Chapter 4: life policies

10%

A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of

Initial premium is lower than for an equivalent amount of term insurance

All of these are considered features of whole life insurance except

Level term

Laura added a children's rider to her insurance policy. What type of coverage was added?

Two

The survivorship life insurance policy usually covers how many lives?

A policy that covers the life of a minor

What is a juvenile life insurance policy?

The seven pay test, adjusted for cash value, applies again

Immaterial change in a modified endowment contract (MEC) results in

Ten year term insurance for a person aged 55

When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for

At the time of death or 30 years after the policy's inception, whichever comes first

When does the insured stop making payments under a thirty-payment whole life policy?

Premiums are averaged over the term of the policy

How are level term policies able to provide level premiums?

Full life of the policy

How long does one premium payment cover in a single premium whole life policy?

Until age 100

How long does protection normally extend to under a limited pay whole life policy?

Premium

What typically changes at the re-entry option date found in some term life policies?

Less than the policy's face amount

What is the guaranteed cash value of a whole life insurance policy on the insured turns 65 years old?

Joint Life Policy

What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured

The initial premium is lower compared to an equivalent amount of whole life coverage

What would be considered an advantage of purchasing term life insurance?

Variable universal life

Which type of life insurance policy allows a policy owner the choice of investments along with flexible premium payments?

Borrower

Who normally pays the premiums for group credit life insurance?

$16,000 was received tax-free and $4000 as ordinary income.

A non-participating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had total of $16,000. What were the federal income tax consequences to the policy owner on the receipt of the cash value?

In the event of death, the loan amount is deducted from the policy proceeds

A policy owner has just borrowed from a life insurance policy's cash value. Which of these statements is true?

The face amount is based on the outstanding loan balance

All of these statements concerning group credit life insurance are false EXCEPT

An improvement in future income

An individual who purchased a modified life insurance policy expects

Variable Life Insurance

Insurance policy that can also be classified as a securities product is called

100%

John received a one time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contracts cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?

Fluctuate with changes in the cash account

Rick owns a variable universal life policy and she was just a variable death benefit option. What will typically happen to the death benefit as a result of the selection?

Policy protection normally expires at age 65

Straight whole life insurance can be accurately described in all of these statements except

The policy is surrendered for less than what was paid into it

Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for

Lender

The Death proceeds of a credit life insurance policy are typically paid to the

The person insured

Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?

Universal life insurance normally has a minimum guaranteed cash value for duration of the policy

What is not true about universal life insurance

$50,000

What is the face amount of $50,000 graded death benefit life insurance policy on the policy is issued?

When the death benefit is increased

When would evidence of insurability be required for a person already covered with a variable universal life policy?

Policy loans

Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)?

Annual increases in premium for a stated number of years then remains level

Which is in accurate description of the premium in a graded premium life insurance policy?

Provide supplemental income in 35 years

Which of the following could be a future use of the cash value that builds in a recently purchased whole life insurance policy?

Endowment at age 70

Which of these is NOT considered a type of limited payment while life insurance?

A cash benefit will be provided if the insured is alive at the end of the policy period

Which of these is not an advantage of term life insurance?

Decreasing term life insurance

Which of these life insurance policies does not contain a cash value provision?

Federal premium taxes

Which of these may not be deducted from premium payments or the cash value of a variable life insurance policy?

Single premium life

Which of these policies is considered a whole life policy?

Face amount decreases over the policy period

Which statement concerning a decreasing term life policy is accurate?

Additional premiums may be required with a single premium life insurance policy

Which statement regarding a single premium life insurance policy is NOT correct?

Policy loans are not permitted

Which statement regarding an adjustable life insurance policy is NOT true?

Cash value accumulations have a guarantee in universal life insurance.

Which statement regarding universal life insurance is correct?

Insurance coverage can continue for life

Which statement regarding whole life insurance is accurate?