Basic Life Ins

Question 1

B has a $10,000 life policy that will pay the face amount to B if B lives to age sixty-five, or to B’s beneficiary if B dies before age sixty-five. B owns which of the following types of policies?

Answer 1

An endowment at 65 policy provides life insurance until the insured reaches age 65. During the insurance period cash value builds quickly so that it equals the policy’s face value at age 65. If the insured is still alive at age 65, the policy owner will receive the cash value as an endowment and life insurance coverage ceases.
The correct answer is: Endowment at Age 65

Question 2

Which is not a characteristic of group insurance?

Answer 2

Group life insurance has an open enrollment period of 31 days.
The correct answer is: There is an open enrollment period of 28 days during which the individual cannot be denied coverage.

Question 3

A non-contributory group policy is one in which:

Answer 3

The employer pays the full premium in a non-contributory policy. If the employee pays any of the premium it is considered a contributory policy.
The correct answer is: The employer pays the full premium.

Question 4

How does Universal Life’s Option B help the policy avoid becoming a MEC?

Answer 4

There are two primary types of universal life, based on the level of death benefits. Option A universal policies pay a fixed, level death benefit, generally the face amount of the policy. Option B universal policies generally pay the face amount of the policy plus the accumulated cash values- as the cash values grow, so does the potential death benefit . This helps to meet the “corridor” requirements of the TAMRA act and keeps the policy from becoming a modified endowment contract (MEC).
The correct answer is: Cash values are added to the death benefit.

Question 5

Which of the following is NOT an example of renewable term insurance?

Answer 5

A Modified Endowment Contract (MEC) is a type of Whole Life policy.
The correct answer is: MEC

Question 6

Which of the following is NOT a characteristic of Level Term insurance?

Answer 6

With Level Term insurance, there is a level or constant face value from date of issue to date of expiration. Premiums often increase each year or period of years because of increased probability of death. Often renewable to a certain age, such as age 60 or age 65. Level term insurance is usually convertible to a permanent policy up to the value of the level term policy?s face value.
The correct answer is: Premiums stay level from the date of issue until the insured’s death.

Question 7

Which of the following is a characteristic of Current Assumption Whole Life Insurance?

Answer 7

Current Assumption Whole Life Insurance (also called Interest Sensitive) products have cash value amounts that are invested in variable investment vehicles such as mutual funds, or tied to indexes that can make the face and cash values of the policy fluctuate. Cash values are not guaranteed and can disappear altogether.
The correct answer is: Cash value amounts are invested in variable investment vehicles.

Question 8

Which of the following is a characteristic of the Universal Life Option A policy?

Answer 8

There are two primary types of universal life, based on the level of death benefits. Option A universal policies pay a fixed, level death benefit. Option B universal policies generally pay the face amount of the policy plus the accumulated cash values- as the cash values grow, so does the potential death benefit . This helps to meet the “corridor” requirements of the TAMRA act and keeps the policy from becoming a modified endowment contract (MEC).
The correct answer is: It pays a fixed, level death benefit.

Question 9

Which of the following is NOT a characteristic of adjustable life insurance?

Answer 9

Adjustable life policies can be converted between term and whole life policies and can combine the two together as a hybrid policy. However, an adjustable life policy does not have any retroactive effect on any policy provisions.
The correct answer is: Changes have a retroactive effect on any policy provisions.

Question 10

The PRIMARY purpose of a Limited-Pay Life policy is to allow an:

Answer 10

A limited policy allows the insured to choose the length of time during which the insured will pay premiums. The premium will be higher during the shorter payment period, but once the payment period is over the policy will remain in full force and continue to increase in cash value.
The correct answer is: insured to pay premiums for a predetermined period of time

Question 11

T is beginning a medical practice and knows his income will gradually grow over the next several years. He wants to take out a life insurance policy now that will have a large face amount and build cash value, but cannot afford the premium for an Ordinary Whole Life policy at this time. Which of the following policies should the insurance producer recommend?

Answer 11

With a Graded or Stepped Premium Whole Life policy, premiums start lower than standard whole life policies, and the increase periodically (every 3-5 years) for a longer period of time (i.e., up to 15 years).
The correct answer is: Graded Premium Whole Life

Question 12

Which of the following describes an Equity-Indexed Universal Life policy?

Answer 12

Equity-Indexed Universal Life policies include interest credits that are a combination of a guaranteed interest rate and an interest rate based on a percentage of the increase in an equity index, such as the S&P 500.
The correct answer is: Includes interest credits that are a combination of a guaranteed interest rate and an interest rate based on a percentage of the increase in an equity index

Question 13

Which of the following cannot be used as a security collateral assignment for a loan?

