Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs.
What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the
A) estimated cost of life insurance.
B) net cost of life insurance.
C) real (inflation-adjusted) cost of life insurance.
D) opportunity cost of buying life insurance.
Question 2
When using the needs approach, several special needs should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n)
A) estate clearance fund.
B) emergency fund.
C) readjustment period fund.
D) mortgage redemption fund.
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