Types of individual life insurance (practice quiz questions)

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? A. Graded premium life B. Limited-pay Life C. Variable life D. Adjustable Life

B. LIMITED-PAY LIFE

All of the following are true about variable products EXCEPT A. the minimum death benefit is guaranteed B. The cash value is not guaranteed C. Policyowners bear the investment risk D. The premiums are invested in the insurer's general account

D. THE PREMIUMS ARE INVESTED IN THE INSURER'S GENERAL ACCOUNT

Which of the following determines the cash value of a variable life policy? A. The company's general account B. The policy's guarantees C. The premium mode D. The performance of the policy portfolio

D. THE PERFORMANCE OF THE POLICY PORTFOLIO -The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested.

The type of term insurance that provides increasing death benefits as the insured ages is called A. Increasing term B. Flexible term C. Interest-sensitive term D. Age-sensitive term

A.INCREASING TERM

The universal Life Insurance Policy is best described as a/an A. Flexible premium Variable Life Policy B. Annually renewable term policy with a cash value account C. Variable Life with a cash value account D. Whole Life policy with two premiums: target minimum

B. ANNUALLY RENEWABLE TERM POLICY WITH A CASH VALUE ACCOUNT - A universal policy has 2 components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy? A. Enhanced life B. Modified life C. Indexed life D. Indeterminate premium

B. MODIFIED LIFE -modified life policies are developed to attract young professionals who have a large financial investment in their education and training, but starting their professional careers, they have limited resources to buy insurance.

A universal life insurance policy had 2 types of interest rates that are called A. Option A and Option B B. Fixed and Variable C. Minimum and Target D. Guaranteed and Current

D. GUARANTEED AND CURRENT -The insurer credits cash value in the policy with a Current (nonguaranteed)

Which of the following is an example of a limit-pay life policy? A. Level term Life B. Straight Life C. Life paid-up at Age 65 D. Renewable Term to Age 70

C. LIFE PAID-UP AT AGE 65 -Limited pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

Which statement is NOT true regarding a Straight Life policy? A. The face value of the policy is paid to the insured at age 100 B. It usually develops cash value by the end of the third policy year C. It has the lowest annual premium of the three types of Whole life policies D. Its premium steadily decreases over time, in response to its growing cash value.

D. ITS PREMIUM STEADILY DECREASES OVER TIME, IN RESPONSE TO ITS GROWING CASH VALUE - Straight Life polices charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A. Jumping Juvenile B. Juvenile Premium Provision C. Waiver of Premium D. Payor Benefit

D. PAYOR BENEFIT - If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

Which of the following types of policies allows the policy owner to skip payments provided that there is enough cash value in the policy to cover the premium amount? A. Universal life B. Flexible life C. Variable life D. Adjustable life

A. UNIVERSAL LIFE -With universal life policies, the policy owner has the flexibility to increase the amount of premium going into the policy and to later decrease it again.

Which of the following of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources? A. Whole Life B. Annuity C. Variable life D. Term

D. TERM -term insurance provides a death benefit only

What do Modified Life and Straight Life policies have in common? A. Graded premium B. Temporary protection C. Accumulation of cash value D. Same amount of premium

C. ACCUMULATION OF CASH VALUE -MODIFIED LIFE: is a type of whole life policy that charges a lower premium in the first few policy years, usually the first 3-5 years, and then a higher level premium for the remains of the insured's life -GRADED-PREMIUM WHOLE LIFE: is similar to modified in that premiums start out relatively low and then level off at a point in the future

To sell variable life insurance policies, an agent must receive all of the following EXCEPT A. FINRA registration B. A securities license C. A life insurance license D. SEC registration

D. Sec registration

The death protection component of Universal Life insurance is always A. Decreasing Term D. Annually Renewable Term C. Whole Life D. Adjustable Life

B. ANNUALLY RENEWABLE TERM - The universal policy has 2 components; an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Variable Whole Life insurance is based on what type of premium? A. increasing B. Flexible C. Graded D. Level Fixed

D. LEVEL FIXED - Variable Whole Life insurance is a level fixed premium investment- based product

Which of the following best describes annually renewable term insurance? A. It is level term insurance B. it requires proof of insurability at each renewal C. Neither the premium nor the death benefit is affected by the insured's age D. It provides an annually increasing death benefit

A. IT IS LEVEL TERM INSURANCE - Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

The premium of a survivorship life policy compared with that of a joint life policy would be A. As high. B. Half the amount C. Lower D. Higher

C.LOWER Joint Life= First to die Survivorship life= second to die( last survivor) -Since the death benefit is not paid until the last death, the joint life expectancy in sense is extended, resulting in a lower premium than that which is typically charged for joint life, which pays upon the first death.

Which Universal Life option has a gradually increasing cash value and a level death benefit? A. Juvenile Life C. Term insurance C. Option B D. Option A

D. OPTION A

An adjustable life policy owner can change what? A. The insured B. The coverage period C. The mortality expense D. The investment account

B. THE COVERAGE PERIOD - the owner of an adjustable life privy had the following privileges: -increasing or decreasing the premium -changing the premium-paying period -increasing or decreasing the face amount of coverage -changing the period of protection

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 premiums will become tax deductible until the insured's 18th birthday. B. Since it is the policy owner, and not the insured, who has become disabled, the life insurance policy will not be affected. C. 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. D. The insured's premiums will be waived until she is 21.

D. THE INSURED'S PREMIUMS WILL BE WAIVED UNTIL SHE IS 21. - If the payor (usually a parent/ guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

If an agent wishes to sell variable life policies, what license must the agent obtain? A. Surplus Lines B. Personal Lines C. Securities D. Adjuster

C.SERCURITIES - Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license

Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? A. A whole life policy B. An endowment policy C. A term policy D. An annuity

B. AN ENDOWMENT POLICY -The cash value in an endowment has to build up faster since the funds are intended to be used while the insured is alive, the premium for an endowment is considerable more expensive than an ordinary straight life policy.

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy A. Decreased death benefit at each renewal. B. Required a premium increase each renewal. C. Built cash values D. Required proof of insurability every year.

B. REQUIRED A PREMIUM INCREASE EACH RENEWAL. - Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

Which special policy combines decreasing term insurance with whole life insurance to provide the insured's family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments? A. Family Protection Policy B. Family Maintenance Policy C. Survivorship life D. Family Income Policy

D. FAMILY INCOME POLICY