life insurance test

the beneficiary

All of the following must sign life insurance applications, EXCEPT: the insured (if not the applicant) the beneficiary the applicant the agent

They endow before age 120.

Endowment contracts are not considered life insurance (for tax purposes) because They do not pay death benefits. They do not build cash values. They never mature. They endow before age 120.

Group life is less expensive.

For any given amount of coverage, how does the cost of group life insurance generally compare to the cost of individual life insurance? Group life is more expensive. Group life is more expensive for smaller companies only. Group life is about the same cost. Group life is less expensive.

The insurer will cancel the policy.

If the policy loan amount plus interest owed is greater than the policy's cash value, which of the following will happen? The policy will automatically go on the extended term option. The policy will remain in effect. The policy will be surrendered for cash. The insurer will cancel the policy.

The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed.

Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? A trust cannot be a beneficiary; Jerry must name an individual or business. The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed. The trust passes the insurance benefit to Jerry's next of kin. The trustee invests the insurance benefit in securities.

the applicant's personal data and health

Jim's life insurance application is the first source of information an underwriter reviews. An accurate and complete application provides critical information about which of the following? the reason for the requested coverage the applicant's personal data and health the agent the applicant's wealth

automatically apply the extended term option

Kevin owns a whole life insurance policy, issued on a standard basis, that has lapsed for nonpayment of the premium. If Kevin has NOT chosen a nonforfeiture option, which of the following actions will the insurer most likely take? automatically surrender the policy and pay Kevin the cash value automatically suspend coverage until Kevin either reinstates coverage or notifies the insurer of his option choice automatically apply the extended term option automatically apply the reduced paid-up option

July 16

Mary lost her job on June 15. She wants to convert her group life insurance policy to an individual policy. To do so, Mary must apply for a conversion policy by June 30 September 15 July 16 December 15

It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash.

Melissa asks to continue her lapsed universal life insurance policy under the extended term option. How will the insurance company respond? It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash. It will tell Melissa that she cannot elect the extended term option but may elect either the reduced paid-up or cash value payment options. It will ask Melissa to complete the nonforfeiture option selection form. It will tell Melissa that lapsed universal life policies automatically go on the extended term option.

current assumption whole life

Premium rates will vary depending on the insurer's actual experience in which one of the following types of whole life insurance? limited pay whole life graded premium whole life straight whole life current assumption whole life

$100,000

Question 1 The automatic premium loan (APL) provision does which of the following? improves the policyowner's credit rating prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities provides liquidity if the insured wants to increase a policy's face amount Question 2 Paul dies with a $50,000 unpaid loan (including interest) against his $150,000 life insurance policy. What death benefit would the insurance company pay his beneficiary? $100,000 $250,000 $25,000 $50,000

Ralph's $200,000 share will pass equally to his two children when Judy dies. The surviving siblings, Jerry and Paula, will each receive $200,000.

Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. If Judy's life insurance policy designates the death benefit be paid "per stirpes," how will the insurer distribute the policy benefits? Judy's estate will get the entire $600,000 death benefit. Tim and Hal will each receive $100,000. The surviving siblings, Jerry and Paula, will each receive $100,000. Ralph's $200,000 share will pass equally to his two children when Judy dies. The surviving siblings, Jerry and Paula, will each receive $200,000. Tim and Hal will each receive $200,000. The surviving siblings, Jerry and Paula, will each receive $100,000

Jerry and Paula will each receive $300,000

Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. Judy's life insurance policy designates the death benefit per capita. How will the insurer distribute the policy benefits? Jerry and Paula will each receive $300,000 Tim and Hal will divide the death benefit between them. Jerry, Paula, Tim, and Hal will divide the benefits equally among them. Ralph's $200,000 share will pass equally to his two children when Judy dies.

She will stop paying premiums.

Sarah, age 40, has just bought a 20-pay whole life policy. Which of the following statements is correct when she turns 60? She will stop paying premiums. She will receive the policy's death benefit. She will receive the policy's cash value. She will have a fully matured policy.

a minimum rate of return on the policy's cash value

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? to pay premiums for Sylvia in the event of emergencies to send an agent to Sylvia's home to collect the premiums a minimum rate of return on the policy's cash value to reinstate Sylvia's policy if it ever lapses

prevents a life insurance policy from lapsing if the policyowner fails to pay a premium

The automatic premium loan (APL) provision does which of the following? improves the policyowner's credit rating prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities provides liquidity if the insured wants to increase a policy's face amount

The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death.

