Insurable Interest and Determining Amount (ID-L)

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Question 1 of 7

1. Question

In which of the following situations would there LEAST likely to be an insurable interest?

Harry wants to buy a life insurance policy on his business partner Lloyd.

Sylvester wants to buy a life insurance policy on himself.

Thomas wants to buy a life insurance policy on his neighbor Todd.

Alfred wants to buy a life insurance policy on his wife Annie.

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Question 2 of 7

2. Question

Of the following, which is the best definition of insurable interest?

The amount of money an insurance company earns on its investments

The willingness of an insurer to insure someone who has applied for an insurance policy, based on how healthy the proposed insured is

A valid reason to buy insurance

The premium that the customer pays for an insurance policy

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Question 3 of 7

3. Question

Sue and Steve are trying to determine the amount of life insurance to purchase. For each of them, they are considering final expenses, the money it will take to pay the survivors’ living expenses, and the amount of life insurance they already have. Which method is this?

Human Life Value Approach

Income Potential Approach

Insurable Interest Approach

Needs Approach

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Question 4 of 7

4. Question

Which of the following is NOT a factor when using the Human Life Value Approach to determine the amount of life insurance to purchase?

Anticipated future income

Future expenses such as a child’s wedding

Number of years until retirement

Current earned income

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Question 5 of 7

5. Question

Which of the following is NOT true of the Human Life Value Approach to determine the amount of life insurance?

It focuses on how much money the individual’s family will need if he or she dies.

It focuses on the individual’s current and potential income.

It can be viewed as the amount of future income lost if the individual were to die today.

This approach estimates the amount of money the individual will earn in the future.

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Question 6 of 7

6. Question

Which of the following is NOT true of the Needs Approach to determine the amount of life insurance?

It focuses on how much money the individual’s family will need if he or she dies.

It focuses on the individual’s current and potential income.

It considers final expenses associated with the insured's death.

It considers the costs associated with running the survivors’ household now and in the future.

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Question 7 of 7

7. Question

Which of the following statements is FALSE?

Insurers require a purchaser of life insurance to have an insurable interest in the life of the insured.

In order for there to be an insurable interest, the death of the insured would have to create a significant loss (financial or otherwise) for the one who is buying the life insurance.

With life insurance, insurable interest is required by the insurer at the time of purchase.

Insurers will only pay the death benefit if the policyowner had an insurable interest at the time of the insured’s death.

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Insurable Interest and Determining Amount (ID-L)

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