Flexible Policies

What happens when a universal life policyholder pays the target premium?

Paying the target premium will build cash value in the policy, and the policy will resemble whole life insurance. The correct answer is: The policy will resemble whole life insurance.

What policy provides flexible premiums, cash values, face amounts, premium-paying period and length of coverage?

Adjustable life insurance policies allow policyowner's to raise or lower the premium and face amount, and change the coverage period and premium-paying period. The correct answer is: Adjustable life

In a universal life insurance policy, the two most common adjustments made during a month are:

Each month, the cost of the death protection is deducted from the cash value, and the current interest rate is credited. The correct answer is: Cost of death protection deducted and current interest rate credited

Which policy works the same way as universal life, but has an interest rate that is tied to the stock market index?

Equity indexed universal life works the same way as universal life insurance except the interest rate is tied to the stock market index which has the potential to offer greater cash value growth than universal life insurance. The correct answer is: Equity indexed universal life

What policy can be described as annual renewable term with a cash value account?

The cash value in a universal life policy must continually cover the cost of death protection (cannot reach zero); otherwise, the policy will expire after its grace period lapses. In this way, universal life policies are simply annual renewable term with a cash value account. The correct answer is: Universal life

Which of the following best describes option 1 under a universal life policy?

With option 1, the policy will pay a level policy face amount. The correct answer is: The death benefit is a level benefit

Some universal policies permit a cash withdrawal. All of the following are true statements about universal life, EXCEPT:

A cash withdrawal from a universal life policy is NOT treated as a loan. The correct answer is: It is treated as a loan.

For what reason would the insurance company raise the death benefit of a universal life policy?

Life insurance policies must comply with the seven-pay test in order to keep their tax-exempt status. If the cash value is growing too quickly, the insurer will increase the policy's death benefit so the policy does not become a MEC. The correct answer is: Prevent the cash value from growing too quickly

Sandra wants to have flexibility with her life insurance policy to accommodate changes in her situation. She should consider:

The adjustable life policy offers flexibility on a variety of characteristics of the policy. The correct answer is: Adjustable life

An adjustable life policy allows the policyowner to make all of the following changes, EXCEPT:

Only variable life policies allow policyowner's to invest premiums in the insurer's separate account. The correct answer is: Invest premiums in a separate account