The facility of payment clause of a life insurance policy could be applied in all the following situations EXCEPT: The sole beneficiary dies before the policyowner and the policyowner did not name a contingent beneficiary. The sole beneficiary is a minor at the time of the insured's death. The sole beneficiary is a charitable organization that no longer exists at the time of the insured's death. The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death.

temporary term insurance.

The insurance coverage provided under a temporary insurance receipt is whatever type of life insurance was applied for. temporary term insurance. temporary whole life insurance. not insurance coverage at all, but the insurer's general account assets.

10

To be eligible for group life insurance, a group must generally cover at least how many persons under one master policy? 3 10 5 15

The insurer names a blood relative or someone with a valid claim as the new beneficiary.

Under a policy's facility of payment provision, what does an insurer do with the death benefit? The insurer names a blood relative or someone with a valid claim as the new beneficiary. The insurer keeps the money. The insurer holds the funds in trust until the insured's estate is probated. The insurer transfers the money to the state.

when the surviving insured dies

Under a survivorship life insurance policy, when does the insurer pay the death benefit? when the first insured dies when either insured dies when the deceased insured has surviving children or dependents when the surviving insured dies

someone serving as an aircraft crew member

Under standard exclusions, most insurers would deny coverage of which of the following? someone flying as a passenger in a private airplane someone killed as a bystander during a bank robbery someone flying as a passenger in a commercial airplane someone serving as an aircraft crew member

3 years

Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the estate if the transfer occurred within how many years before death? 7 years 3 years 4 years 5 years

100 percent

Under traditional whole life insurance plans, policy loans can be as high as what percent of the cash value? 75 to 90 percent 50 to 75 percent 25 percent 100 percent

reduced paid-up option

Under which nonforfeiture option does permanent life insurance continue in force with no further need for premiums? extended term option cash surrender option reduced paid-up option cash withdrawal provision

securities

What are variable life insurance policies considered? conservative investments modified endowment contracts risk-free investments securities

The insurance benefits go directly to the charity. They do not pass through probate or become assets of the estate

What is the advantage of naming a charity as beneficiary of life insurance? The estate's executor distributes the insurance benefits to the charity, as the insured directed The insurance benefits must pass through probate before going to charity It avoids estate taxes and final expenses The insurance benefits go directly to the charity. They do not pass through probate or become assets of the estate

six months

What is the maximum amount of time most states allow insurers to delay paying cash surrender values? one month one week six months nine months

the relationship between the insured and beneficiary

When paying policy death benefits, life insurance companies must consider all of the following, EXCEPT: the relationship between the insured and beneficiary the order of beneficiaries and their succession the share of the death benefits that goes to each beneficiary, if the insured has named more than one the succession of beneficiaries

Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender.

Which of the following best describes a partial surrender of a permanent (non-universal) life insurance policy? Under a partial surrender, the death benefit is not affected by the amount of the surrender. Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender. A partial surrender is the same as a cash withdrawal under a universal life insurance policy. A partial surrender is a loan against the policy's cash surrender value.

policy loans

Which of the following is NOT recognized as a standard life insurance nonforfeiture options? extended term insurance reduced paid-up insurance cash surrender policy loans

cash surrender option only

Which of the following most correctly describes the nonforfeiture option(s) available with universal life insurance? cash surrender, reduced paid-up, and extended term options cash surrender option only cash surrender and reduced paid-up options only cash surrender and extended term options only

Withdrawals incur interest charges.

Which statement about cash value withdrawals from a universal life insurance policy is NOT correct? Insurers do not require policyowners to repay withdrawals. Withdrawals reduce the death benefit dollar-for-dollar. Withdrawals incur interest charges. Policyowners can withdraw funds as long as the policy has a cash surrender value.

Legal entities, such as trusts and corporations, cannot be beneficiaries of individual life insurance.

Which statement about life insurance beneficiary designations is NOT correct? A policyowner can choose a natural person such as a spouse, a child, or children as beneficiaries. Beneficiaries get the policy's proceeds after the insured dies. Insurance buyers are relatively free to choose the beneficiaries of their policies. Legal entities, such as trusts and corporations, cannot be beneficiaries of individual life insurance.

The spendthrift clause keeps beneficiaries from claiming any death benefits until the insurer checks their personal and business credit histories.

