Chapter 3-LIFE
A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force when the insured dies at age 65. The beneficiary receives how much of the policy's values?
$100,000
A convertible term life insurance policy may be converted _____ time(s) for a permanent life policy based on the original or attained age.
1
Which of the following term life insurance policies would have the lowest 1st-year annual premium, all other factors being equal?
1 year
Jason has a Whole Life insurance policy with a face amount of $100,000, an annual premium of $1,000, and a cash value of $10,000. If he wants to borrow money from the insurer, what is the maximum he can obtain?
10,000
A permanent life policy issued 30 years ago would endow at what age?
100
The Double Indemnity Rider requires that the insured die within _____ days of the accident.
90
Which of the following statements about Annual Renewable Term premiums is TRUE? A The premium increases over time as the insured's age increases B Premiums are variable C Premiums initially start out higher than comparable permanent coverage and decrease as the insured's age increases D Premiums are level over time
A
Term Life insurance is designed to provide coverage for ___________.
A specified period of time
All of the following are true in general about riders, except:
All riders are provided for as long as the policy is in effect
In a STOLI/IOLI transaction, what are the insureds basically doing? A Overinsuring themselves B Selling their mortality to another for up-front cash C Committing a misdemeanor punishable by monetary fine and forfeiture of the policy issued D Borrowing the necessary funds from a third party in order to acquire the amount of insurance they need
B
Which of the following term policies cost the least (all other factors being the same)? A Nonrenewable and convertible B Nonrenewable and non-convertible C Renewable and convertible D Renewable and non-convertible
B
An insured owns a whole life policy that ends at age 100 and lives to be 100 years of age. Why does the insurer pay the face value to the insured?
Because the policy endows
An insured owns a $50,000 permanent life policy that she purchased 4 years ago that has a disability waiver of premium. The insured becomes disabled and pays premiums during the waiting period until the waiver begins. Once the waiver begins, what happens to the premiums she paid during the waiting period? A It is added to the policy's cash values B It is held in escrow until the disability is over then refunded C The insurer refunds it D It is kept by the insurer as part of the cost of providing the benefit
C
Bess received information in regard to her individual Term Insurance explaining that she could convert the policy by doing which of the following? A Prove insurability and pay the same level premium B Without providing proof of insurability and pay the same level premium C Without providing proof of insurability, pay higher premiums based on her attained age D Prove insurability and pay higher premiums based on her attained age
C
When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders? A Increased Death Benefit Rider B Accelerated Benefit Rider C Enhanced Settlement Rider D Accidental Death Rider
D
Which statement is true for BOTH Universal Life and Whole Life? A The death benefit is adjustable B Policy loans and partial withdrawals are allowed C A guaranteed minimum interest rate is determined at policy issuance D The policy is supported by the insurer's general account
D
f Jon dies with an outstanding policy loan of $10,000 on his $100,000 interest-sensitive whole life policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim? A $100,000 B $115,000 C $105,000 D $90,000
D 90,000
The cash value in an Indexed Life insurance policy:
Is based on the performance of a designated quity index over a specified period of time
What happens to the overall policy premium when most riders on a life insurance policy expire?
It goes down
How does an Option A death benefit feature of a Universal Life policy work?
It pays out the policy's face amount
The _________ settlement industry has increased awareness of STOLI/IOLI.
Life
M purchased a traditional permanent life insurance plan many years ago. What happens when he attains age 100?
M gets a check for the face amount of the policy
Variable Universal Life should only be sold to those clients who are:
More investment savvy
If X has a life insurance policy that is no longer wanted or needed and is considering selling their policy, how much might X receive if the premiums are $10,000 annually, the cash value is $200,000, and the face amount is $1,000,000?
More than 200,000 but less than 1,000,000
Which of the following term policies cost the least (all other factors being the same)?
Nonrenewable and non-convertible
In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined age?
Payor Benefit (Waiver of Payor Premium)
A rider is usually requested at the time of ____________.
Policy Purchase
A viatical settlement is an agreement between a third party and a(n) ___________.
Policyowner insuring the life of a terminally ill insured with 2 years or less life expectancy
A long-term care rider:
Provides up to 100% of the policy benefits if the insured qualifies for benefits as specified in the rider but will reduce the amount of death benefit protection based on the amount paid under the rider
All of the following regarding convertible term life insurance is true, except:
The conversion can take place at anytime
All of the following are TRUE regarding a Waiver of Premium Rider, except:
The insured must repay the unpaid premiums
What happens to a spouse or child rider just prior to it expiring?
