Chapter 10

B. Beneficiary.

A person who is named to receive the benefits from an insurance policy is a(n)

D. Cost-of-living protection

A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider?

E. 95%

About ___ of the U.S. life insurance companies are stock companies.

C. 10 days.

After you purchase a life insurance contract, you have a "free look" period that lasts

B. Dun & Bradstreet.

All of the following are major rating agencies for insurance except

A. Ben.

Amy bought a life insurance policy and named Ben as her beneficiary. She has since died. Who will receive the benefits from her policy?

C. Individual retirement accounts (IRAs).

Annuities are often purchased for

B. Multiyear level term.

Another name for a straight term policy is

A. Whole life.

Another name for permanent life insurance is

D. Term

Another name for temporary life insurance is

A. Waiver of premium disability benefit

Bill is worried about being able to pay his premium if he is totally and permanently disabled before age 60. Which of the following riders should he consider?

C. Guaranteed insurability option

Bonnie is most concerned about being able to buy additional insurance without undergoing medical exams. Which of the following riders should she consider?

B. Dual income, no kids method

Donald and Charlene are married and do not have any children. Each plans to continue to work after the other one dies. Which method are they using to determine their life insurance needs?

E. Family need method

Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. Which method are they using to determine their life insurance needs?

B. Accidental death benefit

Frank, age 38, was hit by a car and died. Which of the following riders provided an additional benefit for his heirs?

A. Incontestability clause

Fred bought life insurance five years ago. He forgot to tell them that he had a heart condition, and, as a result of that condition, he recently died. Which of the following provisions prevents the life insurance company from refusing to pay his beneficiaries because of his original misrepresentation?

B. Misstatement of age provision

Fred bought life insurance when he was 47, although he told the insurance company that he was 42. He has since died. Which of the following provisions will affect the amount of money his beneficiaries will receive?

E. The grace period

Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium?

C. You can convert your term policy to a permanent policy.

If you have a conversion term policy,

C. Your premium will be the same for the duration of your policy.

If you have a multiyear level term policy,

B. Your premium may increase if you continue it for another term because you will be older.

If you have a renewable term policy,

B. Cash value

If you want to purchase term insurance, you will receive all of the following except

B. Nonparticipating policy

Jeanne wants to purchase a life insurance policy with guaranteed premiums. What kind of policy would she want to purchase?

D. Nonworking spouse method

Jeff and Erica have two children. They plan to purchase life insurance using this formula: (18 - Youngest child's age) × $10,000. Which method are they using to determine their life insurance needs?

A. Easy method

Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs?

E. Variable life

Megan wants to purchase a life insurance policy that will allow her to invest in stock. Which of the following policies should she buy?

E. Accelerated benefits

Mildred was diagnosed with terminal cancer and knows that she doesn't have long to live. Which of the following riders would allow her to receive cash now?

A. Adjustable life

Molly is thinking about buying a life insurance policy, but she is not sure about how much she will need in the next few years. She may need to change her coverage as her needs change. Which of the following policies would meet her needs?

B. Protect the people who depend on the insured from financial losses caused by his or her death.

Most people buy life insurance to

D. It builds cash value.

Of the following, which one is the most positive feature of whole life insurance?

B. Group life

Pam just started working at XYZ Widget Company and finally wants to get insurance coverage. She does not want to take a medical exam to get coverage because she has some underlying health conditions and is concerned that she might not qualify for a policy. Which of the following life insurance policies should she apply for?

D. Universal life

Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following policies would meet her needs?

A. Preserved the tax advantage of annuities but curtailed deductions for IRAs.

The Tax Reform Act of 1986

C. The policy owner can borrow any amount up to the cash value of the policy.

The policy loan provision means that

E. Proceeds left with the company.

The settlement option in which the company acts as trustee and pays interest to the beneficiary is called

B. Limited installment payment.

The settlement option that pays the life insurance proceeds in equal periodic payments for a specified number of years after your death is called

D. Life income option.

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

B. Multiyear level term

This term life policy will guarantee that you will pay the same premium for the duration of your policy.

B. Nonparticipating policy

Todd plans to purchase a life insurance policy from a stock life insurance company. What kind of policy is he planning to purchase?

C. Naming a beneficiary

Wendy has had a life insurance policy for five years. She was recently divorced. Which of the following provisions should she take action on?

D. Help you select the proper kind of protection within your financial boundaries.

What is the most important part of an insurance agent's job?

A. Fixed annuity

Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life?

D. Variable annuity

Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life?

D. Household with children.

Which of the following households most likely has the greatest need for life insurance

E. All of these affect the price.

Which of the following is NOT a factor that affects the price a company charges for a life insurance policy?

C. The policy will return all premiums if you survive to the end of the policy.

Which of the following is NOT a feature of whole life insurance?

D. Term life

Which of the following is NOT a type of permanent insurance?

E. Decreasing term life

Which of the following is NOT a type of permanent life insurance?

C. Ignoring the reputations of local agencies

Which of the following is NOT important when buying life insurance?

A. Whole life

Which of the following is NOT temporary insurance?

E. All of these.

Which of the following is a charge you will pay when you purchase a variable annuity?

C. Credit life

Which of the following is a poor choice for the amount of protection offered for an individual?

D. Immediate annuity

Which of the following products allows an individual to receive payments beginning now?

E. An immediate annuity allows an individual to receive payments from an annuity beginning at once.

Which of the following statements is correct?

E. It is better to fund an IRA, Keogh, or 401(k) before buying an annuity.

Which of the following statements is correct?

D. An annuity is more advisable for people in poor health than for those who are likely to live longer than

Which of the following statements is incorrect?

D. Participating policy

You want to purchase a life insurance policy that pays a dividend. What kind of policy would you want to purchase?