Chapter 3

Question 1

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

Answer 1

Decreasing term insurance

Question 2

How are survivorship life insurance policies helpful in estate planning?

Answer 2

They provide funds to help pay taxes.

Question 3

The type of multiple protection coverage that pays on the death of the last person is called what?

Answer 3

Survivorship life policy

Question 4

What are the three basic categories of life insurance coverage?

Answer 4

Ordinary insurance, industrial insurance, and group insurance

Question 5

Which type of policy combines the flexibility of a universal life policy with investment choices?

Answer 5

Variable universal life policy

Question 6

What is a “term policy”?

Answer 6

A low-cost protection for a specified term that pays a benefit only if the insured dies during that term.

Question 7

That policy feature makes a universal life policy different from a whole life policy?

Answer 7

A flexible premium schedule

Question 8

What kind of life insurance policy covers two or more people with the death benefit payable upon the last person’s death?

Answer 8

Last survivor life insurance

Question 9

Level Term

Answer 9

Provides a level amount of protection because premiums are averaged of the term of the policy.

Question 10

Decreasing Term

Answer 10

Benefit amounts that decrease gradually over the time of protection and have level premiums.

Question 11

A renewable Term Life insurance policy allows the policyowner the right to renew the policy without what?

Answer 11

Proof of insurability

Question 12

Whole Life insurance provides what?

Answer 12

Permanent protection from the date of the issue to the date of the insured’s death with cash value options and set level premiums at time of issue.

Question 13

Define “cash value”.

Answer 13

The combination of protection and savings element that builds value over the life of the policy because of the accumulated interest.

Question 14

A securities license is required for a life insurance producer to sell what type of insurance?

Answer 14

To sell variable life insurance

Question 15

A features held exclusively by variable universal life insurance is what?

Answer 15

Policy owner has the right to select the investment which will provide the greatest return.

Question 16

Which policy does NOT build cash value.

Answer 16

Term

Question 17

Explain Equity Index Whole Life

Answer 17

80%-90% of the premium is invested in traditional fixed income securities and the reminder of the premium is invested in contracts tied to a stipulated stock index.

Question 18

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Answer 18

Endowment policy

Question 19

What is decreasing term life insurance often used for?

Answer 19

To provide coverage for a home mortgage.

Question 20

When can a renewable term life insurance policy be renewed?

Answer 20

At a predetermined date or age, regardless of the insured’s health.

Question 21

What type of life insurance would a business typically used to cover their employees?

Answer 21

A group policy

Question 22

A life insurance policy that contains a guaranteed interest rate which the chance to earn a rate that is higher than the guaranteed rate is called what?

Answer 22

Universal life

Question 23

7-Pay Test

Answer 23

A limitation on the total amount you can pay into your policy in the first seven years of existence which discourages paying up a policy before the end of a 7 year period

Question 24

How does a policy avoid becoming a modified endowment contract?

Answer 24

With 7-Pay Test

Question 25

What is Credit Life Insurance?

Answer 25

Insurance designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid.

Question 26

What is not considered to be a common life insurance nonforfeiture option?

Answer 26

Life income annunity

Question 27

What type of rider will waive the premium on a child’s life insurance policy if the parent paying the premium dies?

Answer 27

Payor benefit

Question 28

When does a waiver of premium rider allow an insured to waive premium payments?

Answer 28

If the insured is COMPLETELY and TOTALLY disabled.

Question 29

If an insured’s age on a life insurance policy has been misstated, what is the insurer’s liability if the insured dies?

Answer 29

A prorated death benefit based on the amount of insurance the insured’s premiums would have been purchased at the correct age.

Question 30

What are two major actions required for a policyholder to comply with the Reinstatement Clause?

Answer 30

Provide evidence of insurability and pay past due premiums.

Question 31

The automatic premium loan provision authorizes an insurer to withdraw from a policy’s cash value the amount of what?

Answer 31

Past due premiums that have not been paid by the end of the grace period.

Question 32

What does a guaranteed issue insurance policy have none of?

Answer 32

Medical underwriting

Question 33

The double indemnity provision in a life insurance policy pertains to an insured’s death caused by what?

Answer 33

An accident