Chapter 4-Flexible Policies
All of the following statements are false regarding universal life insurance, EXCEPT: b. Premium payments cannot be skipped. c. The face amount is level. d. Premiums are fixed.
Proof of insurability is required to increase the policy face amount.
What happens when a universal life policyholder pays the target premium?
The policy will resemble whole life insurance.
All of the following statements are correct regarding adjustable life policies, EXCEPT: Select one: a. The policyowner may take out policy loans. b. Policies have nonforfeiture and settlement options. d. Adjustable life policies are suitable for people with varying incomes.
c. Cash value always accrues in the policy.
Sandra wants to have flexibility with her life insurance policy to accommodate changes in her situation. She should consider:
Adjustable life
What policy provides flexible premiums, cash values, face amounts, premium-paying period and length of coverage?
Adjustable life
All of the following are ways that an adjustable life insurance policy can be altered when an extra premium payment is made, EXCEPT: Select one: a. Increase the coverage period b. Decrease the premium-paying period c. Decrease the premium
Decrease the policy's nonforfeiture values
Which of the following permanent life insurance policies is interest-sensitive?
Universal life insurance
Which policy works the same way as universal life, but has an interest rate that is tied to the stock market index?
Equity indexed universal life
Whole life and universal life policies have some similarities and differences. Which of the following is NOT a characteristic of a universal life policy?
Interest earned by the cash account cannot vary
The primary difference between universal life and adjustable life is:
Premium payments can be skipped
What happens when the cash value in a universal life insurance policy reaches zero and the grace period has lapsed?
The policy expires.
What policy can be described as annual renewable term with a cash value account?
Universal life
Which of the following best describes option B/option 2 under a universal life policy?
The death benefit is the policy face amount and the cash value.
In a universal life insurance policy, the two most common adjustments made during a month are:
Cost of death protection deducted and current interest rate credited
What happens when a universal life policyholder pays the minimum premium?
The policy will resemble term life insurance.
All of the following are true regarding adjustable life policies, EXCEPT: Select one: a. An adjustable life policy can be entirely whole or term, or a mix of both. b. If the policyowner decreases the premium, the policy could be adjusted to have more term coverage. d. When the face amount is increased, the insured is required to provide evidence of insurability.
When the premium is decreased, the insured is not required to provide evidence of insurability.
If Sandra chooses an adjustable life policy, all of the following are flexible, EXCEPT: Select one: a. Face amount of the policy b. Type of protection d. Length of protection
c. No requirement for proof of insurability
An adjustable life policy allows the policyowner to make all of the following changes, EXCEPT: b. Change the length of the coverage period c. Increase or decrease the premium d. Change the length of the premium-paying period
Invest premiums in a separate account
Which of the following changes may the policyowner of an adjustable life policy NOT make?
Invest premiums in the insurer's separate account
A person who has a universal life policy and needs cash from the policy, but does not want to have an outstanding policy loan should:
Take a partial surrender of the policy's cash value
For what reason would the insurance company raise the death benefit of a universal life policy?
Prevent the cash value from growing too quickly
If Jaime has an adjustable life policy, he can:
-Convert term to lessen the amount of the whole life -Convert whole life to lessen or increase the term -Convert term to equal whole life
Marci's universal life policy is currently crediting its cash value with 5% interest. The interest rate on policy loans is currently 6%. Based on these figures, at what interest rate is Marci's cash value accumulating?
5% on the entire cash value
What are the two premiums in a universal life insurance policy?
Target premium; minimum premium
Which of the following best describes option 1 under a universal life policy?
The death benefit is the policy face amount or policy cash value, but not both.
Which of the following best describes how the cash value in a universal life policy grows?
At a guaranteed minimum rate, but may earn a higher current rate
Which of the following best describes a circumstance in which the insurer would increase the death benefit of a universal life insurance policy?
To prevent the cash value from growing too quickly
Compared to ordinary whole life policies, universal life interest rates are:
Higher
Mr. Barnes purchased a universal life policy with a death benefit of $200,000 several years ago. With a current cash value of $50,000, he selected benefit option B. What is his current death benefit?
If the policyholder chooses option B, the result is an increase in the death benefit equal to the cash value plus the face value; $250,000
Some universal policies permit a cash withdrawal. All of the following are true statements about universal life, EXCEPT; b. It will reduce the cash value. c. It is not subject to interest. d. Repayment is treated like a premium payment.
It is treated as a loan.
