Life Policy Provisions, Riders, and Options

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? A$7,000 B$3,000 C$13,000 D$10,000

B$3,000

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? ANothing, since the insured was killed as a result of a war BThe full death benefit CThe policy's cash value DA refund of premiums

B. The full death benefit

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? AIncontestability period BAssignment CAutomatic premium loan DWaiver of premium

CAutomatic premium loan

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? AVariable life BDecreasing term CStraight whole life DUniversal life

D. Universal Life

The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a AConvertible Term Policy. BRenewable Term Policy. CDecreasing Term Policy. DWhole Life Policy.

AConvertible Term Policy.

The death protection component of Universal Life Insurance is always AIncreasing Term BAnnually Renewable Term CWhole Life DAdjustable Life

BAnnually Renewable Term

In term policies, what happens to the premium throughout the term of the policy? APremium fluctuates. BPremium always remains level. CPremium gradually increases. DPremium gradually decreases.

BPremium always remains level.

Which of the following are NOT fundable by annuities? AA person's retirement BEstate liquidation CDeath benefits DCash accumulation for any reason

CDeath benefits

Annually renewable term policies provide a level death benefit for a premium that ARemains level. BFluctuates. CIncreases annually. DDecreases annually.

CIncreases annually.

An insured receives an annual life insurance dividend check. What term best describes this arrangement? AReduction of Premium BAnnual Dividend Provision CAccumulation at Interest DCash option

DCash option

Which policy component decreases in decreasing term insurance? ACash value BDividend CPremium DFace amount

DFace amount

In life insurance policies, cash value increases AAre income taxable immediately. BAre taxed annually. CAre only taxed when the owner reaches age 65. DGrow tax deferred.

DGrow tax deferred.

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? ALife with period certain BFixed amount CInterest only DFixed period

DFixed period

Why is an equity indexed annuity considered to be a fixed annuity? AIt has modest investment potential. BIt has a fixed rate of return. CIt is not tied to an index like the S&P 500. DIt has a guaranteed minimum interest rate.

DIt has a guaranteed minimum interest rate.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? AIt is increased when extra premiums are paid. BIt decreases over the term of the policy. CIt remains the same as the original policy, regardless of any differences in value. DIt is reduced to the amount of what the cash value would buy as a single premium.

DIt is reduced to the amount of what the cash value would buy as a single premium.

All of the following are the types of term insurance depending on how the face amount changes during the policy term EXCEPT ADecreasing. BLevel. CIncreasing. DRenewable.

DRenewable (not one of big 3)

What type of insurance would be used for a Return of Premium rider? ADecreasing Term BAnnually Renewable Term CIncreasing Term DLevel Term

C. Increasing Term

Which of the following is NOT true about a group annuity? AIt can be qualified. BIt can be tax deferred. CIt can be owned by individual employees. DIt can be noncontributory.

CIt can be owned by individual employees.

Which of the following Life Insurance policies would be considered interest sensitive? AAdjustable life BWhole life CIncreasing term DUniversal life

DUniversal life

Which of the following is another term for the accumulation period of an annuity? APay-in period BPremium period CLiquidation period DAnnuity period

APay-in period

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be A. Discounted. B. Adjusted to the insured's age at the time of renewal. C. Determined by the health of the insured. D. Based on the issue age of the insured.

B. Adjusted to the insured's age at the time of renewal.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? A. The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. B. The insured's premiums will be waived until she is 21. C. The premiums will become tax deductible until the insured's 18th birthday. D. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.

B. The insured's premiums will be waived until she is 21.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? AThe policy will expire at the end of the 20-year period. BAt the end of 20 years, the policy's cash value will equal $100,000. CThe policy premiums will remain level for 20 years. DIf the insured dies before the policy expired, the beneficiary will receive $100,000.

BAt the end of 20 years, the policy's cash value will equal $100,000. (term policies dont develop cash values)

Variable Life insurance is based on what kind of premium? AGraded BLevel fixed CIncreasing DDecreasing

BLevel fixed

Which two terms are associated directly with the premium? ATerm or permanent BRenewable or convertible CLevel or flexible DFixed or variable

CLevel or flexible

The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT AProjected interest rates. BFace amount of the policy. CThe insured's age at death. DThe beneficiary's life expectancy.

CThe insured's age at death.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? A. If the insured dies before the policy expired, the beneficiary will receive $100,000. B. The policy will expire at the end of the 20-year period. C. At the end of 20 years, the policy's cash value will equal $100,000. D. The policy premiums will remain level for 20 years.

C. At the end of 20 years, the policy's cash value will equal $100,000.

Which of the following best describes fixed-period settlement option? A, The death benefit must be paid out in a lump sum within a certain time period. B. Income is guaranteed for the life of the beneficiary. C. Both the principal and interest will be liquidated over a selected period of time. D. Only the principal amount will be paid out within a specified period of time.

C. Both the principal and interest will be liquidated over a selected period of time.

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? AInterest-sensitive whole life BLife annuity with period certain CIncreasing term DLimited pay whole life

DLimited pay whole life

All of the following are true about variable products EXCEPT APolicyowners bear the investment risk. BThe premiums are invested in the insurer's general account. CThe minimum death benefit is guaranteed. DThe cash value is not guaranteed.

BThe premiums are invested in the insurer's general account.

An insured committed suicide 6 months after his life insurance policy was issued. The insurer will ARefund the premiums paid. BPay the policy's cash value. CPay the full death benefit to the beneficiary. DPay nothing.

ARefund the premiums paid.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a ANonforfeiture option. BGuaranteed insurability rider. CPaid-up additions option. DCost of living provision.

BGuaranteed insurability rider.

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? AAmount of interest BSize of each installment CPredetermined length of time stated in the contract DLength of income period

BSize of each installment