symmetry
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit.
S buys a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000
T took out a $50,000 life insurance policy with an accidental death and dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answer "NO". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?
$50,000 minus any outstanding policy loans.
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
A 15- year mortgage, is best protected by what kind of life policy?
15 year, decreasing term.
What year was the McCarran-Ferguson Act enacted?
1945
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated:?
1970: Fair Credit Reporting Act
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20- Pay life accumulates cash value faster than Straight life.
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20- Pay life.
What type of policy would offer a 40- year old the quickest accumulation of cash value?
20-pay life.
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.
Which of these is an element of a variable life policy?
A fixed, level premium.
Which statement is true regarding a Variable Whole Life policy?
A minimum guaranteed death benefit is provided.
What kind of life insurance product covers children under their parent's policy?
A term rider.
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A whole life policy with an other insured rider.
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
A whole life policy with other insured rider.
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount.
Accidental Death and Dismemberment clause.
The option that provided an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
Accidental death and Dismemberment (AD&D) rider.
Which of the following Dividend options results in taxable income to the policy owner?
Accumulation at Interest.
L takes out a life insurance policy and dies 10 years later. During the process the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision. the insurer will:
Adjust the death benefit to a reduced amount.
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
The consideration clause of in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
When does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise.
What actions can a policy owner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank.
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates specified in the contract with no evidence of insurability required.
S has a whole life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan.
The automatic premium loan provision is designed to:
Avoid a policy lapse.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process.. Which of these actions will the insurer take?
Beneficiary will be paid the death benefit.
All of the following are considered to be typical characteristics describing the nature of a insurance contract, EXCEPT:
Bilateral
A variable whole life insurance can be described as?
Both an insurance and securities product.
Which statement about a whole life policy is correct?
Cash Value may be borrowed against.
A whole life insurance policy endows when the:
Cash value equals the death benefit
A policy loan is made possible by which of these life insurance policy features?
Cash value provision.
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider.
N is covered by a Term life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take.
Claim will be denied.
How do life life insurance companies handle cases where the insured commits suicide within the contract's stated contestable period.
Claims are denied under the Suicide clause of the policy.
Which of these actions is taken when a policy owner uses a life insurance policy as collateral for a bank loan?
Collateral assignment.
Which of the following consists of an offer, acceptance, and consideration?
Contract.
Insurance policies are offered on a "take it or leave it" basis, which make them:
Contracts of adhesion.
Which provision allows the policyowner to change the term life policy to a permanent one without providing proof of good health?
Conversion
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege.
When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
What kind of life insurance starts out as temporary coverage but can later be modified to permanent coverage without evidence of insurability.
Convertible term.
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered.
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term.
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
Additional coverage can be added to a whole life policy by adding a(n)
Decreasing term rider.
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing term.
Which of these types of policies may NOT have the automatic premium loan provision attached to it?
Decreasing term.
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued.
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at age 65
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
Which provision prevents an insurer from changing the terms of the contract with the policy owner by referring to documents not found within the policy it's self.
Entire contract provision
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity Index insurance.
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised.
D is the policy owner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?
Ex-wife.
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.
In a life insurance policy, which feature states that the policy will not cover certain risks.
Exclusion
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to??
F
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value.
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the:
Fair Credit Reporting Act
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family maintenance policy
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary responsibility
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
Flexible premiums
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums.
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
Full face amount.
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy.
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract.
A life insurance policy would be considered a wagering contract WITHOUT:
Insurable interest.
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
Insured
All of these statements are about the Waiver of premium provision are correct except?
Insured must be eligible for social security disabiliity for claim to be accepted.
A renewable term policy is renewable at the option of the:
Insured.
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)-
Insuring agreement.
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the"
Insuring clause.
How are policy owners dividends treated in regards to income tax?
Interest on accumulations is taxed.
All of these settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:
Interest only
A life insurance arrangement which circumvents insurable interest statues is called:
Investor-Originated Life Insurance.
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life insurance.
Which of the following statements is CORRECT about the period in which a term policy can be converted?
It varies according to the contracts.
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
It's taxed as ordinary income.
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint life Policy
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
L's spouse dies at age 66+
Stranger-Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level
Which of the following would be considered a Limited-Pay Life policy?
Life Paid - Up at Age 70.
Which of these are NOT an example of a Nonforfeiture option?
Life income.
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited Pay life.
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
Living benefit.
An insured's inability to preform two or more activities of daily living may trigger which type of policy rider?
Long term care.
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract. (MEC)
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT
Modified Whole life.
Which of these life products is NOT considered interest- sensitive?
Modified Whole life.
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
Modified premium life.
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.
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract.
Which of the following is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify.
All of these statements concerning Settlement Options are true, EXCEPT:
Only the beneficiary may select.
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's rights
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends.
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance.
All of the following statements are true regarding a policy's Grace period, EXCEPT?
Past due premiums are waived.
Which statement is True in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt.
M had a annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay Face amount minus the past due premium.
Which life insurance rider typically appears on a Juvenile Life insurance policy?
Payor Benefit rider.
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policy owner becomes disabled?
Payor clause.
A provision in a life insurance policy that pays the policy owner an amount that does not surpass the guaranteed cash value is called the:
Policy loan provision.
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policy owner
Which is true concerning a Variable Universal Life policy?
Policy owner controls where the investment will go and selects the amount of the premium payment.
M has a insurance policy that also has a outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the?
Policy proceeds.
Which of these describe a participating life insurance policy?
Policyowners are entitled to receive dividends
Which of the following characteristics is correct about the interest sensitive whole life?
Premium payments can vary.
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force.
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured.
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if the payor becomes disabled.
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
Which of these nonforfeiture options continues to build-up cash value?
