Unit 4: Types of Insurance
Which of the following $50,000 limited-pay life policies will have the highest premium for an applicant who is age 30?
20 pay life policy
Equity index life insurance policy values are determined by a specified participation rate and:
indirect links to a stock market index
Which of the following policies endows at age 100?
Whole life and limited-pay life
Jorge would like to purchase a life insurance policy that offers level premiums from the time the policy is issued until his death. He also wants a policy that combines death protection with a savings element that can eventually be used for retirement purposes. Jorge should consider purchasing which of the following plans?
A straight whole life insurance policy
Mitsuko is interested in buying a life insurance policy that must have these two features: a fixed premium and a separate account. What type of policy would best meet her needs?
A variable life policy
Withdrawals from a universal life policy
do not require repayment
Variable universal life policies provide all of the following EXCEPT?
fixed premiums
Variable life insurance policies are regulated by
the SEC, FINRA, and the states
With interest-sensitive whole life insurance,
the cash value fluctuates in accordance with interest rates
Variable life insurance policies are regulated by the Securities Exchange Commission and FINRA because
the cash values are tied to the actual performance of investment funds
All of the following elements of an adjustable life policy are adjustable EXCEPT
the policy loan rate
The party to whom the life insurance policy cash value belongs is
the policyowner
A significant feature of adjustable life insurance is that
the premiums may be increased or decreased from time to time by the policyowner
Decreasing term insurance could be recommended for all of the following EXCEPT
to build a retirement fund
Limited representatives can sell any of the following kinds of insurance EXCEPT
variable life
Which of the following statements pertaining to limited-pay life policies is CORRECT?
Both limited-pay life and whole life policies endow at age 100
Michelle has a term insurance policy in which the amount of protection remains constant during the term period. Which kind of term insurance does Michelle have?
Level term
An individual wishes to purchase whole life insurance but does not wish to pay premiums past retirement age. Which of the following policies should the person buy?
Limited pay
Which of the following statements regarding limited pay life insurance is NOT correct?
Limited pay policies mature more quickly than do continuous premium whole life policies
In addition to the Department of insurance, who has the authority to regulate variable life insurance?
The Securities Exchange Commission
Diane would like to purchase a life insurance policy in which the face amount remains level and the cash value grows each year until she dies (or reaches age 100). Which type of policy should she purchase?
Whole life policy
Of the following, which statement best describes a 10 year renewable term life insurance policy?
a 10 year renewable term is a policy with a fixed face amount
A life insurance policy in which the face amount remains level and the cash value grows to an amount equal to the face amount when the insured reaches age 100 is
a whole life policy
"Ken, the insured, purchased a $40,000 5-year level term policy and a $100,000 whole life insurance policy when he was 49. When he died at age 56, his beneficiary received
$100,000
Darlene owned a $100,000 whole life policy that had a $75,000 cash value when she died at the age of 75. The amount paid by the insurance company as a death benefit was:
$100,000
Tom has a $50,000 whole life policy. If he continued to pay the required premiums and lived to age 100, he would receive:
$50,000 as an endowment
"Sophia has a $250,000 10-year convertible term policy and would like to convert it to a permanent policy. Her agent provides her with the following information. Which statement is NOT correct? A) The new premium will be based on either her original or her attained age. B) She may convert to the permanent policy for up to 12 months following the term policy's expiration. C) Sophia will not have to provide evidence of insurability. D) A new application will not be required."
She may convert to the permanent policy for up to 12 months following the term policy's expiration
Which of the following statements pertaining to term insurance is CORRECT?
Term insurance provides protection for only a temporary period
Which of the following statements pertaining to a whole life policy is NOT correct?
The face amount may be paid as a lump sum at the policyowners selected retirement age
Which of the following differentiaties a variable life product from a conventional life product?
The fact that the product has a separate account which id distinct from the general account
"Leo purchases a $50,000 5-year level term policy. Which of the following statements about Leo's coverage is CORRECT?
The policy provides a straight, level $50,000 of coverage for 5 years.
Which of the following statements pertaining to modified whole life and graded premium whole life policies is NOT correct?