Which statement regarding the "spendthrift clause" of a life insurance policy is NOT correct? The spendthrift clause keeps beneficiaries from claiming any death benefits until the insurer checks their personal and business credit histories. The spendthrift clause protects only death benefits paid in installments or under the interest-only option. The spendthrift clause keeps the beneficiary's creditors from forcing the insurer to pay them the death benefit. The spendthrift clause keeps the beneficiary from changing the settlement option or alienating the funds.

Frank Grant

Who is the tertiary beneficiary in the following beneficiary designation: "Sally Grant, wife of the insured, if she survives the insured; otherwise in equal shares to surviving children of the insured, if any; otherwise to Frank Grant, brother of the insured." the insured's estate the surviving children Sally Grant Frank Grant

the full death benefit

Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer? a return of the premiums paid nothing a return of premiums paid, plus interest the full death benefit

3 days of requesting the report.

The Fair Credit Reporting Act (FCRA) generally requires insurers that seek a credit report to notify the applicant of the request within 10 days of requesting the report. 3 days of requesting the report. 24 hours of requesting the report. 5 days of requesting the report.

lower cost than two separate policies.

What is the main appeal of joint life insurance? renewal feature higher death benefit lower cost than two separate policies. ability to cover an entire family

higher annual premiums to account for lost interest and additional insurer costs

What is the result of Alice paying her life insurance premiums more frequently than once a year? lower annual premiums higher annual premiums to account for the increased risk to the insurer higher annual premiums to account for lost interest and additional insurer costs no effect

well before age 120, usually at age 65

A life insurance policy matures or endows when its guaranteed cash value equals its face amount. With an endowment contract, when does the policy endow? after age 120 when the insured dies well before age 120, usually at age 65 at age 120

The insurer bears the investment risk of any losses.

A policyowner owns a variable universal life insurance policy that offers a wide array of variable subaccounts. With respect to this policy, which of the following statements is NOT correct? Funds can be transferred from one subaccount to another without income tax consequences. The insurer bears the investment risk of any losses. They are not guaranteed by the insurer. The variable subaccounts allow policyowners to participate in the investment performance of the assets underlying their contracts.

a corridor of insurance protection between the cash value and death benefit that depends on the insured's age.

According to the legal definition of life insurance, a contract must maintain a certain level of pure risk to be considered life insurance. This means that a life insurance policy must contain which of the following? a corridor of insurance protection between the cash value and death benefit that depends on the insured's age. a cash value that is more than the death benefit. a death benefit equal to at least 25 percent of the policy's cash value. a death benefit equal to at least 50 percent of the policy's cash value.

mortality and interest assumptions

Actuaries calculate net single premiums based on which of the following? mortality and dividend assumptions mortality and interest assumptions morbidity and interest assumptions mortality and assumed bond rates

Pete, a preferred risk.

All other factors being equal, which of the following applicants can expect to pay the lowest premium for a given face amount of life insurance protection? Jim, a standard risk. Carl, a sub-standard risk. Sean, whose application was declined as uninsurable. Pete, a preferred risk.

Cross out and initial the incorrect entry, and enter the correct information next to it.

Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which one of the following? Write over the incorrect entry with the correct information. Cover up the incorrect entry and enter the correct information. Cross out and initial the incorrect entry, and enter the correct information next to it. Erase the original entry and enter the correct information.

basis

As a legal contract, a life insurance requires all of the following elements, EXCEPT acceptance consideration basis offer

$150,000

Bob bought a $100,000 universal life insurance policy and chose an increasing death benefit. At his death ten years later, the policy's cash value had increased to $50,000. What will his beneficiary receive? $150,000 $200,000 $100,000 $50,000

A family income policy combines whole life insurance with decreasing term, while a family maintenance policy combines whole life and level term insurance.

How does a family income policy differ from a family maintenance policy? A family income policy combines whole life insurance with level term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with increasing term insurance, while a family maintenance policy combines whole life and level term insurance. A family income policy combines whole life insurance with an increasing term insurance, while a family maintenance policy combines whole life and decreasing term. A family income policy combines whole life insurance with decreasing term, while a family maintenance policy combines whole life and level term insurance.

two years from the date of issue

How long is the standard incontestability period? two years from the date of issue 31 days from the date of issue five years from the date of issue one year from the application date

surrender the policy.