The spouse or child has a conversion option
How long would a policyowner have to pay premiums on a term life policy to age 65 that was taken out at age 35?
To the earlier of the insured's death, or to age 65
Which of the following are characteristics of universal life insurance policies?
Two death benefit options, an adjustable death benefit and flexible premiums
If a policyowner has a whole life insurance policy with a disability waiver of premium rider, when does the rider benefit start if a qualifying disability should occur?
Typically 6 months after the disability occurs
A Variable Universal Life (VUL) is a combination of:
Universal and Variable Life
How would a term policy normally be used to pay off a mortgage upon death?
Using the death proceeds after the insured has died
A _______________ policy has a death benefit that will increase or decrease over time based on the performance of the separate account, provides a guaranteed minimum death benefit, offers a choice of subaccounts in which cash value may be allocated, and a has fixed premium.
Variable Life
Agents must have a FINRA registration as well as an insurance license in order to sell
Variable Life
Which of the following products requires a producer to obtain a securities registration in addition to an insurance license to solicit?
Variable Universal
Which of the following policies must be sold by prospectus?
Variable Whole Life
Increases in insurance protection to keep a Current Assumption policy from endowing is provided:
Without evidence of insurability
Annually renewable term life insurance's premiums increase every:
Year
Term Life insurance is designed to provide coverage for ___________.
a specified period of time
The face amount of an Ordinary Whole Life Policy _________ over the life of the policy.
remains the same
How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy?
the ability to invest the gas values in various separate accounts
If the cash value of a permanent life policy equals the face amount, what is that referred to?
the policy's endowment
The maximum amount the accidental death and dismemberment rider will pay out before it expires is
the principal sum
What is the typical time limit on life expectancy for a Viatical Settlement candidate?
2 years
A married couple purchases a $250,000 Joint Life Policy. When the older of the two dies, what is the amount payable to the survivor?
250,000
If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, upon his death the amount of the benefit payable to the beneficiary would be _________ if the policy had $25,000 in cash values.
275,000
A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force. The base policy costs $750 and the rider is $50. What is the total premium annually the policyowner must pay to keep the policy in force?
800
The premium charged for new policies obtained by exercising the Guaranteed Insurability Rider is based upon the:
Attained Age of the insured
All of the following about Universal Life are true, except: A Increases in face amount do not require proof of insurability if under $100,000 B The fixed expense charges from the policy are deducted monthly from the cash values C The premium paid can be increased, decreased, or even skipped D The mortality charge is determined annually, based on age
A
All of the following are correct pertaining to Decreasing Term, except: A The premium declines throughout the term of the policy B The death benefit decreases C The premium stays level D Its most common use is mortgage protection
A
First-to-die and last-to-die life insurance policies have in common all of the following, except: A They both continue in force after one of the named insureds dies B They both require premiums to be paid on time C They are both issued by an insurance company D Generally they cover the lives of two people, typically husband and wife
A
If a client owns an indexed product, what happens if the market falls in value by a large amount? A The policy's values can never decline due to negative index performance B The policy's values are reduced in proportion to the loss C The policy's values are reduced on a dollar-for-dollar basis D The policy's losses must first be made up before any future interest can be credited
A
What is the net amount at risk in a Whole Life Insurance policy? A The face amount less the cash values B The face amount of the policy C The face amount plus the cash values D The face amount minus any dividends paid
A
Which type of term protection has an increasing face value as the insured gets older? A Increasing Term B Renewable Term C Convertible Term D Level Term
A
How is a life settlement transaction similar to a viatical settlement transaction?
A third party buys a life insurance policy for less than its face amount
All of the following are TRUE regarding a Waiver of Premium Rider, except: A In a Whole Life policy, cash values continue to build B The insured must repay the unpaid premiums C The insurer foregoes the premium should the insured be disabled D There is usually a 6 month period before premiums are waived
B
How would a term policy normally be used to pay off a mortgage upon death? A By using the policy's cash values B By using the policy as collateral for a policy loan C Through a viatical or life settlement D Using the death proceeds after the insured has died
D
A 22 year-old applicant for life insurance has a limited budget for premiums. Which of the following policies would provide for the highest face value, for the lowest premium amount? A 10 Year Term B 30 year Term C 20 Year Term D Annually Renewable Term
Annually Renewable Term
If a father were to add a Child Rider to a policy to cover his children, when would coverage become effective for a newborn?
