Life Insurance Policies
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a. modified endowment contract (MEC) b. level term life c. graded premium whole life d. single premium whole life
d. single premium whole life
Which of the following statements about group life is correct? a. the premiums are higher than in an individual policy because there is no medical exam b. the group sponsor receives a certificate of insurance c. the policy can be converted to an individual term insurance policy d. the cost of coverage is based on the ratio of men and women in the group
d. the cost of coverage is based on the ratio of men and women in the group
An adjustable life policyowner can change which of the following policy features? a. the mortality expense b. the investment account c. the insured d. the coverage period
d. the coverage period
Which of the following is NOT true regarding a variable universal life policy? a. the cash values are not guaranteed b. the death benefit is fixed c. the policyowner can participate in some of the investment decisions d. the minimum death benefit is guaranteed
b. the death benefit is fixed
Which of the following policies would be classified as a traditional level premium contract? a. universal life b. variable universal life c. straight life d. adjustable life
c. straight life
Which of the following is an example of a limited-pay life policy? a. level term life b. straight life c. life paid-up at age 65 d. renewable term to age 70
c. life paid-up at age 65
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a. the death benefit can be increased only when the policy has developed a cash value b. the death benefit can be increased only by exchanging the existing policy for a new one c. the death benefit can be increased by providing evidence of insurability d. the death benefit cannot be increased
c. the death benefit can be increased by providing evidence of insurability
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a. for 20 years or until death, whichever comes first b. until the policyowner reaches age 65 c. for at least 20 years d. until the policyowner's age 100, when the policy matures
a. for 20 years or until death, whichever comes first
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? a. interest-sensitive whole life b. life annuity with period certain c. increasing term d. limited pay whole life
d. limited pay whole life
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium account? a. flexible life b. variable life c. adjustable life d. universal life
d. universal life
The type of term insurance that provides increasing death benefits as the insured ages is called a. increasing term b. flexible term c. interest-sensitive term d. age-sensitive term
a. increasing term
Which of the following life insurance policies would be considered interest sensitive? a. whole life b. increasing term c. universal life d. adjustable life
c. universal life
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? a. joint life policy b. survivorship life policy c. second to die d. family income policy
a. joint life policy
A return of premium term life policy is written as hat type of term coverage? a. renewable b. level c. increasing d. decreasing
c. increasing
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? a. single premium whole life b. interest-sensitive whole life c. decreasing term d. adjustable life
d. adjustable life
What are the licensing requirements for someone who sells variable universal life insurance? a. life insurance b. securities c. universal life and variable products d. life insurance and securities
d. life insurance and securities
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a. those who have no history of claims b. those who have been insured under the plan for at least 5 years c. those who have worked in the company for at least 3 years d. those who have dependents
b. those who have been insured under the plan for at least 5 years
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-yr term? a. the insured must provide evidence of insurability to renew the policy b. the insured may only convert the policy to another term policy c. the insured may renew the policy for another 10 years at the same premium rate d. the insured may renew the policy for another 10 years, but at a higher premium rate
d. the insured may renew the policy for another 10 years, but at a higher premium rate
When would a 20-pay whole life policy endow? a. when the insured reaches age 100 b. at the insured's age 65 c. after 20 payments d. in 20 years
a. when the insured reaches age 100
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for life insurance, they were rejected. Why? a. the purpose of the group was to purchase life insurance b. their profession poses too high of a risk for the insurer c. there are not enough people in the group to qualify for group life insurance d. the group has not been established for long enough
a. the purpose of the group was to purchase life insurance
Which statement is NOT true regarding a straight life policy? a. it has the lowest annual premium of the three types of whole life policies b. its premium steadily decreases over time, in response to its growing cash value c. the face value of the policy is paid to the insured at age 100 d. it usually develops cash value by the end of the third policy year
b. its premium steadily decreases over time, in response to its growing cash value
Which option for universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a. option a b. option b c. corridor option d. variable option
b. option b
All of the following are characteristics of a group life insurance plan EXCEPT a. the cost of the plan is determined by the average age of the group b. there is a requirement to prove insurability on the part of the participants c. the participants receive a certificate of insurance as their proof of insurance d. a minimum number of participants is required in order to underwrite the plan
b. there is a requirement to prove insurability on the part of the participants
An individual purchased a $100,000 joint life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? a. nothing b. $50,000 c. $100,000 d. $200,000
c. $100,000
Concerning juvenile life insurance, which of the following statements is INCORRECT? a. it can be a limited premium payment policy b. juvenile life is classified as any life insurance written on the life of a minor c. juvenile life is classified as any life insurance purchased by a minor d. usually a parent or guardian is the applicant for insurance on the life of a minor