The premium for modified whole life policies build cash values and have premium paying periods to age 100
"Willa purchases a 5-year $50,000 level term policy with an option to renew. Which of the following statements about the policy's renewability is CORRECT?
The premium for the renewal period will be higher than the initial period.
Helen has just taken out a modified whole life policy. Which of the following statements pertaining to her policy is CORRECT?
The premium will be lower during the next few years and then be increased to a higher, constant level
Roland is 45 years old and married. He has a 19-year-old son who is a freshman at a local university. He also has an 8-year-old daughter. A decreasing term policy could be recommended for Roland for which of the following reasons?
To guarantee that his son's college tuition will be covered
Universal life distinguished from whole life insurance in that
partial withdrawals can be taken from the cash value account
In contrast to traditional whole life insurance policies, term life insurance
provides pure insurance protection only
Which of the following individuals can access the cash value of her life insurance policy to provide extra retirement income?
Harriet, who owns a $100,000 single premium whole life policy
If a policyowner purchases a $250,000 single premium whole life insurance policy and needs additional funds for retirement 6 months later
He can draw on the cash value to supplement his retirement income
Gerald, a 40-year-old building contractor, wants financial protection for his family while $150,000 of his assets are tied up in a building project for about five years. Which of the following types of life insurance policies would give him that protection at the lowest cost?
5 year level term
Which of the following life insurance policies with the same face value would have the highest premium if issued to the same person?
10 year nonrenewable term
Brian, a 45-year old general contractor, wants financial protection for his family while $300,000 of his assets are tied up in a building project for the next five years. Which of the following types of life insurance policies would give him that protection at the lowest cost?
5 year level term
Jane, age 35, has just purchased a 20-pay whole life policy. When she turns 55, she will A. receive the policy's face value benefit B. have a fully matured policy C. cease paying premiums D. no longer be covered by the policy
Cease paying premiums
Madge took out a $100,000, 10-year convertible term policy at age 30, and at age 36 decides to convert the policy to permanent insurance of the same amount on an original-age basis. All of the following statements pertaining to this situation are correct EXCEPT:
Conversion will be contingent upon her evidence of insurability
Amanda took out a $250,000 home mortgage when she purchased her house five years ago. What type of life insurance policy would be the best choice to insure the remaining balance on her home mortgage?
Decreasing term
Joe buys his first home after obtaining a 30-year mortgage from his bank. He is considering the purchase of life insurance to ensure that the mortgage will be paid in the event of his death, in which case he will leave the house to his wife and children. What would be the best life insurance protection for Joe?
Decreasing term
Which of the following statements regarding current assumption whole life insurance is NOT correct?
During a period of relatively high rates the premiums could be increased
Sean has a young family and needs affordable whole life insurance. He is looking for a policy with lower initial premiums but is not adverse to paying more at a later time. Based only on this information, what type of whole life insurance variation would be suitable for him?
Graded Premium
"Jenna owns a policy in which the premium at the inception of the policy is lower than the continuous premium whole life rate and then increases each year for the first 5 years of the policy period. After 5 years, the premium levels off. What type of policy does Jenna own?
Graded premium whole life
Gene, age 20, purchased a $50,000 life insurance policy. The premium at issue is lower than normal whole life rates, and increases each year for the first five years of the policy period. After that, the premium levels off. What type of policy does Gene own?
Graded premium whole life
"Malia purchases a $50,000 5-year level term policy. Which of the following statements about Malia's coverage is NOT correct? A) If Malia dies at any time during the 5 years, her beneficiary will receive the policy's face value. B) If Malia dies after the specified 5 years, only the policy's cash value will be paid. C) If Malia lives beyond the 5 years, the policy expires and no benefits are payable. D) The policy provides a straight, level $50,000 of coverage for 5 years."
If Malia dies after the specified 5 years, only the policy's cash value will be paid
Which of the following statements pertaining to the conversion privilege in group insurance policies is NOT correct?
Insureds who resign or are terminated have 365 days in which to convert their coverage to individuals policies
Which of the following statements about variable universal life insurance is NOT correct?
