(Life) 3 - Life Insurance Policies - Provisions, Options and Riders (1)
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 Limited pay whole life policies have level premiums that are limited to a certain period.
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion The conversion provision allows the policysowner to change the policy to a permanent life policy without providing evidence of insurability.
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract Policies that do not meet the 7-pay test are considered MEC's and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.
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 The type of policy in this situation is a Modified Whole Life policy.
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment With Variable Universal Life, the policyowner controls the investment of cash values and selects the timing and amount of premium payments.
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?
Renewable Renewable Term policies guarantee the insured the right to continue term coverage after expiration of the initial policy period.
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance Equity Indexex Life Insurance is permanent life insurance that allows policyholders to tie accumulation values to a stock market index.
Which policy requires a producer to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life Whole life insurance is designed to mature at age 100.
A variable insurance policy
does not guarantee a return on its investment accounts In contrast, variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends An insured may make all of these actions with an adjustable life policy EXCEPT "face amount can be adjusted using policy dividends".
Credit Life insurance is
issued in an amount not to exceed the amount of the loan Credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid.
What kind of premium does a Whole Life policy have?
level A Whole Life insurance policy has a level premium.
A Limited-Pay Life policy has
premium payments limited to a specified number of years In a Limited-Pay Life policy, premium payments are limited to a specified number of years.