At 14 or 15 days of age
All of the following are characteristics of Ordinary Whole Life Insurance, except: A Premiums are designed to be paid throughout the life of the insured B If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner C Premiums remain uniform D The policy pays the face value if the insured dies before age 100
B
All of the following are true about riders, except: A Most riders are added at the time of policy issue B All riders are available free of charge and can be added at anytime without proof of insurability C Once a rider drops from the policy, the additional premium will also drop D Riders added after the policy has been issued usually require evidence of insurability
B
If a policyowner of a convertible term life insurance policy exercises his/her right to convert, which of the following will happen? A The new life insurance policy will likely have a much lower premium B The term policy will be replaced by a permanent life insurance policy C The new policy will have much more life insurance coverage than the previous one D The new policy will only be issued after proof of insurability is provided
B
Q has an ordinary straight whole life insurance policy for $100,000. Due to a change in circumstances, Q finds that there is now a need for more coverage, but the budget is not sufficient for another similar policy. What can Q do to satisfy the need for additional coverage at a low price? A Use the cash values of the policy to cover the difference B Add a term rider C Add an accidental death rider D Ask for an increase in the existing policy's face amount
B
Which of the following situations will require proof of insurability? A Variable Whole Life insurance as the cash values grow due to favorable separate account investment earnings B Adjusting the face amount up on a Universal Life insurance policy with Option A death benefit selected C Universal Life insurance with Option B death benefit as the cash values grow due to additional premium payments and favorable interest rate crediting D Current Assumption Whole Life when the interest crediting is so favorable that the insurer adds a corridor of protection to keep the policy from endowing
B
Which of the following policies is used in estate planning to fund irrevocable trusts? A Joint Life B Juvenile Insurance C Joint Survivorship Life Policy D Variable Life
C
Which of the following statements about Indexed Life insurance is TRUE? A The insured/owner bears all risk regarding cash surrender value, as negative stock market performance can cause the cash values to decrease B To sell Equity Indexed Life, a producer only needs a securities license C The interest credited to the policy is based off of the performance of a stock market index like the S&P 500 D The policyowner can decide which separate accounts to invest the policy's cash values into
C
The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________.
Cash Value
If the insured of a Whole Life policy is on claim with a Waiver of Premium rider, what happens to the cash values?
Cash value and dividends are not affected
What is the net amount at risk in a Whole Life Insurance policy? A The face amount minus any dividends paid B The face amount of the policy C The face amount plus the cash values D The face amount less the cash values
D
Which of the following is NOT a type of Term Life Insurance Policy? A Level B Increasing C Decreasing D Variable
D
Sean has a home with a mortgage. He needs life insurance to protect his family but also wants to leave them without a mortgage payment if he dies. Ideally which of the following riders should he acquire?
Decreasing Term Rider
This rider allows for the insured to obtain additional insurance in between the specified ages including marriage and the birth or adoption of a child, when the need for insurance coverage may increase without having to prove insurability. It is called the ________ rider:
Guaranteed Insurability
Which of the following term life insurance policies would be the most expensive, everything else being equal at the time of issuance?
Renewable and Convertible
Which of the following term policies costs the most, all other factors being equal?
Renewable and convertible
What is the 'waiver of premium' called on a Universal Life insurance policy?