Answer 13

An insurance policy death benefit or cash value may be used as collateral, and homes are often used as collateral for a mortgage. A term policy, however, does not have any cash value.
The correct answer is: The cash value within a term life insurance policy

Question 14

Which of the following policies can typically be purchased as either a single contract or as a rider to another type of policy?

Answer 14

Decreasing Term may be purchased as either a separate policy or as additional insurance on a policy rider. COLAs, cost of living adjustments, might be an endorsement to a policy. Increasing term insurance is usually sold as a rider, not as a separate policy.
The correct answer is: Decreasing Term

Question 15

Which of the following is not true of Servicemen’s Group Life Insurance?

Answer 15

SGLI policies can be canceled upon the insured’s written request.
The correct answer is: The policy cannot be canceled while the insured is still in the military.

Question 16

H owns a whole life policy with $100,000 cash value. He wants to take a loan at the bank to finance a book store he wants to buy. The bank will finance the loan if H uses his life insurance policy’s cash value to back up payment on the loan. Which of the following policy provisions allows H to do this?

Answer 16

H is using the cash value as collateral with the bank and is assigning the cash value to the bank in case he does not or cannot pay the bank loan. He is not borrowing money from the cash value of the policy, but if he were he would be using the policy loan provision.
The correct answer is: Collateral assignment

Question 17

Which of the following is NOT true of the standard spendthrift clause in a life insurance policy?

Answer 17

The standard spendthrift clause in a life insurance policy is designed to protect the beneficiary from losing the life insurance proceeds to creditors, spending recklessly or assigning the proceeds to others. It applies to installment settlement, not lump sum settlement options.
The correct answer is: It is only applicable to lump sum payments.

Question 18

When is the death benefit paid out for a family maintenance policy?

Answer 18

The death benefit is paid in one lump sum, after the level term period of the insurance ends.
The correct answer is: After the specified term period has ended.

Question 19

A family income policy has which of the following characteristics?

Answer 19

A family income policy combines ordinary whole life with decreasing term insurance.
The correct answer is: Combines ordinary whole life with decreasing term insurance

Question 20

E misstated his age on the life insurance application and wrote that he was born May 18, 1980, when in fact his date of birth was May 18, 1970. What will the insurer do if this fact is discovered before the death benefit is paid out?

Answer 20

The insurer will not leave itself in a position to pay out more than what was contracted. Since the age of the insured is higher than originally stated, the death benefit will be recalculated as to what the paid premium would have bought at the insured’s correct age.
The correct answer is: The death benefit will be recalculated as to what it would have been at the correct age for the paid premium and the payout will be changed accordingly.

Question 21

Which of the following is not found in the premium payment clause?

Answer 21

The premium payment clause deals with premium requirements regarding the timing of when a policy goes into effect. Policy accounts are associated with Universal Life policies and are not mentioned in the premium payment clause.
The correct answer is: Premiums are put into the policy account.

Question 22

Which of the following is NOT true of viatical settlements?

Answer 22

The viatical settlement provider will not receive the proceeds from double indemnity payments. Payment must be made in a lump sum. A viatical settlement broker or provider may not compensate in any way a viator’s physician, attorney or other person acting for the viator in regard to the viatical settlement. Viatical settlement providers and brokers cannot solicit investors who could influence the treatment of the viator’s illness.
The correct answer is: The viatical settlement provider will receive the proceeds from double indemnity payments.

Question 23

The Long Term Care Accelerated Benefit Rider:

Answer 23

Accelerated Benefit Provisions allow for payment of partial benefits before the insured’s death in order to pay for medical or nursing care while the insured is still alive. The LTC Accelerated Benefit Rider helps pay for long-term nursing care. A reduced death benefit would be paid to the policy beneficiary upon the insured’s death.
The correct answer is: allows the insured to receive monthly income benefits for payment of long term nursing care expenses.

Question 24

According to Standard Non-forfeiture Law, all of the following are options an owner has when canceling a cash value life insurance policy EXCEPT:

Answer 24

The owner may take the cash value of the policy and invest in an annuity with a life annuity period certain payout option, but the annuity option ITSELF is not one of the options under the Standard Non-forfeiture Law.
The correct answer is: Life Annuity Period Certain.

Question 25

Doug and Clarissa have a Family Policy in which Doug is the principal insured. They have three children. If Clarissa dies, the children’s portion will be paid up until the children reach what age?

Answer 25

In a Family Policy, if either of the parents dies, the children’s portion of the premium is paid up until the child reaches age 25.
The correct answer is: 25