Life Insurance 2

Kate bought a universal life policy with a $200,000 death benefit and chose death benefit Option 1. In year five of the policy, she withdrew $50,000 from the policy's cash value. If she dies shortly after withdrawing the $50,000, what will her beneficiary receive? $50,000 $200,000 $250,000 $150,000

$150,000

Gina owns a $200,000 five-year renewable term insurance policy and wants to renew the policy at the end of the term. In this case, all the following statements are correct, EXCEPT: Gina must prove insurability before the insurer can renew the policy. The insurer will base the premium for the renewal coverage on Gina's age at the time of renewal. Gina will be able to renew the policy any time before the policy expires. The policy may prohibit policy renewals beyond a certain age, such as 65 or 70.

Gina must prove insurability before the insurer can renew the policy.

What typically happens to the face amount of an indexed whole life insurance policy over time? It increases annually to reflect increases in the consumer price index. It increases annually based on a fixed rate specified in the policy. It increases every year at the same rate as the national inflation rate. It increases annually as long as the insured continues to prove insurability.

It increases annually to reflect increases in the consumer price index.

Which statement regarding adjustable life insurance is correct? It offers five times higher cash value than whole life insurance. The policyowner can stop and start premium payments at any time. The policyowner can increase the death benefit and keep the premium unchanged without hurting the policy's cash value. Premiums can increase or decrease to suit the policyowner's changing needs.

Premiums can increase or decrease to suit the policyowner's changing needs.

All the following statements about ordinary (straight) whole life insurance are correct EXCEPT: The death benefit increases during the early policy years and then levels off. The insured pays premiums for his or her entire life. Premiums remain level. It has a steadily increasing cash value.

The death benefit increases during the early policy years and then levels off.

Which of the following statements regarding the practice of backdating a life insurance application is correct? The policy premium is lower than it would be if the policy was issued with the actual date the application was signed. Most states allow a policy application to be backdated up to 12 months. The producer has the authority to approve the backdating of policy applications. The policyowner is not required to pay back premiums from the backdated issue date to the present.

The policy premium is lower than it would be if the policy was issued with the actual date the application was signed.

Which one of the following statements about variable life insurance is correct? Variable life insurance policies do not guarantee a minimum death benefit. The death benefit under a variable life insurance policy will never be more than the stated minimum. Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account. With variable life insurance, it is the insurance company that assumes most of the investment risk.

Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account.

The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy? a renewable term policy a convertible term policy a paid-up whole life insurance policy a permanent life insurance policy

a permanent life insurance policy

Frank, an applicant for life insurance who is a substandard risk, can expect to pay a premium that is best described as which of the following? generally higher than for a standard risk generally the same as for standard risks for the duration of the policy generally lower than for standard risks generally the same as for standard risks, but over a shorter period of time

generally higher than for a standard risk

With a survivorship life insurance policy, the insurer pays the death benefit: when the surviving spouse dies only when the older of the two insureds dies when either of the insureds dies first only when the younger of the two insureds dies

when the surviving spouse dies

Which one of the following statements about variable life insurance is correct? There is no guaranteed death benefit with variable life. Variable life policyowners cannot choose how their contract premiums are invested. The cash value is not guaranteed with variable life. Variable life's premiums are only invested in safe, conservative investments.

The cash value is not guaranteed with variable life.

Which one of the following statements about indexed whole life insurance is correct? Its cash values may decrease as well as increase. There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other. The policyowner may adjust the policy premium up or down. It combines whole life insurance and term life insurance.

There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other.

Which of the following statements best explains the basic level premium concept of ordinary whole life insurance? The death benefit is decreased to offset the rising cost of insurance with age. The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age. Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance. The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level.

The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age.

Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? modified premium whole life single premium whole life graded premium whole life 10-pay whole life

graded premium whole life

To renew a term life insurance policy at a lower re-entry rate than the guaranteed rate, what must the insured prove? an insurable interest exists his or her insurability he or she is under age 60 his or her attained age

his or her insurability

Insurers will decline applicants with very high substandard risk ratings. What percentage of applicants do insurers reject? Practically speaking, no applicants are rejected as uninsurable. about 2 percent about 5 percent about 10 percent

about 2 percent

Andrea owns a variable universal life insurance policy and would like to stop making premium payments for several years while her son attends college and resume them when he graduates. Regarding her policy, which of the following statements is most correct? As long as the policy's cash value covers the monthly deductions for the cost of insurance and expenses, Andrea's policy will remain in force. Andrea can stop making premium payments while her son is in college as long as she makes up the missed payments later. Andrea can increase or decrease premium payments under her policy but cannot stop making payments altogether. Andrea's policy will lapse.

As long as the policy's cash value covers the monthly deductions for the cost of insurance and expenses, Andrea's policy will remain in force.

How is increasing term life insurance normally sold? as a rider attached to a permanent life insurance policy as an endorsement as a stand-alone term life insurance policy as a permanent insurance policy

as a rider attached to a permanent life insurance policy

Which of the following statements regarding the replacement of a life insurance policy is correct? replacement can be achieved without requiring the applicant to prove insurability once again replacing a policy will require the insured to go through a new contestability period replacing a policy usually results in a lower premium the new policy may be cancellable by the insurer

replacing a policy will require the insured to go through a new contestability period

A life insurance application's main purpose is to provide underwriters with information regarding: the type of policy being applied for the reason for the requested coverage the applicant's personal risk data and health the applicant's wealth

the applicant's personal risk data and health

Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct? Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time. Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's.

Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time.

Which of the following statements about backdating life insurance applications is correct? The purpose for backdating an application is to qualify for a better underwriting classification. Only the insurance company, not the producer, can authorize the backdating of specific applications. Backdating has no impact on the policy's premium, but it does result in the policy being issued with a cash value. Insurers normally allow an applicant to backdate a policy by up to 2 years.

Only the insurance company, not the producer, can authorize the backdating of specific applications.

With a joint life insurance policy, which of the following best describes the coverage continuation option available to the surviving insured upon the death of the first insured? The surviving insured may continue the existing joint life policy, after providing evidence of insurability. The surviving insured may buy an individual policy with the same or a lesser face amount, without having to provide evidence of insurability. The surviving insured may buy an individual policy with the same or a lesser face amount, after providing evidence of insurability. The surviving insured may continue the existing joint life policy, without having to provide evidence of insurability.

The surviving insured may buy an individual policy with the same or a lesser face amount, without having to provide evidence of insurability.

To meet the federal definition of life insurance and thus qualify for life insurance's favorable tax treatment, all permanent life insurance policies must have: a cash value that eventually exceeds the policy's death benefit a cash value that never equals the death benefit a cash value that grows to equal the death benefit no later than the insured's life expectancy a corridor of pure insurance protection between the cash value and death benefit, the amount of which depends on the insured's age

a corridor of pure insurance protection between the cash value and death benefit, the amount of which depends on the insured's age

A life insurance applicant who is a preferred risk can expect to pay a premium that is best described as which of the following? generally lower premiums than for standard risks, but over a short period of time, at which point rates increase to the same as standard rates generally the same premiums as for standard risks, for the life of the policy generally lower premiums than for standard risks for the life of the policy generally higher premiums than for a standard risk

generally lower premiums than for standard risks for the life of the policy

What is the main appeal of joint life insurance? ability to cover an entire family higher death benefit lower cost than two separate policies underwriting is performed only on the older of the two applicants

lower cost than two separate policies

With interest-sensitive whole life insurance policies, insurers may change premium rates after reviewing their investment experience in a process called: reconfiguration renewal underwriting indexing redetermination

redetermination

In-person delivery of a whole life insurance policy gives the producer the opportunity to do all of the following, EXCEPT: review coverage to determine if the policyowner wants to increase the policy's face amount explain policy benefits, terms, and riders get any required delivery forms, discuss any exclusions, and explain any substandard ratings explain that the free-look period begins at that moment, giving the policyowner ten days (in most states) to return the policy for a full premium refund

review coverage to determine if the policyowner wants to increase the policy's face amount

Under a joint life insurance policy, when does the insurer pay the death benefit? upon the death of the insured who dies second when the younger insured dies when the older insured dies upon the death of the insured who dies first

upon the death of the insured who dies first