Types of Policies

Question 1

L, aged 50, and L’s spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L’s spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
<> Their natural child dies at the age of 18
<> L’s spouse dies at age 62
<> Their adopted child dies at the age of 18
<> L’s spouse dies at age 66

Answer 1

L’s spouse dies at age 66

~ L’s spouse has coverage until age 65

Question 2

Which statement is true regarding a Variable Whole Life Policy?
<> It has guaranteed dividends
<> its premiums and benefits are variable
<> A minimum guaranteed Death benefit is provided
<> It is a combination of an Endowment and an increasing Term policy

Answer 2

A minimum guaranteed Death benefit is provided

Question 3

If X wants to buy $50,000 worth on permanent protection on his/her spouse and $25,000 worthy of 10-year Term coverage in X under the same policy, the applicant should purchase:
<> A Whole Life Policy with Extended Term
<> A Whole life Policy with a Payor benefit
<> An Estate Builder Policy
<> A Whole Life Policy with an Other Insured Rider

Answer 3

A whole Life Policy with an Other Insured Rider

~ In this situation, the application should purchase a Whole Life Policy with an Other Insured Rider

Question 4

How long does the coverage normally remain on a limited-pay life policy?
<> when premium payments stop
<> age 100
<> age 65
<> at the discretion of the insurer

Answer 4

age 100
~ Even though the premium payments are limited to a certain period, the insurance protection extends until the insured’s death or to age 100

Question 5

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?
<> 20-pay Life
<> Straight Life 
<> Increasing Term to age 65
<> Life Paid-up at Age 70

Answer 5

20-pay Life

~ The shorter the pay period, the faster the cash value growth

Question 6

What kind of life insurance product covers children under their parent's policy?
<> Family Maintenance rider
<> Family Income rider
<> Term rider
<> Payor benefit

Answer 6

Term rider
~ Family plan policies usually cover the family head with permanent insurance and the coverage on the spouse and children is term insurance in the form of a rider

Question 7

A 43-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
<> Universal Life
<> Modified Whole Life
<> Graded Benefit Whole Life 
<> Endowment at Age 75

Answer 7

Universal Life

~ Universal Life insurance is characterized by flexible premiums an adjustable death benefit

Question 8

When applied to Whole Life insurance, the word “straight” denotes?
<> The absence of dividends
<> The mode premium payments
<> The duration of premium payments
<> Options to reduce or withhold premium payments

Answer 8

The duration of premium payments

~ The word “straight” denotes the duration of premium payments, usually for the rest of the owner’s life

Question 9

What type of life insurance are credit policies issued as?

Answer 9

Term
<> The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.

Question 10

Under a Renewable Term Policy,
<> evidence of insurability must be provided at each renewal
<> a new application must be completed at each renewal
<> the renewal premium is calculated on the basis of the insured’s attained age
<> the face amount is automatically adjusted at the time of renewal

Answer 10

The renewal premium is calculated on the basis of the insured’s attained age

Question 11

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
<> Graded whole life policy
<> Endowment
<> Return of premium policy 
<> Equity index insurance

Answer 11

Equity index insurance

~ Equity index insurance yields greater gains than bonds but will still protect the principal with a minimum of risk

Question 12

When is the face amount of a Whole Life policy paid?
<> When the insured dies or a the policy’s maturity date, whichever happens first
<> At the policy’s maturity date only
<> When the policy is surrendered
<> Only when the insured dies

Answer 12

When the insured dies or at the policy’s maturity date, whichever happens first
` The face amount of a Whole Life Policy will be paid when the insured dies or on maturity of the policy, whichever occurs first

Question 13

How does a typical Variable Life Policy investment account grow?
<> Tied to Treasury Billed
<> Based on returns from insurer’s general account
<> Tied to price of gold
<> Through mutual funds, stocks, and bonds

Answer 13

Through mutual funds, stocks, and bonds

~A Variable Life Policy has investment values based instruments such as mutual funds, stocks, and bonds

Question 14

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
<> Level
<> Increasing
<> Renewable
<> Decreasing

Answer 14

Renewable
~ Renewable Term Policies guarantee the insured the right to continue term coverage after expiration of the initial policy period

Question 15

Which of the following statements is CORRECT about the period in which a Term Policy can be converted?
<> Is is the same in all contracts 
<> it varies according to the contracts 
<> It can be changed by the insured
<> It is set by state regulations

Answer 15

It varies according to the contracts

~ The conversion period varies according to the contracts

Question 16

A 15-year mortgage is best protected by what kind of life policy?