In a collateral assignment, policyowners may (or must) do all the following, EXCEPT borrow against any cash value that exceeds the loan security amount pay the premiums. surrender the policy. change beneficiaries.

earnings available for distribution (the divisible surplus)

In a participating policy, the insurance company pays the policyowner a dividend out of which of the following? the company's cash reserves earnings apportioned from company profits earnings available for distribution (the divisible surplus) set amounts prescribed in the policy

Prohibits insurance companies from discriminating on the basis of information derived through genetic test.

The Genetic Information Nondiscrimination Act (GINA) essentially does which of the following? Prohibits insurance companies from discriminating on the basis of information derived through genetic test. Requires insurance companies to consider genetic test information when underwriting applicants for life insurance. Prohibits insurance companies from telling applicants that they were rejected on the basis of information derived through a genetic test (if that is the case). Requires insurance companies to tell applicants that they were rejected on the basis of information derived through a genetic test (if that is the case).

Field underwriting

The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance is called Field underwriting Agency development Due diligence Fiduciary process

using life insurance for wagering or betting

The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance for wagering or betting using life insurance to fund future cash needs overusing life insurance designating an ineligible person as the policy beneficiary

a valid reason for the unpaid premiums

To reinstate his lapsed life insurance policy under a reinstatement agreement, Peter must provide all of the following, EXCEPT: payment of all back premiums, plus interest proof of insurability a written request or application for reinstatement a valid reason for the unpaid premiums

31 days

What is a typical life insurance policy's grace period? 20 days 2 years 31 days 10 days

the borrower's life

What is credit life insurance designed to cover? an employee's life the creditor's life the borrower's life an association member's life

10 days after the policy is delivered, or it can be extended to 45 days after the insurance application is completed, whichever is later The free-look period for a variable life policy general

When does the free-look period for a variable life insurance policy end? 30 days after the policy is delivered 7 days after the policy is delivered 21 days after the policy is delivered 10 days after the policy is delivered, or it can be extended to 45 days after the insurance application is completed, whichever is later

the group as a whole

When underwriting a group life insurance policy, which of the following does the underwriter looks at? the health status of the group's older members only the health status of specific members the group as a whole the health status of the group's youngest members only

Bill, who is on long-term disability this month

Which of the following employees of ABC Computers could NOT convert their group life coverage to an individual policy? Paul, who retired this month Emily, who was laid off from her job this month Bill, who is on long-term disability this month Sue, who voluntarily terminated employment this month to work for a competitor

lower cost

Which of the following is the main appeal of joint life insurance compared to two separate policies? renewal feature higher death benefit for the same premium as an individual policy. ability to cover an entire family lower cost

the business

Who normally owns life insurance used to meet business insurance needs? the business jointly with the insured the business the insured the employees

They endow before age 120.

Why are endowment contracts NOT considered life insurance? They endow before age 120. They do not build cash values. They endow after age 120. They do not pay death benefits.

redetermination

With interest-sensitive whole life insurance policies, insurers may change interest and premium rates after reviewing their investment experience. What is the process that insurers use to make these changes called? redetermination reconfiguration re-evaluation indexing

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

With respect to adjustable life insurance, which one of the following statements is correct? The policyowner stops making premium payments after the policy has been in force for a certain period. It offers five times higher cash value than whole life insurance. Premiums can increase or decrease to suit the policyowner's changing needs. The policyowner can increase the death benefit without hurting the policy's cash value.

adjustable term insurance

All the following are common types of term life insurance EXCEPT: annually renewable term increasing term insurance level term insurance adjustable term insurance

They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.

Actuaries begin the process of calculating life insurance premium rates by using mortality tables, which help predict future experience but not with 100 percent certainty. How do actuaries compensate for this uncertainty when determining the gross premium charged to the policyowner? They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium. They assume a higher rate of interest than actually expected, which provides a safety margin by increasing the gross premium. They assume there will be fewer deaths than their past mortality experience would predict, which provides a safety margin by increasing the gross premium. They add a safety margin load to the mortality charge, increasing the net premium.

weekly or monthly, often personally to the agent who comes to the policy owner's home.

Alex owns a "home service" life insurance policy, which means he most likely pays his premiums in which of the following ways? quarterly by checking account debit. with a single premium payment annually by personal check. weekly or monthly, often personally to the agent who comes to the policy owner's home.

Upon the insured employee's death, the surviving family receives the policy's death benefit.

All of the following statements about key person life insurance are correct, EXCEPT: Key person, or key employee, life insurance is an example of third-party ownership. The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee Upon the insured employee's death, the surviving family receives the policy's death benefit. Life insurance used as key person life is normally owned by the business rather than the insured.

