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.