c. juvenile life is classified as any life insurance purchased by a minor
Which policy component decreases in decreasing term insurance? a. cash value b. dividend c. premium d. face amount
d. face amount
The death benefit in a variable universal life policy a. is guaranteed to be higher than when the policy is originally issued b. is fixed c. always equals the face amount stated in the policy d. depends on the performance of a separate account
d. depends on the performance of a separate account
All of the following are characteristics of group life insurance EXCEPT a. certificate holders may convert coverage to an individual policy without evidence of insurability b. premiums are determined by the age, sex and occupation of each individual certificate holder c. amount of coverage is determined according to nondiscriminatory rules d. individuals covered under the policy receive a certificate of insurance
b. premiums are determined by the age, sex and occupation of each individual certificate holder
Which of the following best defines target premium in a universal life policy? a. the minimum amount to make sure the policy is annually renewable b. the corridor of insurance c. the recommended amount to keep the policy in force throughout its lifetime d. the maximum amount the policyowner may pay on a policy
c. the recommended amount to keep the policy in force throughout its lifetime
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? a. she will still be covered under the group plan, but will have to pay an individual policy premium b. she can only convert her coverage without proof of insurability if she has the master policy c. she must apply for a new policy, which requires her to provide proof of insurability d. she can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
d. she can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? a. variable life b. adjustable life c. graded premium life d. limited-pay life
d. limited-pay life
An insured buys a 5 year level premium term policy with a face value amount of $10,000. The policy also contains renew ability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? a. it will remain the same for the new 5 year term b. it will decrease for the new 5-year term since the insured is now a lesser risk to the company c. it will increase each year during the next 5 years as the face amount increases each year d. it will increase because the insured will be 5 years older than when the policy was originally purchased
d. it will increase because the insured will be 5 years older than when the policy was originally purchased
The premium of a survivor ship life policy compared with that of a joint life policy would be a. half the amount b. lower c. higher d. as high
b. lower
Which component increases in the increasing term insurance? a. cash value b. interest on the proceeds c. premium d. death benefit
d. death benefit
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT a. the premium for individual coverage will be based upon the insured's attained age b. the insured may choose to convert to term or permanent individual coverage c. the insured would not need to prove insurability for a conversion policy d. the insured may convert coverage to an individual policy within 31 days
b. the insured may choose to convert to term or permanent individual coverage
Which of the following is called a "second to die" policy? a. juvenile life b. joint life c. survivorship life d. family income
c. survivorship life
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as a. the next month's premium is sufficient to cover both the current premium amount and the skipped amount b. the policy contains sufficient cash value to cover the cost of insurance c. the previous premium payments were high enough to create an excess of premium d. the policyowner cannot skip premiums without the policy lapsing
b. the policy contains sufficient cash value to cover the cost of insurance
All of the following could own group life insurance EXCEPT a. a group needing low-cost life insurance b. a group sponsored by an employer c. an alumni group d. a debtor group
a. a group needing low-cost life insurance
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a a. convertible term policy b. renewable term policy c. decreasing term policy d. whole life policy
a. convertible term policy
A universal life insurance policy has 2 types of interest rates that are called a. guaranteed and current b. option a and option b c. fixed and variable d. minimum and target
a. guaranteed and current
To sell variable life insurance policies, an agent must receive all of the following EXCEPT a. a life insurance license b. SEC registration c. FINRA registration d. a securities license
b. SEC registration
The LEAST expensive first-year premium is found in which of the following policies? a. level term b. annually renewable term c. increasing term d. decreasing term
b. annually renewable term
All of the following entities regulate variable life policies EXCEPT a. the insurance department b. the guaranty association c. federal government d. the SEC
b. the guaranty association
An individual has just borrowed $10,000 from his bank on a 5-yr installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a. universal life b. whole life c. decreasing term d. variable life
c. decreasing term
Which of the following best describes annually renewable term insurance? a. neither the premium nor the death benefit is affected by the insured's age b. it provides an annually increasing death benefit c. it is level term insurance d. it requires proof of insurability at each renewal
c. it is level term insurance
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may a. prolong the open enrollment period b. increase medical requirements on existing members c. require evidence of insurability d. require a higher premiums
c. require evidence of insurability
In an adjustable life insurance policy all of the following can be changed by the policy owner EXCEPT a. the premium b. the amount of insurance c. the type of investment d. the length of coverage
c. the type of investment
The death protection component of universal life insurance is always a. adjustable life b. decreasing term c. annually renewable term d. whole life
c. annually renewable term