Waiver of Cost of Insurance
How much of a cash value policy loan will an insurer normally grant with a variable type policy? A 75-90% B 50-75% C 80-90% D 100%
A
Which of the following is false in regards to a variable whole life's death benefit? A Death benefits are recalculated monthly B While the separate account values may decrease, the policy will never pay less than the guaranteed death benefit in the general account C Policy loans are available from either the general account or the separate account and will reduce the overall payout until repaid D The death benefit is tied to and varies with the performance of the separate account
A Death benefits are recalculated monthly
Of the following, which best describes a Straight Whole Life Policy? A Level guaranteed premium and face value for the life of the insured B Increasing cash value and decreasing premiums C Decreasing face amount and level premiums D Increasing premium and level death benefit for the life of the insured
A Level guaranteed premium and face value for the life of the insured
In all cases upon the insured's death, the beneficiary receives which of the following? A The policy's cash values B The face amount of the policy C The policy's rider values D A refund of premiums
B
Which of the following situations will require proof of insurability? A Current Assumption Whole Life when the interest crediting is so favorable that the insurer adds a corridor of protection to keep the policy from endowing B Adjusting the face amount up on a Universal Life insurance policy with Option A death benefit selected C Universal Life insurance with Option B death benefit as the cash values grow due to additional premium payments and favorable interest rate crediting D Variable Whole Life insurance as the cash values grow due to favorable separate account investment earnings
B
With indexed life, the interest credited to the policy is: A Declared by the insurer's board of directors B Based on a percentage of the increase in a stipulated stock index C Equal to the dividends paid on a stock index's underlying securities D Established by the full amount of a stock market advance, including dividends
B
Which of the following traditional whole life policies has the highest first-year annual premium, all other factors being equal? A 20-pay life B 30-pay life C 10-pay life D 40-pay life
C 10-pay life
A producer is explaining the concept of limited-pay life insurance to a 40-year-old client. When comparing a straight life policy with a 10-pay life policy, which of the following statements is correct?
The cash value in a straight life policy will accumulate at a slower rate than the cash value in a 10-pay life
Which of the following statements is correct regarding a Waiver of Premium Rider on a participating whole life policy? A Cash values do not grow B Dividends cease when the rider activates C The premiums are waived until either the insured recovers from the disability, the policy achieves paid-up status, or the insured dies D The death benefit is reduced by the amount of all premiums waived
C
A life insurance premium is paid each month. The insurer then subtracts a mortality and expense charge from the policy's cash value. This best describes which of the following life insurance policies?
Universal Life
Timothy is the insured/owner of a universal life insurance policy and is concerned that in the event of disability, the policy might lapse. Which rider would keep the policy from lapsing if he became disabled? A Return of Premium Rider B Waiver of Premium Rider C Waiver of Cost of Insurance D Guaranteed Insurability Rider
C
Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured? A Ordinary Term B Split Level Term C Decreasing Term D Renewable Term
C
Which of the following is correct regarding a 15-Pay Life policy? A It is term insurance providing 15 years of coverage B It is term insurance but converts to permanent after 15 years of on-time premium payments C It is permanent insurance but the insured only pays premiums for 15 years D It is permanent insurance providing 15 years of coverage
C
Which type of rider pays out a capital sum in case an insured loses a limb or their eyesight? A Return of Premium B Accidental Death C Accidental Death and Dismemberment D Disability Benefit
C
Sean has a home with a mortgage. He needs life insurance to protect his family but also wants to leave them without a mortgage payment if he dies. Ideally which of the following riders should he acquire? A Family Rider B Level Term Rider C Decreasing Term Rider D Increasing Term Rider
C Decreasing Term Rider
All of the following about Universal Life are true, except: A The mortality charge is determined annually, based on age B The premium paid can be increased, decreased, or even skipped C Increases in face amount do not require proof of insurability if under $100,000 D The fixed expense charges from the policy are deducted monthly from the cash values
C Increases in face amount do not require proof of insurability if under $100,000
Mary decides to convert her Term Policy to permanent protection. Which of the following statements is true regarding the conversion? A Premiums and the amount of coverage remain the same B She may convert after proof of insurability C She may convert without evidence of insurability D She may convert at any time
C She may convert without evidence of insurability
Which of the following would have the highest first-year annual premium for a 30-year-old, all other factors being equal? A Term age to 40 B Term age to 60 C Term age to 70 D Term age to 50
C Term age to 70
Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford, but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions? A living needs transaction B viatical trust settlement agreement C life settlement D buy/sell agreement
C life settlement
Which of the following is not a feature of term life insurance?