The applicant must have an insurable interest in the proposed insured.

At the time the application is signed, which one of the following is a requirement for life insurance ownership in all cases? The applicant must have an insurable interest in the proposed insured. The proposed owner must be married The proposed owner must be an American citizen The proposed owner must be a natural person

Bob's beneficiary will not get any benefits.

Bob bought a $100,000 ten-year level term insurance policy on March 1. What will happen if he dies ten years later on March 10? The beneficiary of Bob's policy will receive the $100,000 death benefit, minus an amount equal to the one-year term premium that would be required to extend the policy beyond the current policy termination date. The beneficiary of Bob's policy will get $100,000. The beneficiary of Bob's policy will get part of the $100,000 death benefit. Bob's beneficiary will not get any benefits.

term insurance

Bob's only goal is to provide a death benefit to protect his family in case he dies while his children are young. What type of life insurance is best suited to this need? group insurance whole life insurance business insurance term insurance

generally higher premiums than for a standard risk

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 premiums than for a standard risk generally the same premiums as for standard risks, but over a shorter period of time generally lower premiums than for standard risks generally the same premiums as for standard risks

whole life insurance

Harry and Constance want life insurance to provide death benefits in case either dies, as well as living benefits in the event of financial emergencies. Which of the following would this couple most likely buy? whole life insurance business life insurance term insurance group insurance

before crediting the premium to the policy's cash value

In a front-end loaded universal life contract, when does an insurer deduct costs and fees from each premium? at the end of each policy year after premiums have been deposited and when values are withdrawn from the policy before crediting the premium to the policy's cash value twice each year after premiums have been deposited and credited to the policy's cash value

applicants who ask for very high amounts of life insurance or business insurance

Insurers use inspection reports to verify the information applicants provide to agents and examiners. Who is most likely to be the subject of an inspection report? applicants who ask for very high amounts of life insurance or business insurance applicants whom the agent knows well all applicants business life insurance applicants who have already been issued high amounts of life insurance

The application and the first premium

What is the consideration that an applicant gives an insurance company when buying life insurance? The application only The application and the first premium The application and Agent's Report The first premium only

cash value

What is the term for the money that builds within a whole life insurance policy over the policy's life? cash value death benefit policy reserve accrued value

The owner can only take the dividend as cash.

All of the following statements about participating policies are correct EXCEPT The owner can only take the dividend as cash. The owner can leave the dividend in the policy or use it to buy term insurance. The owner can apply the dividend to the premium payment in some form. The insurance company pays the owner a dividend out of its earnings that are available for distribution (the divisible surplus).

The policyowner must pay all premiums owed from the backdated issue date to the present.

All of the following statements regarding the practice of backdating a life insurance application are correct EXCEPT: It effectively extends the incontestability period by adding the backdated period to the two-year incontestability period provided in the contract. The policyowner must pay all premiums owed from the backdated issue date to the present. The policy premium is based on the insured's age on the policy issue date. Most states do allow a policy to be backdated up to six months.

Premiums will be lower.

An actuary is setting life insurance rates. What affect will it have on a policy if higher interest assumptions are used? Premiums will be lower. Premiums will be higher. The effect cannot be known. It will have no effect.

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

Andrea owns a variable universal life insurance policy. She has been paying premiums for the last ten years. The policy's cash value is now $75,000. When her son enters college she stops making premium payments and pays tuition instead. After her son graduates, Andrea plans to start making premium payments again. Which one of the following statements is most correct, assuming Andrea wishes to keep the policy 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'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 stays in force. Andrea can increase or decrease premium payments under her policy but cannot stop making payments altogether.

the owner, the insured and the insurance company.

In a third-party life insurance contract, the parties to the contract are the the owner, the insured and the insurance company. the owner, the insured and the beneficiary. the insured, the beneficiary and the insurance company. the insurance company, the owner and the beneficiary.

require the applicant to sign a waiver exempting the producer from any liability associated with the replacement.

In cases where an existing life insurance policy is going to be replaced by new life insurance policy, the producer must do all the following EXCEPT: list all existing life insurance policies that will be replaced. give the applicant a policy comparison statement signed by the producer. give the applicant a "Notice to Applicants Regarding Replacement of Life Insurance." require the applicant to sign a waiver exempting the producer from any liability associated with the replacement.

The insured has no right to name the beneficiary.

