True or False
1. Pure risks are those that, when they occur, create a loss.
2. Insurance is a contract of indemnity, which means that a person is entitled to compensation only to the extent that an actual financial loss has been suffered.
3. The principle of insurable interest states that a person is entitled to compensation only to the extent that financial loss has been suffered.
4. When a person or firm is exposed to risk and decides to bear all or part of the financial burden if a loss occurs, this is known as risk retention or risk assumption.
5. Exposures that are high in frequency yet low in potential severity are best handled by insurance.
6. Financial planners recognize two fundamental needs for the monies generated by a life insurance policy: replacing income and preserving assets.
7. Life insurance death proceeds are taxable as income to the recipient.
8. The capital retention approach determines the amount of life insurance needed by first determining what level of annual income the insured wishes to provide for the family.
9. Term life, because it is temporary pure death protection, tends to be quite expensive in the early years of the policy.
10. Unlike whole life in which premiums increase with age, term life policies are based on a level premium throughout the duration of the payment period.