Cash Value
______________ is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.
Current Assumption Whole Life
A and B are married. They have two minor age children. A and B feel that all family members should have coverage on their lives, not just A. What would be the least expensive way to accomplish this? A Add accidental death coverage riders on B and the two children B Buy a traditional whole life policy on B, and juvenile policies on the children C Buy traditional whole life policies on B and the two children D Add a term life insurance rider to this policy to provide additional coverage on the spouse and children
D
Of the following, which best describes a Straight Whole Life Policy? A Increasing premium and level death benefit for the life of the insured B Increasing cash value and decreasing premiums C Decreasing face amount and level premiums D Level guaranteed premium and face value for the life of the insured
D
Which of the following policies is used in estate planning to fund irrevocable trusts? A Juvenile Insurance B Variable Life C Joint Life D Joint Survivorship Life Policy
D
Which of the following life insurance policies is ideally suited for estate planning purposes? A Variable Whole Life B Joint Life C Universal Life with death benefit Option B D Joint Survivorship
D Joint Surviorship
A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal? A Buy two separate Whole Life policies B Buy a Joint and Survivorship Life Policy C Buy two separate Limited payment life policies D Purchase a Joint life policy
D Purchase a Joint life policy
Level, decreasing and increasing term refer to which policy feature?
Death Benefit
Universal Life provides for an increasing death benefit only if the applicant chooses:
Death Benefit Option B
A "level term" policy means that the _________ remains the same throughout the entire policy period.
Face amount
A client wants coverage for himself as well as coverage for his wife and children all under one policy at an affordable price. Which of the following would best meet the need?
Family Rider
Permanent insurance is designed to provide coverage ___________.
For an entire lifetime
Which of the following is designed for someone with a large insurance need but with limited cash flow?
Term Life Insurance
Money accumulated in a permanent policy that the policyowner may borrow via a policy loan or receive if the policy is surrendered, refers to:
The Cash Value
A viatical settlement is a contract between a life insurance policyowner and a _______________.
Viatical settlement provider
In a viatical settlement transaction, the life insurance policyowner is referred to as the _________.
Viator
Which rider waives the cost of insurance and expenses if an insured becomes disabled?
Waiver of Monthly Deduction
In the event total disability continues beyond a specified period of time, future premiums will not be required to be sent in to the insurer for the duration of the disability. This optional rider is called the _________ rider.
Waiver of premium
Which of the following best describes a viatical settlement? A A policy that is donated to a charitable organization in exchange for certain benefits B A terminally ill insured/owner sells his or her policy to a third party for much needed cash C Gifting a policy to a non-profit organization in exchange for certain benefits D An insured with 5 years or more life expectancy sells a policy he or she no longer needs for more than its cash value
B A terminally ill insured/owner sells his or her policy to a third party for much needed cash
Which of the following best describes a viatical settlement? A An insured with 5 years or more life expectancy sells a policy he or she no longer needs for more than its cash value B A terminally ill insured/owner sells his or her policy to a third party for much needed cash C A policy that is donated to a charitable organization in exchange for certain benefits D Gifting a policy to a non-profit organization in exchange for certain benefits
B A terminally ill insured/owner sells his or her policy to a third party for much needed cash
Generally, Universal Life has how many death benefit options to choose from?
2
Which of the following life insurance policies does not develop a cash value? A Universal Life B 5 year term C Whole Life D Variable whole life
5 year term
All of the following activities could cause an insurance purchase to be treated as a STOLI, except: A Fill out the application for life insurance on behalf of the insured B Change the policy ownership and beneficiary designations C Keep paying policy premiums until the insured dies, and then file a claim D Pay for the policy they acquire from the policyowner
A
Term life insurance will not pay out a death claim in which of the following situations? A Death after the term expires B Death as a result of sickness C Death while at work D Death as a result of accident
A
Universal Life and Variable Universal Life share all of the following characteristics, except: A The investment risk B Policy loans, surrenders, and partial withdrawals are permitted C Flexible premiums D Adjustable death benefit options
A
All of the following about Universal Life are true, except: A Increases in face amount do not require proof of insurability if under $100,000 B The mortality charge is determined annually, based on age C The fixed expense charges from the policy are deducted monthly from the cash values D The premium paid can be increased, decreased, or even skipped
A Increases in face amount do not require proof of insurability if under $100,000
A Second to Die policy would be the most appropriate recommendation for which of the following?
A husband and wife concerned about paying estate taxes after they have died
What type of policy has an endowment date, a face amount, and cash value?
A permanent life insurance policy
With Joint Life Insurance policies, the premium is based on the:
Average age of both insureds
The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the insurer, this sub-account is a part of what is also known as the:
Separate Account
Term life insurance is primarily a _______ form of life insurance protection.
Temporary
Life insurance protection for a specified period of time is provided by what type of policy?
Term
The face amount of insurance is also referred to as the:
The limit of liability