Types of Insurance Policies Overview
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Questions and Answers

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?

    <p>Policy Statement</p> Signup and view all the answers

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

    <p>To generate potentially higher returns over time</p> Signup and view all the answers

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

    <p>Taking a trip each year to relax and rejuvenate</p> Signup and view all the answers

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

    <p>To cover unexpected expenses without needing to sell investments</p> Signup and view all the answers

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

    <p>Accumulating assets for immediate and long-term needs</p> Signup and view all the answers

    What is the primary function of health insurance?

    <p>Assisting with medical bill payments</p> Signup and view all the answers

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

    <p>A result of excess premium payments and investment performance</p> Signup and view all the answers

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

    <p>High-risk stocks</p> Signup and view all the answers

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

    <p>Equal to about six months' living expenses</p> Signup and view all the answers

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

    <p>Purchasing adequate life insurance coverage</p> Signup and view all the answers

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

    <p>To cover living expenses and unexpected happenings</p> 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?

    <p>Term Life Insurance</p> Signup and view all the answers

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

    <p>To diversify investments based on risk tolerance and goals</p> Signup and view all the answers

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

    <p>Favorite Color</p> Signup and view all the answers

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

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

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