Chapter 4 Types of Policy

Annually renewable term policies provide a level death benefit for a premium that

Increases annually.

A Return of Premium term life policy is written as what type of term coverage?

Increasing

What are the two components of a universal policy?

Insurance and cash account

Which of the following is correct regarding credit life insurance?

It insures the life of a debtor.

In Modified Life policies, what happens to the premium?

It is level at the beginning and increases after the first few years.

Which of the following best describes annually renewable term insurance?

It is level term insurance.

Which statement is NOT true regarding a Straight Life policy?

Its premium steadily decreases over time, in response to its growing cash value.

Variable Whole Life insurance is based on what type of premium?

Level fixed

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

Level term

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Option B

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? 1

Payor Benefit

In term policies, what happens to the premium throughout the term of the policy?

Premium always remains level.

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

Required a premium increase each renewal.

Which type of life insurance policy generates immediate cash value?

Single Premium

Which of the following would help prevent a universal life policy from lapsing?

Target premium

All of the following entities regulate variable life policies EXCEPT

The Guaranty Association.

The initial amount of credit life insurance may NOT exceed

The amount to be repaid under the contract.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability.

All of the following are true regarding a decreasing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of the contract.

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

A full death benefit

For variable products, underlying assets must be kept in

A separate account.

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?

Adjustable Life

The LEAST expensive first-year premium is found in which of the following policies?

Annually Renewable Term

The death protection component of Universal Life Insurance is always

Annually Renewable Term

All of the following statements are correct regarding credit life insurance EXCEPT

Benefits are paid to the borrower's beneficiary.

Which of the following features of the Indexed Whole Life policy is NOT fixed?

Cash value growth

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

Credit life

Which of the following would be the beneficiary in credit life insurance?

Creditor

What is another name for interest-sensitive whole life insurance?

Current assumption life

Which component increases in the increasing term insurance?

Death benefit

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term

Which of the following types of insurance policies is most commonly used in credit life insurance?

Decreasing term

Which policy component decreases in decreasing term insurance?

Face amount

What type of premium do both Universal Life and Variable Universal Life policies have?

Flexible

Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy?

Graded premium whole life

Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?

Greatest

What kind of policy does NOT typically require proof of insurability?

Group insurance

A Universal Life insurance policy has two types of interest rates that are called

Guaranteed and Current.

Which of the following statements is correct regarding a whole life policy?

The policyowner is entitled to policy loans.

Which of the following is TRUE regarding an indeterminate premium whole life policy?

The premium can be raised up to a guaranteed maximum rate.

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment.

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?

They can convert their coverage to permanent life insurance without evidence of insurability.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

Universal life

What kind of policy allows withdrawals or partial surrenders?

Universal life

Which of the following is a key distinction between variable whole life and variable universal life products?

Variable whole life has a guaranteed death benefit.

Which of the following types of policies will provide permanent protection?

Whole life