Types of Insurance Policies Overview

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What type of financial goals are typically focused on funding purchases such as buying a house or taking a trip?

Long-term, high priority goals

Lower-priority goals

Near-term, high priority goals (correct)

Immediate, high priority goals

Which type of investments are generally not suitable for achieving near-term, high-priority financial objectives?

Low-risk investments

Variable-rate investments

High-risk investments (correct)

Medium-risk investments

What is the purpose of establishing charitable trusts or funding trusts as an estate planning tool according to the text?

To minimize estate taxes (correct)

To maximize income from investments

To fund short-term financial objectives

To increase personal income

What document outlines general rules for a portfolio manager and a client in the portfolio management process?

Policy Statement Signup and view all the answers

Why are high-risk investments sometimes considered for long-term, high-priority financial goals?

To generate potentially higher returns over time Signup and view all the answers

Which of the following is an example of a lower-priority financial goal mentioned in the text?

Taking a trip each year to relax and rejuvenate Signup and view all the answers

What is the purpose of a cash reserve in financial planning?

To cover unexpected expenses without needing to sell investments Signup and view all the answers

During the accumulation phase of an individual's working career, what is a common goal?

Accumulating assets for immediate and long-term needs Signup and view all the answers

What is the primary function of health insurance?

Assisting with medical bill payments Signup and view all the answers

How does the cash value of an insurance policy typically increase over time?

A result of excess premium payments and investment performance Signup and view all the answers

Which of the following is NOT a recommended vehicle for a cash reserve?

High-risk stocks Signup and view all the answers

What advice do most experts give regarding the size of a cash reserve?

Equal to about six months' living expenses Signup and view all the answers

What is one of the first steps in developing a financial plan according to the text?

Purchasing adequate life insurance coverage Signup and view all the answers

Why is it important for an individual to have adequate income before starting a serious investment plan?

To cover living expenses and unexpected happenings Signup and view all the answers

Which type of insurance provides both death benefits and a savings plan to the insured according to the text?

Term Life Insurance Signup and view all the answers

What is the purpose of asset allocation decision in the portfolio management process?

To diversify investments based on risk tolerance and goals Signup and view all the answers

Which factor is NOT related to an individual's financial plan, according to the text?

Favorite Color Signup and view all the answers

What does adequate life insurance coverage provide protection against according to the text?

Financial hardship due to death before financial goals are met Signup and view all the answers