Question 1

Credit Life insurance is

Accepted Answer

issued in an amount not to exceed the amount of the loan

Question 2

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Accepted Answer

Universal Life

Question 3

When applied to Whole Life insurance, the word “straight” denotes

Accepted Answer

The duration of premium payments

Question 4

M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is

Accepted Answer

"Modified Premium Life". Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter.

Question 5

K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which type of policy?

Accepted Answer

Endowment policy. Characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date or (before age 100).

Question 6

A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which policy will best meet this need?

Accepted Answer

Universal life - characterized by flexible premiums and an adjustable death benefit.

Question 7

If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase

Accepted Answer

A Whole Life Policy with an Other Insured Rider

Question 8

Which policy BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?

Accepted Answer

Universal Life policy - has a cash value that may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

Question 9

A Whole Life Insurance Policy endows when the

Accepted Answer

Cash value plus dividends equal the death benefit

Question 10

The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the

Accepted Answer

Cost of insurance

Question 11

Which policy combines investment choices with a form of Term coverage?

Accepted Answer

Variable Universal Life - combines investment choices with a form of Term coverage.

Question 12

Interest Sensitive Whole Life

Accepted Answer

There is a flexible premium payment - An Interest-Sensitive Whole Life policy is characterized by premiums that vary to reflect the insurer's changing assumptions regarding its death, investment, and expense factors.

Question 13

A Family Income Policy is a combination of Whole Life and

Accepted Answer

Decreasing Term insurance

Question 14

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)

Accepted Answer

Exclusion

Question 15

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which provision?

Accepted Answer

Reinstatement provision - In cases where a policyowner wishes to reinstate a lapsed policy, the reinstatement provision allows the policyowner to do so with some limitations.

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Chapter 3 Life Flashcards

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