In personal insurance, what is the disadvantage to third-party ownership? The insured has access to the policy's cash values The policyowner has no right to name the beneficiary The beneficiary holds rights to the policy's cash values The insured has no right to name the beneficiary.

increase the policy's face amount, if the applicant agrees to do so (and pay the additional premium) within ten days of policy delivery.

In-person delivery of a whole life insurance policy gives the agent the opportunity to do all of the following, EXCEPT get any required delivery forms, discuss any exclusions, and explain any substandard ratings. explain policy benefits, terms, and riders. begin the free-look period. increase the policy's face amount, if the applicant agrees to do so (and pay the additional premium) within ten days of policy delivery.

annually renewable term

What is the type of insurance used most often in group life insurance plans? annually renewable term 30-year renewable term single-premium whole life 20-year renewable term

ten-year family maintenance policy

Jack bought a life insurance policy to make sure his surviving family members would have an income for ten years if he died prematurely. Five years after purchasing the policy, Jack died. Beginning with the date of his death, the policy began paying a level monthly benefit to his family for ten years. What type of policy did Jack buy? ten-year family income policy survivorship life insurance policy ten-year family maintenance policy ten-year family protection policy

a return of premiums paid, plus interest

Jones commits suicide 18 months after buying a life insurance policy that contains a standard suicide provision. Jones's beneficiary will get which of the following from the insurer? a return of the premiums paid only the full death benefit nothing a return of premiums paid, plus interest

whether the policy pays dividends to its owner

Life and health insurance can be classified as participating or non-participating. This classification determines which of the following? whether the policy accumulates cash value whether the policy pays dividends to its owner whether the insurance company contributes premium payments, if needed whether the insurer is a member of the Life Insurance Council of America

Life insurance is used to make up for the financial losses that might occur when an important customer dies.

Life insurance applies to business arrangements in all of the following ways, EXCEPT: Partners and partnerships use life insurance to ensure liquidity cash on hand. Life insurance is used to make up for the financial losses that might occur when an important customer dies. Life insurance is often bought by businesses to cover the lives of their key employees or owners. Partners often insure each other's lives (naming themselves as beneficiaries) in order to provide funds that can be used to buy out the business interest of the one who dies

The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company can only retain its coverage on June because she is not a principal of the company. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company would have to drop its coverage for both Hugh and June within 30 days of their departures.

excludes coverage of death that occurs while the insured is operating an aircraft.

Most states permit insurers to include a provision in their life insurance policies that does which of the following? makes the value of the policy at policy maturity anything less than the face amount plus dividend additions minus any outstanding loan amount. allows the insurer to cancel the policy if the total amount owed on a policy loan is less than the cash value of the policy. limits the period for filing a lawsuit against the insurer to less than one year after a contested claim. excludes coverage of death that occurs while the insured is operating an aircraft.

The existing policy's beneficiary designation is changed.

Replacement is considered to have occurred if a life insurance policy is purchased and, in conjunction with that purchase, any of the following occur with an existing policy EXCEPT The existing policy is amended with a reduction in benefits. The existing policy's beneficiary designation is changed. The existing policy is surrendered. The existing policy is converted to reduced paid-up insurance.

Do nothing as the company has no contractual obligation to the policy owner at this point.

Six months ago, Bill surrendered his life insurance policy for its cash value. He now realizes his mistake and asks to reinstate his coverage at his then-attained age. The insurance company is obligated to do which of the following? Ask for repayment of back premiums plus interest only. Do nothing as the company has no contractual obligation to the policy owner at this point. Ask for repayment of back premiums, plus interest, and proof of insurability. Ask for a written request for reinstatement only.

a source of emergency cash for any financial need.

Term life insurance is well suited for all the following needs EXCEPT: protection while the family children are living at home or attending college. a source of emergency cash for any financial need. inexpensive protection until the policyowner can afford permanent life insurance. mortgage protection insurance.

to provide insurance coverage for large-volume customers

The Acme Supply Company might buy life insurance to do all of the following, EXCEPT: to provide insurance coverage for large-volume customers to insure liquidity in case one of the owners or key employees dies to insure the lives of key employees or owners to insure partners' lives to provide liquidity to fund buy-out agreements

renew the policy at lower current rates, though evidence of insurability would be required.

The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policy owner renew the policy at lower current rates without having to provide evidence of insurability. convert the term policy to a permanent life insurance policy. reinstate the policy after it has lapsed without having to provide evidence of insurability. renew the policy at lower current rates, though evidence of insurability would be required.

representations

The entire contract provision specifies that all statements the policyowner makes in the application are considered which of the following? representations warranties claims declarations

If Tom wants to increase the amount of the death benefit by more than $50,000, he will have to buy a new policy.