It guarantees a minimum cash value in the investment account
Which of the following statements describes variable life insurance>?
It provides insurance benefits that vary according to the investment experience of separate accounts maintained by the insurer
Which of the following statements about a 1 year renewable term policy is CORRECT?
It renews with an increase in premium based on the insured's age
"Carlos and Jenna both work to support their family. To provide the same amount of life insurance protection in the event either dies, they should consider purchasing which of the following plans?
Joint Life
A family in which both parents work and, therefore, are in need of the same amount of coverage, would be a candidate for which of the following plans?
Joint life
"Juan owns a 5-year $50,000 term life insurance policy, and Maria owns a $50,000 whole life insurance policy. Which of the following statements is CORRECT?
Juan's policy, but not Maria's, may have an option to convert.
Which of the following statements regarding basic forms of whole life insurance is NOT correct?
Limited payment life provides protection only for the years during which premiums are paid
A prospect with a young family needs affordable whole life insurance. As a rising young executive, it is likely that the prospect's current limited resources will increase substantially overt he next 15 years. What type of whole life insurance variation would you recommend?
Modified life
Which of the following provides for an enhanced death benefit on a universal life policy?
Option B
Mark purchased a 20-year old $100,000 level term life insurance policy and a $250,000 straight whole life insurance policy. Which of the following statements is CORRECT?
Premiums for both policies are set at the time of the policy issue and remain level throughout the term of the policies.
Which of the following statements applies to universal life insurance?
Premiums generally may be increased or decreased at the policyowner's option
Of the following, which best describes a need that decreasing term insurance is often used to meet?
Providing funds to pay off an outstanding loan at a reasonable premium
Assume 4 individuals, all age 30, purchase the following life insurance policies. If all policies are still in force 10 years later, who will have the largest cash value in his policy?
Rajesh, who has a $100,000 20 pay life policy
Michelle, age 31, just purchased a $50,000 variable life insurance policy. With regard to her policy, which of the following statements is NOT correct?
The death benefit of $50,000 is not guaranteed
For which of the following reasons would a domestic insurer set up separate accounts?
To provide for annuities to be payable in fixed or variable amounts or for variable life insurance
Which of the following statements regarding universal life is INCORRECT?
UL premiums are fixed, however the policyowner may increase or decrease the death benefit
While a policy loan is generally an available option with any form of permanent life insurance, a partial withdrawal of cash value from the policy is available only with which of the following types of life insurance?
Universal life
Patrick owns an adjustable life policy. Which of the following statements pertaining to his policy is CORRECT?
Upon showing evidence of insurability, Patrick can increase the face amount of his policy
With respect to the regulation of variable contracts and those who sell them, which of the following statements is most accurate?
Variable contracts and their distribution are regulated separately but in a fairly coordinated fashion between the department of insurance, the SEC, and FIRNA
Which of the following types of life insurance requires that the agent be licensed by FINRA before selling the policy?
Variable life
Which of the following statements pertaining to variable life insurance is CORRECT?
Variable life insurance cannot be proposed in a sales situation unless the proposal is preceded or accompanied by a prospectus
In contrast to traditional whole life insurance policies, with variable life insurance products
contract cash values are not guaranteed
All of the following are purposes of juvenile insurance EXCEPt
covering the medical expenses of a child
Which of the following statements about a modified whole life policy is NOT correct?
it is basically an endowment policy
David has a $300,000 nonrenewable 5 year term policy. The premium he pays for this policy would be
less than for a $300,000, 5 year renewable term policy
"Nora, age 25, just started working and would like to purchase life insurance to ensure that her spouse and child are protected if she dies prematurely. She has very limited funds but would eventually like to have permanent protection. Nora should consider purchasing
level term life insurance
A policy loan is generally available with all of the following types of life insurance policies EXCEPT
level term life insurance
A whole life policy that makes it possible to stop premium payments at the end of a specified time without a reduction in the death benefit is called
limited pay
"When he was 45, Frank purchased a $40,000 5-year level term policy. When he died at age 52, his beneficiary received
nothing
All of the following are distinguishing characteristics of straight whole life policies EXCEPT?
option to renew