Life Insurance Policies Flashcards
Which type of life insurance is normally associated with a Payor Benefit rider?
Juvenile insurance
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
Will no longer provide insurance protection
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?
Universal Life policy
A Renewable Term Life insurance policy can be renewed
At a predetermined date or age, regardless of the insured’s health
Term insurance is appropriate for someone who
Seeks temporary protection and lower premiums
The least expensive option to pay off a 30-year mortgage balance would be
Decreasing term life
A limited payment who life policy provides
Lifetime protection but requires only a limited number of premium payments
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
Partial Surrender
A life insurance policy written on one contract for two people in which it is payable upon the first death is called
Joint
Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because
The (MEC) tends to be an investment vehicle
A life insurance policy that has premiums fully paid up within a stated time period is called
Limited payment insurance
Which type of policy combines the flexibility of a universal life policy with investment choices?
Variable universal life policy
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
C) pre-death distributions are typically taxable
How are survivorship life insurance policies helpful in estate planning?
Provide funds to help pay taxes
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
B) when a whole life policy is surrendered, income taxes may be owed
Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?
Endowment policy
A policy owner may change two policy features on what type of life insurance?
Adjustable Life
The type of policy which pays on the death of the last person is called
Survivorship life
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?
Universal life
What does the word “level” in Level Term describe?
The face amount
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
D) the face amount and premium will remain constant over the 10-year period
What types of life insurance are normally used for key employee indemnification?
Term, whole and universal life insurance
When a decreasing term policy is purchased, it contains a decreasing death benefit and
Level premiums
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
D) policy owner has the right to select the investment which will provide the greatest return
A securities license is required for a life insurance producer to sell
Variable life insurance
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
C) cash value is surrendered to policy owner
A waiver of premium rider allows an insured to waive premium payments if the insured is
Completely and permanently disabled
If an insured dies during the grace period with no premiums paid
The policy would be payable, minus the premium amount
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
Minus indebtedness and without interest
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)
Guaranteed insurability rider
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?
Grace period
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,
The protection ends
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?
Disability income rider
Which of these would limit a company’s liability to provide insurance coverage?
A) waiver
B) exclusion
C) rider
D) provision
B) exclusion
A provision that allows a policy owner to withdraw a policy’s cash value interest free is a(n)
Partial surrender
A whole life policy option where extended term insurance is selected is called a(n)
Nonforfeiture option
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
Entire Contract
In order to activate the reinstatement clause of lapsed life insurance policy, the insured MUST
Provide evidence of insurability to the insurer
Under a life insurance policy, what does the insuring clause state?
The insurer’s obligation to pay a death benefit upon an approved death claim
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
D) the benefit can be offered as a rider at a specific extra cost or may be at no cost
A whole life insurance policy accumulates cash value that becomes
The policy loan value which the insured may borrow against
Loans obtained by a policy owner against the cash value of a life insurance policy
Would not be treated as taxable income
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
A) Accelerated death benefit rider
In what part of an insurance policy are policy benefits found?
Declarations
Which of the following is a reinstatement condition?
A) proof of insurability
B) changes in the insuring cause
C) premium increase
D) premium decrease
A) proof of insurability
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)
Nonforfeiture provision
The automatic premium loan provision authorizes an insurer to withdraw from a policy’s cash value the amount of
Past due premiums that have not been paid by the end of the grace period
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?
$4,000
A guaranteed issue insurance policy has no
Medical underwriting
What is the purpose for having an accelerated death benefit on a life insurance policy?
It allows for cash advances to be paid against the death benefit if the insured becomes terminally ill