Tom bought a $100,000 adjustable life insurance policy. With respect to that policy, all the following statements are correct EXCEPT Tom can increase the death benefit under his policy if he proves insurability. If Tom increases the amount of death benefit but does not increase his premium, the cash value growth slows or stops growing. The policy may effectively be changed to a term life, ordinary whole life, or limited-pay whole life policy. If Tom wants to increase the amount of the death benefit by more than $50,000, he will have to buy a new policy.

a guaranteed minimum death benefit equal to the policy's level net amount at risk plus the sum of total premiums paid

Variable universal life policies have the same two death benefit options as those in fixed interest universal life insurance policies. As a third death benefit option, what do some variable universal life polices offer? a guaranteed minimum death benefit equal to the policy's decreasing net amount at risk plus its cash value a guaranteed minimum death benefit equal to the policy's increasing net amount at risk only a guaranteed minimum death benefit equal to the policy's level net amount at risk plus the sum of total premiums paid a guaranteed minimum death benefit equal to the policy's level net amount at risk plus its cash value

Under decreasing term insurance, the death benefit decreases over the policy period while with a level term policy, the death benefit stays level over the policy period.

What is the main difference between decreasing term insurance and level term insurance? Decreasing term life insurance can be converted to a permanent policy while level term cannot. The insured can renew decreasing term life insurance but not level term. Under decreasing term insurance, the death benefit decreases over the policy period while with a level term policy, the death benefit stays level over the policy period. Premiums decrease over the life of a decreasing term policy but stay the same for level term policies.

Insurable interest exists only if the person buying the contract will suffer a financial loss when the insured dies

What of the following best describes the meaning or purpose of insurable interest? Insurable loss exists only if the parties involved are married. Insurable interest must always be present for as long as the coverage lasts with all types of insurance. Insurable interest exists only if the person buying the contract will suffer a financial loss when the insured dies Insurable interest can protect business owners from fraudulent claims of creditors.

Insurable interest is the relationship between the person applying for life insurance and the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract.

Which of the following most accurately describes "insurable interest"? With life insurance, insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. Insurable interest is the length of the relationship between the person applying for insurance and the insured. For insurable interest to exist, the buyer must have known the insured for at least three years. Insurable interest is the reason one person is insuring the life of another. Though of interest to the insurer, Insurable interest is not a necessary element for a life insurance contract to be issued. Insurable interest is the relationship between the person applying for life insurance and the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract.

The net single premium is the sum of the present values of all the expected benefits payable under the policy.

Which of the following most accurately describes the basic function of a life insurance policy's net single premium? The net single premium represents the insurer's mortality and expense factors and is used to help actuaries determine the proper mortality charge. The net single premium is the amount an individual actually pays to provide all the benefits promised in the policy regardless of premium mode. The net single premium is the sum of the present values of all the expected benefits payable under the policy. The net single premium is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.

The war exclusion excludes paying the death benefit only if the death is the direct result of war action.

Which of the following most accurately describes the standard life insurance policy war clause? The war exclusion excludes paying the death benefit if the insured dies when there is a declared war in effect. The war exclusion excludes paying the death benefit only if the death is the direct result of war action. The war exclusion excludes paying the death benefit if the insured dies while in the military, whether or not there is a declared war in effect. The war exclusion excludes paying the death benefit if the insured dies while in the military, but only if there is a declared war in effect.

As long as the applicant understands the life insurance product being recommended, it is not necessary for the agent to be concerned with the product's suitability for the applicant.

Which of the following statements about agent/producer responsibilities is NOT correct? As long as the applicant understands the life insurance product being recommended, it is not necessary for the agent to be concerned with the product's suitability for the applicant. The manner in which the agent conducts business reflects the insurance company and directly impacts the agent's ultimate success. Agents must always act ethically and professionally in all dealings with policyowners and future policyowners. To policyowners, the agent who sold them their insurance coverage represents the insurer.

The application is part of the entire contract.

Which of the following statements most correctly describes the relationship, if any, between the application and the insurance contract? The application is part of the entire contract. The application is completed under oath, so it may be voided. Technically, the application is not a part of the contract, and the agent or the insured can change it. The application is the contract.

Joint life insurance is especially popular in the estate planning market.