Answer 16

15-year decreasing term

~ A 15-year mortgage is best protected by a 15-year decreasing term policy

Question 17

K is looking to purchase Renewable Term Insurance. Which of these types of Term insurance may be renewable?
<> Adjustable
<> Level
<> Increasing
<> Decreasing

Answer 17

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

Question 18

Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
<> Adjustable Life
<> Joint Life
<> Limited Pay Life 
<> Renewable Term

Answer 18

Limited Pay Life
~ Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called Limited Pay Life

Question 19

A policy that becomes a Modified Endowment Contract (MEC):
<> will lose many of its tax advantages 
<> can never be reinstated after a lapse
<> will no longer allow for policy loans
<> must be placed in a irrevocable trust

Answer 19

will lose many of its tax advantages

Question 20

A term life insurance policy matures:
<> upon endowment of the contact
<> upon the insured’s death during the term of the policy
<> when the cash value equals the death benefit
<> upon death of the insured

Answer 20

Upon the insured’s death during the term of the policy

~ Term life policies can only mature (pay out the face amount) if death occurs during the term of the policy

Question 21

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
<> Variable Universal Life 
<> Interest-Sensitive Whole Life
<> Ten-Year Endowment 
<> Ten-Year Renewable Term

Answer 21

Ten-Year Endowment

~ In this situation, a Ten-Year Endowment should be purchased to ensure the funds will be available when needed

Question 22

The amount of coverage on a group credit life policy is limited to:
<> half of the insured’s total loan value
<> the insured’s total loan value
<> $25,000
<> 75% of the insured’s total loan value

Answer 22

The insured’s total loan value
~ With a group credit life policy, the amount of insurance on the life of a debtor is limited to the total amount of the insured’s loan

Question 23

N is a 40-year old applicant who would like to retire at age 70. He is looking to buy life insurance policy with level premiums, permeant protection, and be paid-up at retirement. Which of these should N purchase?
<> Term to age 70
<> 30 pay life
<> Universal Life 
<> Adjustable Life

Answer 23

30 Pay Life

~ Limited pay whole life policies have level premiums that are limited to a certain period

Question 24

P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
<> Family Maintenance policy
<> Family Benefit policy
<> Family Survivor policy 
<> Family Income policy

Answer 24

Family Maintenance policy
~ In this situation, a Family Maintenance policy should be purchased. A Family Maintenance policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period

Question 25

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
<> Payor provison
<> Accelerated Benefits provision 
<> Waiver of Premium provision
<> Assignment provision

Answer 25

Payor provision
~ a payor provision provides that in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract

Question 26

Which policy requires an agent to register with the National Association of Securities (NASD) before selling?
<> Interest-Sensitive Whole Life
<> Variable Life
<> Credit Life
<> Universal Life

Answer 26

Variable Life
~ Because of the transfer of investment risk from the insurer to the policy owner, variable insurer products are considered securities contracts as well as insurance contracts

Question 27

What kind of life insurance starts out as a temporary coverage but can be later modified to permeant coverage without evidence of insurability?
<> Limited-Pay Whole lie
<> Decreasing Term
<> Convertible Term
<> Endowment policy

Answer 27

Convertible Term

~ provides temporary coverage that may be changed to permanent coverage without evidence of insurability

Question 28

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Answer 28

Decreasing term policy
~A Life insurance policy written for a specified period of time with a death benefit that changes regularly according to a schedule is a decreasing term policy

Question 29

Which of these characteristics is consistent with a Straight Life Policy?
<> Premiums are lower for the first five years, increases the sixth year, then level off for the remaining length of the contract
<> Premiums are payable for as long as there is insurance coverage in force
<> Owner can adjust both premium and death benefit
<> Owner has the option of converting to term insurance

Answer 29

Premiums are payable for as long as there is insurance coverage in force
~ Straight Whole Life provides permanent level protection with level premiums from the time the policy is issued until the insured’s death (or age 100)

Question 30

A Variable insurance policy:
<>does not allow the policy owner to assume the investment risk
<> does not guarantee an assignment provision
<> does not guarantee a return on its investment accounts
<> guarantees a minimum rate of return

Answer 30

does not guarantee a return on its investment accounts
~ In contrast, variable insurance products do not guarantee contact cash values, and it is the policy owner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values