Life insurance is an important part of financial planning. In fact, at Northwestern Mutual we believe it’s the bedrock of a financial plan. That’s because in addition to the death benefit, which can protect your family, some types of life insurance have additional benefits that give you financial flexibility and efficiency throughout your life.

Whether you’re a novice or have already done some research on the topic, our life insurance quiz can help you test your knowledge and learn more about how it fits into a solid financial plan.

1. The only way anyone benefits from a life insurance policy on my life is if I die.

A. True

B. False

Answer: False. People often believe they will never reap the benefits of getting a life insurance policy on themselves, which is true to some extent for term life insurance, because it only pays a death benefit if you die within the term period. But with permanent life insurance, which includes whole life insurance, you also accumulate cash value, which grows in a tax-advantaged way and is available for you to access throughout your life. (Note that you can convert Northwestern Mutual term policies into permanent insurance.)

This is why we believe permanent life insurance is the bedrock of a financial plan. It can serve so many roles – from providing the protection of the death benefit, to being a stable asset that can flex to help you meet so many goals.

2. The cost of a life insurance policy is based on:

A. Your health

B. The type of car you drive

C. Your age

D. Your shoe size

Answer: A and C. The cost of your insurance is based on the likelihood that you will have a claim. The younger and healthier you are, the less you will pay for life insurance. Unfortunately, this is often why people don’t think they need life insurance early in life. By putting coverage in place when you’re young and healthy, you can lock in lower rates. If you wait until you’re older, you may pay significantly more for your insurance. Or, if you develop certain health conditions, you may not be able to get life insurance at all.

Depending on your policy, when you buy life insurance at a young age, you may be able to purchase additional insurance at set times in the future, even if you develop a health condition. This is why it’s important to get at least some life insurance coverage in place when you’re young.

3. A common rule of thumb for how much life insurance you should get is enough to cover:

A. A year’s worth of your salary

B. Five years’ worth of your salary

C. 10 times your yearly salary

D. 40 times your yearly salary

Answer: C. Generally speaking, 10 times your yearly salary is a good amount of insurance. But remember this is only a rule of thumb and can vary greatly depending on a number of factors. For instance, do you have one child, a low mortgage payment and some college savings already? If so, you may not need as much insurance. If you have five children and little savings, then you may need more. A financial professional can help you determine how much life insurance is right for you and how it fits in with the rest of your financial plan.

4. You must earn an income before you can get insurance.

A. True

B. False

Answer: False. There are a number of reasons you might get life insurance for someone who doesn’t earn an income. For instance, people often buy life insurance for a stay-at-home spouse because his or her death would have a tremendous financial impact on their family. People also frequently buy life insurance on their children.

Ultimately, in order to start the process of getting life insurance, you must have an insurable interest on the person’s life that you are insuring, meaning the person’s death would impact you or your family in some material way.

5. Once I have accumulated cash value in a permanent life insurance policy, the cash value can never decline.

A. True

B. False

Answer: False. This is where life insurance gets a little tricky. It’s true that once you have accumulated cash value in whole life insurance is guaranteed to grow. But whole life insurance is just one type of permanent insurance (Remember that with permanent insurance, the death benefit never expires like it does with a term policy.) Other types of permanent life insurance, such as universal and variable life insurance, offer more flexibility, which can be beneficial in certain situations. But it also means that the cash value in these policies can decline.

6. Because a permanent life insurance policy will pay a death benefit when I die, I have to pay premiums until I die.

A. True

B. False

Answer: False – for the most part. Permanent life insurance policies have a premium paying period. Depending on the type of policy you may only pay premiums for 15 or 20 years. For other policies, you may pay until you reach a certain age, like 65 or 100. But once you’ve reached the end of your premium paying period, you won’t owe anything additional. And the insurance policy will stay in effect and can continue to grow.

Utilizing the accumulated value through policy loans, surrenders, or cash withdrawals will reduce the death benefit; and may necessitate greater outlay than anticipated and/or result in an unexpected taxable event.