Reduced Paid-up
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision.
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called?
Reinstatement.
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement.
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
The stated amount or precent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called:
Reserves
S buys a $10,000 whole life policy in 2003, and pays a annual premium of 100$. S dies 5 years later in 2008 and the insurer pays the beneficiary 10,500$ what kind of rider did S include on the policy??
Return of premium rider.
What is the Suicide provision designed to do?
Safeguard the insurer from an applicant who is contemplating suicide.
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
What type of life insurance are credit policies issued as?
Term
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term Life.
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider.
The investment gains from a Universal Life Policy usually go toward
The cash value.
the most important factor to consider when determining whether to convert term insurance at the insured's attended age or the insured original age is?
The cost.
When applied to Whole Life insurance, the word "straight" denotes
The duration of premium payments.
A policy of adhesion can only be modified by whom?
The insurance company.
All of these statements about Equity Index Life insurance are correct, EXCEPT!!
The premiums can be lowered or raised, based on investment performance.
The consideration clause of an insurance contract includes?
The schedule and amount of premium payments.
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks and bonds.
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral.
A 42-year-old executive wants to purchase a life insurance that allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
Universal Life.
What type of life insurance incorporated flexible premiums and an adjustable death benefit?
Universal life.
which of the following types of policies BEST identifies one in which cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal life.
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life.
Life insurance immediately creates an estate upon the death of the insured. Which of the following polices is characterized by a guaranteed minimum death benefit??
Variable Life.
Which of the life policy contains a monthly mortality charge as well as a self-directed investment choices?
Variable Universal Life
Which of the following polices combines investment choices with a form of term coverage?
Variable Universal Life.
Which of the following policies is characterized by a flexible premium and death benefit and allows the policy owner control of the investment aspect of the plan?
Variable Universal Life.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life.
Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options?
Variable life.
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable life.
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable life.
Which of the following policies is characterized by a flexible premium and death benefit and allows the policy owner control of the investment aspect of the plan?
Variable universal life.
A(n) _______________ Life policy offers the owner investment in products such as money- market funds, long-term bonds and equities.
Variable.
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the contestable period and proven to be material.
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of premium
The part of a life insurance policy guaranteed to be true is called a(n)
Warranty
Which of these is considered a statement that is assured to be true in every respect?
Warranty
At what point does an informal contract become binding?
When one party makes an offer and the other party accepts that offer.
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made.
When is the face amount of a whole life policy paid?
When the insured dies, or at the policies maturity date, whichever happen first.
What does the ownership clause in a life insurance policy state?
Who the policy owner is and what rights the policy owner is entitled to.
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.
A return of premium life insurance policy is?
Whole life and increasing term.
A life insurance policy that provides a policy owner with cash value along with a level face amount is called:
Whole life.
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole life.
A policy that becomes a Modified Endowment Contract (MEC)
Will lose many of its tax advantages.
A nonprofit incorporated society that does not have capital stock and operated for the sole benefit of it's members is known as :
a fraternal benefit society
B owns a Whole life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of:
additional Whole life coverage at specified times.
How long does the coverage normally remain on a limited-pay life policy?
age 100
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)
an exclusion
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due on the loan balance.
S would like to use dividends from her life insurance policy to purchase paid-up additions.
beneficiary's age
Variable Whole Life Insurance can be described as
both an insurance and securities product
Whose life is covered on a life insurance policy that contains a payor benefit clause?
child
Which rider provides coverage for a child under a parent's life insurance policy?
child term rider.
Insurance contracts are known as ___________ because certain future conditions or acts must occur before any claims can be paid.
conditional
The Incontestable clause allows an insurer to:
contest a claim during the contestable period
The Universal Life Policy is called an unbundled Life policy because the policy holder can see the expense charges, the interest earned, and the:
cost of insurance.
A family income policy is a combination of Whole life and :
decreasing term insurance.
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
decreasing term policy
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider.
A variable insurance policy:
does not guarantee a return on its investment accounts
N is student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the even N was killed while flying as a student pilot?`
exclusion
Term insurance has which of the following characteristics?
expires at the end of the policy period.
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends.
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
family maintenance policy
Variable Life products require a producer to
hold a Life Insurance license and a Securities license
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable life policy?
increase face amount.
The consideration clause in a life insurance policy indicates that a policy owner's consideration consists of a completed application and...
initial premium.
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:
insurable interest in the proposed insured.
A policy of adhesion can only be modified by whom?
insurance company
What is a warranty?
is a statement guaranteed to be true
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured.
is blinded in an accident.
Credit life insurance is:
issued in an amount not to exceed the amount of the loan
What kind of premium does a Whole Life policy have?
level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
level term.
Which of these is NOT considered to be an element of an insurance contract?
negotiating
Whole life insurance polices are contractually guaranteed to provide each of the following EXCEPT:
partial withdrawal features beyond a surrender charge period.
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
payor provision
Insurance policies are considered Aleatory contracts because?
performance is conditioned upon a future occurrence.
Who elects the governing body of a mutual insurance company?
policyholders
A limited- pay life policy has:
premium payments limited to a specified number of years
Which of the following is not possible with a universal life policy?
premiums may be applied as a credit against income tax.
Which of these is NOT a type of agent authority?
principal
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called
representations
A group-owned insurance company that is formed to assume and spread the liability risks of it's members is known as a:
risk retention group
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
ten year endowment.
The amount of coverage on a group credit life policy is limited to
the insured's total loan value.
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
Stranger-Owned life insurance (STOLI) is when a person purchases a life insurance only to sell to a (n):
third party with no insurable interest.
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
treaty
Life and Health insurance policies are:
unilateral contracts
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
A term life insurance policy matures ?
upon the insured's death during the term of the policy