Which of the following statements regarding joint life insurance and survivorship life insurance is NOT true? Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. Joint life insurance is especially popular in the estate planning market. Survivorship life insurance pays the death benefit upon the death of the second insured. Joint life insurance includes a conversion provision that lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death.

Neighbors have insurable interest in each other.

Which of these personal relationships does NOT automatically constitute insurable interest? Dependent children have insurable interest in their parents or grandparents. Neighbors have insurable interest in each other. People have insurable interest in themselves. Spouses have insurable interest in each other

Insurers cannot rate or decline a life insurance risk based solely on MIB information.

Which one of the following best describes the restrictions an insurer must operate under when using information from the Medical Information Bureau (MIB)? Insurers cannot rate, but can decline, a life insurance risk based solely on MIB information. Insurers can rate, but cannot decline, a life insurance risk based solely on MIB information. Insurers cannot rate or decline a life insurance risk based solely on MIB information. Insurers must rate or decline a life insurance risk based on MIB information.

mortality

Which one of the following do actuaries use to predict the likelihood of an individual dying at any certain age in the premium rate-making process? morbidity company experience mortality industry-wide rating history

State laws typically set a maximum coverage limit that creditors can offer to borrowers.

Which one of the following statements about credit life insurance is most correct? State laws typically set a maximum coverage limit that creditors can offer to borrowers. If the borrower dies while the loan remains in effect, the insurer will pay the death benefit of a credit life policy to the borrower's beneficiary. Creditors can require borrowers to buy credit life insurance as a condition for obtaining a loan. Increasing term is most often used for credit life insurance.

The policy pays a death benefit only if the insured dies during the term.

Which one of the following statements about term insurance is correct? Money accumulates in term policies. The policy pays a death benefit only if the insured dies during the term. It is permanent insurance. It is intended to cover the insured to age 120.

Subaccounts are separate and distinct from the insurer's general accounts.

Which one of the following statements about variable life insurance is correct? Subaccounts are separate and distinct from the insurer's general accounts. With a variable life insurance policy, the insurer assumes most of the investment risk. Variable life policyowners can choose flexible premium payment schedules. Variable life policyowners can invest all of their premiums in the insurer's general account.

Premiums are set and remain fixed over the full term of the premium-paying period.

Which one of the following statements best describes if and when a life insurance premium may change under the level premium concept? Premiums are set and remain fixed over the full term of the premium-paying period. Premiums may change if the risk to the insurer increases over time. Premiums may vary each time they are due based on the insured's current insurability. Premiums are either fixed or flexible at the option of the insurer.

Current assumption policies guarantee minimum cash values while interest-sensitive policies guarantee the death charges and expenses.

Which one of the following statements most correctly describes how interest-sensitive whole life and current assumption whole life insurance differ? Current assumption whole life's premium can change over time, while the premium for interest-sensitive whole life does not change. Current assumption whole life policies base their interest rate changes on a guaranteed table in the contract, while interest-sensitive policies base their interest rate on the rise and fall of the index linked to the policy. Current assumption policies guarantee minimum cash values while interest-sensitive policies guarantee the death charges and expenses. Only current assumption policies include an interest crediting feature.

A binding receipt guarantees coverage from the time the applicant completes the application (or the insured completes the medical exam). This does not hold true if the insured is later found to be uninsurable.

Which statement about binding receipts is NOT correct? A binding receipt guarantees coverage from the time the applicant completes the application (or the insured completes the medical exam). This does not hold true if the insured is later found to be uninsurable. An alternative to a binding receipt is the temporary insurance receipt. A binding receipt guarantees coverage from the time the applicant completes the application or the insured completes the medical exam. The insured is guaranteed coverage throughout the underwriting period, which can extend for a number of weeks.

A small cash value gradually accumulates while the policy is in force.

Which statement about term life insurance is NOT correct? It offers protection for a specified, limited period. It pays a benefit only if the insured dies during the specified period. Upon issue, it is generally less expensive than permanent insurance of comparable face amount. A small cash value gradually accumulates while the policy is in force.

The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.

Which statement about the net single premium for a traditional life insurance policy is NOT correct? The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment. The net single premium reflects two of the premium factors: mortality and interest. The net single premium is the sum of the present values of all the expected benefits under the policy. Calculation of the net single premium is the first step in calculating the gross premium charged to the policyowner.

decreasing term

Which type of life insurance policy would most likely be used to insure the declining balance of a home mortgage? increasing term decreasing term renewable term level term