Lesson 4 - Life Insurance Premiums, Proceeds & Beneficiaries Flashcards
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
a. universal life insurance
b. key person insurance
c. graded insurance
d. executive insurance
Key person insurance
Key person insurance is a type of life insurance policy that provides a death benefit to a business if its owner or another significant employee passes away.
Which of these needs is satisfied by adjustable life insurance?
a. insured’s need for level premiums
b. insured’s need for flexible premiums
c. insured’s need for flexible non-forfeiture options
d. insured’s need for level death benefits
insured’s need for flexible premiums
As financial needs and objectives change, the policy owner can make adjustments to the premium and/or face amount.
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
a. 30 pay life
b. term to age 70
c. universal life
d. adjustable life
30 pay life
limited pay whole life policies have level premiums that are limited to a certain period.
Variable whole life insurance can be described as:
a. both an insurance and securities product
b. an insurance product only
c. a securities product only
d. the insurance company assumes the investment risk
both an insurance and securities product
variable whole life is both an insurance and securities product
Credit life insurance is typically issued with which of the following types of coverage?
a. annual renewable term
b. decreasing term
c. individual whole life
d. group term
decreasing term
the type of insurance used for credit life is typically decreasing term, with the term matched to the length of the loan period.
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Universal life
Variable life
Fixed annuity
Modified endowment contract
Variable life
The variable nature of a variable whole life insurance is its death benefit. However, if investment performance is poor, the death benefit will not go lower than the policy’s guaranteed minimum.
What type of insurance offers permanent life coverage with premiums that are payable for life?
Credit Life
Renewable Term Life
Whole Life
Endowment
Whole Life
A policy that provides permanent life insurance with premiums payable for life is called Whole Life.
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Endowment
Straight life
10-Year Renewable Term
Joint life
Straight life insurance
Straight life insurance policies provide an insured the greatest amount of permanent protection per dollar of annual premium.
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies, will provide the most rapid growth of cash value?
Life Paid-up at Age 70
20-pay Life
Increasing Term to age 65
Straight Life
20 pay life
The shorter the pay period, the faster the cash value growth.
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
may be altered by the policyowner
is controlled by the NAIC
is the same in all contracts
varies according to the contract
varies according to the contract
The conversion period varies according to the contracts.
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
Face amount plus the policy’s cash value
Face amount plus the policy’s dividends
The greater amount of the policy’s death benefit or the cash value
Face amount plus total premium paid throughout the life of the policy
Face amount plus the policy’s cash value
A Face Amount Plus Cash Value Policy is a contract that promises to pay at the insured’s death the face amount of the policy plus a sum equal to the policy’s cash value,
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Whole Life
Modified Endowment Contract
Variable Universal Life
Interest-Sensitive Whole Life
Modified Endowment Contract
A policy that is overfunded to where it does not meet the 7-pay test is considered a Modified Endowment Contract.
Additional coverage can be added to a Whole Life policy by adding a(n):
payor rider
accelerated benefit rider
decreasing term rider
automatic premium loan rider
decreasing term rider
A decreasing term rider can add additional coverage to a whole life policy.
A variable insurance policy:
guarantees a minimum rate of return
does not allow the policyowner to assume the investment risk
does not guarantee a return on its investment accounts
does not guarantee an assignment provision
does not guarantee a return on its investment accounts
In contrast, variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Increasing
Decreasing
Adjustable
Level
Level
A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable.
Qis looking to buy a life insurance policy that will provide the greatest amount of protection for a emporary time period. Which of these policies should Q purchase?
Term life
Straight life
Endowment
Annuity
Term life
Term life provides the greatest amount of protection for a temporary period.
Under a Renewable Term policy:
the face amount is automatically adjusted at the time of renewal
evidence of insurability must be provided at each renewal
The renewal premium is calculated on the basis of the insured’s attained age
a new application must be completed at each renewal
the renewal premium is calculated on the basis of the insured’s attained age
Under a Renewable Term policy, the renewal premium is calculated on the basis of the insured’s attained age.
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured’s lifetime/ coverage lasts until death of the insured
Premiums are payable for a set period/ coverage expires at that point
Premiums are payable until age 65/ coverage lasts a lifetime
A single premium is paid at time of application/ coverage lasts until retirement
Premiums are payable throughout the insured’s lifetime/ coverage lasts until death of the insured
With whole life insurance, premiums are payable throughout the insured’s lifetime, and coverage continues until the insured’s death.
The combination of Whole Life and Term insurance is referred to as a Family Income Policy
Decreasing
Universal
Variable
Level
Decreasing Term insurance
A Family Income Policy is a combination of Whole Life and Decreasing Term insurance.
A(n) Life policy combines investment choices with a form of Term coverage
Straight Whole
Variable Universal
Variable Term
Adjustable Universal
Variable Universal
Variable Universal Life combines investment choices with a form of Term coverage.
