Life Insurance Policies

Question 1

Which type of life insurance is normally associated with a Payor Benefit rider?

Answer 1

Juvenile insurance

Question 2

Shawn, Mike, and Dave are brothers who have a $100,000 “first to die” joint life policy covering all three of their lives. If Mike dies first, the policy proceeds

Answer 2

Will no longer provide insurance protection

Question 3

Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy’s cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this?

Answer 3

Universal Life policy

Question 4

A Renewable Term Life insurance policy can be renewed

Answer 4

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

Question 5

Term insurance is appropriate for someone who

Answer 5

Seeks temporary protection and lower premiums

Question 6

The least expensive option to pay off a 30-year mortgage balance would be

Answer 6

Decreasing term life

Question 7

A limited payment who life policy provides

Answer 7

Lifetime protection but requires only a limited number of premium payments

Question 8

An interest-sensitive life insurance policy owner may be able to withdraw the policy’s cash value interest free. The provision that allows this is called

Answer 8

Partial Surrender

Question 9

A life insurance policy written on one contract for two people in which it is payable upon the first death is called

Answer 9

Joint

Question 10

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because

Answer 10

The (MEC) tends to be an investment vehicle

Question 11

A life insurance policy that has premiums fully paid up within a stated time period is called

Answer 11

Limited payment insurance

Question 12

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

Answer 12

Variable universal life policy

Question 13

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test?
A) policy loans are disallowed
B) the premium payments will be tax deductible
C) pre-death distributions are typically taxable
D) withdrawals will be prohibited

Answer 13

C) pre-death distributions are typically taxable

Question 14

How are survivorship life insurance policies helpful in estate planning?

Answer 14

Provide funds to help pay taxes

Question 15

All of these statements concerning whole life insurance are false EXCEPT
A) policy owner can take out a policy loan up to the face amount
B) when a whole life policy is surrendered, income taxes may be owed
C) coverage is normally temporary
D) the death benefit is not affected by outstanding loans

Answer 15

B) when a whole life policy is surrendered, income taxes may be owed

Question 16

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

Answer 16

Endowment policy

Question 17

A policy owner may change two policy features on what type of life insurance?

Answer 17

Adjustable Life

Question 18

The type of policy which pays on the death of the last person is called

Answer 18

Survivorship life

Question 19

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy’s face amount has become $600,000. Which type of life insurance policy is this?

Answer 19

Universal life

Question 20

What does the word “level” in Level Term describe?

Answer 20

The face amount

Question 21

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true?
A) the policy automatically converts to whole life after the 10-year period
B) the face amount will remain constant and the premium will increase over the 10-year period
C) the premium will remain constant and the face amount will increase over the 10-year period
D) the face amount and premium will remain constant over the 10-year period

Answer 21

D) the face amount and premium will remain constant over the 10-year period

Question 22

What types of life insurance are normally used for key employee indemnification?

Answer 22

Term, whole and universal life insurance

Question 23

When a decreasing term policy is purchased, it contains a decreasing death benefit and

Answer 23

Level premiums

Question 24

Variable life insurance and Universal life insurance are very similar. Which of these features are help exclusively by variable universal life insurance?
A) policy owner may increase or decrease the premium payments
B) policy owner may increase or decrease the face amount
C) policy owner can contribute large sums of money
D) policy owner has the right to select the investment which will provide the greatest return

Answer 24

D) policy owner has the right to select the investment which will provide the greatest return

Question 25

A securities license is required for a life insurance producer to sell

Answer 25

Variable life insurance

Question 26

Which situation accurately describes a reduced paid-up nonforfeiture option?
A) policy has a decreased face amount
B) face amount of the new policy equals that of the original policy
C) cash value is surrendered to policy owner
D) premiums must continue to be paid

Answer 26

C) cash value is surrendered to policy owner

Question 27

A waiver of premium rider allows an insured to waive premium payments if the insured is

Answer 27

Completely and permanently disabled

Question 28

If an insured dies during the grace period with no premiums paid

Answer 28

The policy would be payable, minus the premium amount

Question 29

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy’s inception, the insurer will only be liable for a return of premiums paid

Answer 29

Minus indebtedness and without interest

Question 30

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)

Answer 30

Guaranteed insurability rider

Question 31

An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period?

Answer 31

Grace period

Question 32

Dorian exercised a nonforfeiture option by using his life policy’s cash value to purchase an extended term insurance option. When the term insurance expires,

Answer 32

The protection ends

Question 33

A life insurance policy owner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?

Answer 33

Disability income rider

Question 34

Which of these would limit a company’s liability to provide insurance coverage?
A) waiver
B) exclusion
C) rider
D) provision

Answer 34

B) exclusion

Question 35

A provision that allows a policy owner to withdraw a policy’s cash value interest free is a(n)

Answer 35

Partial surrender

Question 36

A whole life policy option where extended term insurance is selected is called a(n)

Answer 36

Nonforfeiture option

Question 37

What is the name of the provision which states that a copy of the application must be attached to the policy when issued?

Answer 37

Entire Contract

Question 38

In order to activate the reinstatement clause of lapsed life insurance policy, the insured MUST

Answer 38

Provide evidence of insurability to the insurer

Question 39

Under a life insurance policy, what does the insuring clause state?

Answer 39

The insurer’s obligation to pay a death benefit upon an approved death claim

Question 40

Which of these is NOT a characteristic of the Accelerated Death Benefit option?
A) the face amount and policy premium are not affected by the payment
B) before payment of the benefit is made, specific conditions must exist, such as suffering from a terminal illness
C) there may be a dollar limit on the maximum benefit
D) the benefit can be offered as a rider at a specific extra cost or may be at no cost

Answer 40

D) the benefit can be offered as a rider at a specific extra cost or may be at no cost

Question 41

A whole life insurance policy accumulates cash value that becomes

Answer 41

The policy loan value which the insured may borrow against

Question 42

Loans obtained by a policy owner against the cash value of a life insurance policy

Answer 42

Would not be treated as taxable income

Question 43

Which of the following is considered to be an alternative to a life settlement?
A) Accelerated death benefit rider
B) Waiver of premium rider
C) Extended term option
D) Decreasing term insurance

Answer 43

A) Accelerated death benefit rider

Question 44

In what part of an insurance policy are policy benefits found?

Answer 44

Declarations

Question 45

Which of the following is a reinstatement condition?
A) proof of insurability
B) changes in the insuring cause
C) premium increase
D) premium decrease

Answer 45

A) proof of insurability

Question 46

A provision in a whole life policy that allows a policy owner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n)

Answer 46

Nonforfeiture provision

Question 47

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

Answer 47

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

Question 48

Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy?

Answer 48

$4,000

Question 49

A guaranteed issue insurance policy has no

Answer 49

Medical underwriting

Question 50

What is the purpose for having an accelerated death benefit on a life insurance policy?

Answer 50

It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill