chapter 3 quiz
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 Death benefit
Which provision allows the policy-owner to change a term life policy to a permanent one without providing proof of good health.
Conversion
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his/ her insurance without providing evidence of insurability?
Conversion privilege
When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing Term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
The Accidental death and dismemberment (ad&d) provision in a life insurance policy would pay additional benefits if the insured:
Is blinded in an accident
What type of life policy covers two lives and pays the face amount after the first one dies?
Joint Life Policy
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT
K's wife dies at age 66
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Life insurance that covers an insured's whole life with level premiums over a limited time is called:
Limited Pay Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified whole life
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force.
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life
The investment gains from a Universal Life Policy usually go toward:
The cash value
Under a Graded Premium Whole Life policy,
The premium increases each year during the early years of the contract and remains the same after that time .
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance.
All of these statements about Equity Indexed Life Insurance are correct EXCEPT:
The premiums can be lowered or raised, based on investment performance.
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. 20 years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much- higher premium is paid because of falling interest rates. this type of policy is known as a(n) __________ life policy.
Universal
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured
A ___________ life policy offers the owner investment in products such as money- market funds, long term bonds and equities .
Variable
What does the insuring agreement in a Life insurance contract establish?
an insurer's basic promise
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.
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?
Straight life
S is covered by a whole-life policy. Which insurance product can cover his children?
Child term rider
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
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?
Key Person insurance
The advantage of reinstating an original life policy is
The Premiums are based on a younger age.
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit
Dividends paid from a life insurance policy are
issued by the insurer
Which provision prevents an insurer from changing the terms of the contract with the policy owner by referring to documents not found within the policy itself?
Entire Contract Provision
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
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?
30 Pay Life
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
A variable insurance policy:
does not guarantee a return on its investment accounts
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
What advantage does the renewability feature give to a term policy?
The insured may extend the coverage period
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-pay life accumulates cash value faster than Straight life.
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-Pay life
J is 35-year old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the growth of cash life?
20-pay Life
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental Death and Dismemberment rider (AD&D)
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans
A company that owns a life insurance policy on one of its key employees may do all the following except:
Change the policy's interest rate
All of these are characteristics of an Adjustable Life policy EXCEPT:
Face amount can be adjusted using policy dividends
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
Without evidence of insurability
The incontestable clause allows an insurer to:
contest a claim during the contestable period
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life policy with an Other Insured Rider
All of these are characteristics of an adjustable life policy, except:
Face amount can be adjusted using policy dividends
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 year convertible term
A(n) _________ Life policy offers the owner investments in products such as money- market funds, long-term bonds and equities.
Variable
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole life
All of these statements about the waiver of premium provision are correct, EXCEPT:
insured must be eligible for social security disability for claim to be accepted.
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:
The cost
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "straight" indicate when using this phrase.
The duration of premium payments.
Term insurance has which of the following characteristics?
Expires at the end of the policy period.
What does a Face Amount Plus Cash Value Policy pay upon the insured's death?
Face amount plus the policy's cash value
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
A cost of living rider gives the insured
additional death benefits
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at Age 70.
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
Whole life insurance policies are contractually guaranteed to provide each of the following, Except:
Partial withdrawal features beyond a surrender charge 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?
Variable Life
A policyowner may generate taxable income from which of the following dividend options
accumulation at interest
A(n) _____________ term life policy is normally used when covering an insured's mortgage balance
decreasing
Variable Life products require a producer to
hold a Life Insurance license and a Securities license