Chapter 2
Which of the following best defines target premium in a universal life policy?
BThe recommended amount to keep the policy in force throughout its lifetime
All of the following are true regarding insurance policy loans EXCEPT
DPolicy loan can be made on policies that do not accumulate cash value.
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term
What type of insurance would be used for a Return of Premium rider?
Increasing term
Which of the following policy components contains the company's promise to pay?
Insuring clause
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
Other insured rider
Equity indexed annuities
Seek higher returns
Periodic payments of accumulated funds best describes
An annuity
Which of the following is NOT true regarding Equity Indexed Annuities?
AThey earn lower interest rates than fixed annuities.
All of the following are characteristics of a Universal Life policy EXCEPT
AThe planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.
All of the following are true regarding the convertibility option under a term life insurance policy EXCEPT
BUpon conversion, the death benefit of the permanent policy will be reduced by 50%.
Which of the following is true regarding the annuity period?
It may last for the lifetime of the annuitant
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
What is true about nonforfeiture values?
They are required by state law
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Universal life
Which life policy is designed to provide the policyowner a hedge against the effects of inflation?
Variable life
The rider that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium.
Which life policy is designed to provide the policyowner a hedge against the effects of inflation?
variable life
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured.
All of the following are true regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
An insured is involved in a car accident that damages his cervical vertebrae and surrounding nerves. As a result, the insured become quadriplegic. If the policy contains a Waiver of Premium rider, which of the following statements is true regarding the policy premiums?
6 months
All other factors being equal, the least expensive first-year premium payment is found in
Annually Renewable Term.
Which of the following statements is correct regarding Adjustable Life?
Evidence of insurability may be required when insurance is increased.
What document must be made part of the insurance policy entire contract?
Original application
Equity indexed annuities
Seek higher returns.
The corridor in a Universal Life Insurance policy raises the death benefit to avoid
Tax advantages
All of the following are characteristics of a Universal Life policy EXCEPT
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.
What is the purpose of a fixed period settlement option?
To provide a guaranteed income for a certain amount of time
Lyle has a $10,000 term life policy. He paid his annual premium on February 1. Lyle fails to renew the policy and dies on February 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company?
9800