higher cash value accumulation within life insurance
*b.  a new way to think about life insurance as an asset
c.  uniform regulation of the marketplace
d.  all of the above

Investigations by the Armstrong Commission at the turn of the 20th century resulted in:

a.  tax-deferred growth of accumulated cash values
*b.  state mandated non-forfeiture values
c.  endowment at age 100
d.  all of the above

Which of the following distort the cash values available in a permanent life insurance policy?

a.  the monopsony power of the insurer
*b.  endowment at age 100
c.  tax deferral of cash value accumulation
d.  all of the above

What was the impetus for developing a secondary market in life insurance?

*a.  the AIDS crisis of the 1980s
b.  the aging baby boom generation
c.  arbitrageurs who seek to profit from more efficient markets
d.  all of the above

Which of the following is NOT needed for an effective market?

a.  willing buyers
b.  willing sellers
*c.  government oversight
d.  all of the above are needed for an effective market

The development of a secondary market in life insurance have spurred:

a.  insurers offering accelerated benefit provisions in their policies
b.  increased government oversight of market participants
c.  clearer tax implications for payment of life insurance benefits
*d.  all of the above

A "viatical settlement" is the purchase of a life insurace policy in which the insured is:

*a.  terminally ill
b.  chronically ill
c.  over age 65
d.  all of the above

The purchase of a life insurance policy if the insured is over age 65 is called a:

a.  life settlement
b.  senior settlement
c.  high net worth transaction
*d.  all of the above