Chapter 4 Life Policies and Riders Review Questions

A whole life policy will mature at what age? A. 80 B. 90 C. 100 D. Never

Answer: C

A Waiver of Premium rider provides that in the event of disability, premiums will be waived for the duration of the disability. Most commonly, disability is defined as "permanent and total" with a presumption that it is permanent if it has persisted for at least _______ months: A. 3 B. 6 C. 9 D. 12

Answer: B

A type of endowment policy that only pays benefits if the insured lives past the end of the endowment period is called a: A. Life endowment B. Pure endowment C. Limited endowment D. None of the above

Answer: B

A 25-year-old man purchased a 20-year family income policy and died at age 35. How long will benefits be paid to his beneficiary? A. 10 years B. 20 years C. Life D. None of the above

Answer: A

A policy that provides protection for a specific period of time without permanent cash value is called: A. Term B. Endowment C. Whole Life D. Straight Life

Answer: A

Which of the following statements is false about Universal Life? A. Adjustments to the cash value are made each month consisting of credits from current interest and charges for the insurance protection B. Option A causes the death benefit to increase by the amount of cash value in the policy at any point in time C. The "risk corridor" is the amount at risk over and above the cash value D. The grace period for Universal Life is 30 days

Answer: B

Which of the following would not be considered an appropriate reason for purchasing term insurance? A. To pay funeral expenses B. To provide survivors with a monthly income C. To pay off a home mortgage if the insured dies D. To provide retirement income

Answer: D

Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value? A. Mode of premium payment B. Past due premium option C. Application to reduce premium option D. Automatic premium loan option

Answer: D

Bobby purchased a Decreasing Term policy. All of the following statements would be true, EXCEPT: A. The payable premium amount steadily declines throughout the duration of the contract B. All other factors being the same, it has a lower premium outlay than level term C. The face amount of the contract steadily declines throughout the duration of the contract D. The contract pays only in the event of death during the term and there is no cash value

Answer: A

Ron bought a 20 Year Level Term policy that is both guaranteed renewable and convertible. Which of the following statements about Ron's policy is correct? A. At the end of the 20 years, Ron can choose to renew the policy for another 20 years, but at a higher premium rate B. At the end of the 20 years, Ron can only convert to another term policy C. At the end of the 20 years, Ron can choose to renew the policy for another 20 years at the same premium rate D. Rom must declare at the time the policy is issued, whether or not he intends to renew or convert the policy

Answer: A

Under a Guaranteed Insurability Rider, if the insured exercises the right to buy more insurance, the premium for the additional coverage will be based on: A. Attained age B. Issue age C. Current health status D. Current age and health

Answer: A

A Joint life policy usually has all the following characteristics except: A. Two people insured B. Coverage continues after the first insured dies C. Policy expires after the first insured dies D. Insureds name each other as beneficiary

Answer: B

A family income policy is created by combining whole life and: A. Level term B. Decreasing term C. Increasing term D. Endowment

Answer: B

Aaron recently borrowed $20,000 from his bank on a five year note. The note is due in installments. The type of life insurance policy best suited to this situation would be: A. Whole life B. Decreasing term C. Level term D. None of the above

Answer: B

All of the following statements about Variable Life are true except: A. The death benefit cannot fall below a guaranteed minimum B. The cash values are determined on a weekly basis C. A "separate account" holds the assets used to determine policy benefits D. A statement of relevant information must be sent to each policyholder at least annually

Answer: B

All the following are true about a "Jumping Juvenile Policy" except: A. Usually contains a "payor benefit" B. Premium increases when benefits increase C. Benefits increase at a specified age D. Premiums remain the same when benefits increase

Answer: B

Rick and Lisa own a permanent policy which covers both of their lives and pays the face amount upon the death of the first to die. They own a: A. Family income policy B. Joint life policy C. Survivorship life policy D. Family policy

Answer: B

Steve wants a policy that provides both protection and savings and he is willing to pay premiums until retirement at age 65. Which of the following policies would he choose? A. Increasing term insurance B. Limited pay whole life insurance C. 10 year endowment D. Modified Life

Answer: B

The Guaranteed Insurability rider provides the insured the option to: A. Buy additional insurance on his immediate family B. Buy additional insurance on himself C. Convert his plan of insurance D. Take the agent to court, if the policy is not issued

Answer: B

There are three methods of paying the premium for a whole life policy. Which of the following is not a method? A. Single premium B. Weekly premium C. Limited Pay D. Continuous Pay

Answer: B

Which of the following is an example of a Limited Pay Life policy? A. Whole life B. Life paid up at age 65 C. Renewable Term to age 70 D. Endowment maturing at age 65

Answer: B

A policy that has a lower than average premium in the first three to five years with a slightly higher than average premium thereafter is called: A. Minimum deposit B. Reversionary policy C. Modified life D. Variable life

Answer: C

All whole life policies have certain characteristics. Which of the following is not a characteristic of whole life? A. Level premiums B. Constant face amount C. Pure protection D. Cash values

Answer: C

Assuming all benefits are equal, which of the following policies would have the highest annual premium? A. Straight whole life (3) B. 30 pay whole life (2) C. 30 year endowment (1) D. 30 year level term (4)

Answer: C

Mark wants a policy that will provide coverage on all five family members at the lowest cost. Which type of policy listed below would he most likely purchase? A. Universal life B. Family income C. Family policy D. Joint life

Answer: C

The Automatic Premium Loan rider: A. Costs an additional premium B. Allows unpaid premiums to be deducted from the claim payments C. Allows premiums to be borrowed from the loan value of the policy D. All of the above

Answer: C

The type of policy that matures at an age earlier than 100 is: A. Whole life B. Term C. Endowment D. Multiple protection

Answer: C

A family policy usually provides all the following except: A. Permanent coverage on the family head B. Automatic coverage for children C. Convertible term on children and spouse D. Whole life and decreasing term on the father

Answer: D

A policy rider: A. Has effect only when attached to a policy B. Usually adds benefits to a policy C. Usually costs an additional premium D. All of the above

Answer: D

All other factors being equal, which of the following lists from the largest annual premium to the smallest annual premium? A. 20-pay life, 20 year level term, 20 year decreasing term, 20 year endowment B. 20 year endowment, 20 year level term, 20 year decreasing term, 20 pay life C. 20 year endowment, 20 year decreasing term, 20 year level term, 20 pay life D. 20 year endowment, 20 pay life, 20 year level term, 20 year decreasing term

Answer: D

Ralph has just recently started a new job and wants life insurance coverage. He has been out of work for a while and his income is limited so he wants as much coverage as possible for the lowest premium. What type of policy should he get? A. An Endowment B. Whole life C. Variable life D. Term life

Answer: D

The following statements about convertible term are true except: A. Conversion is usually made at the attained age B. Proof of insurability is not required C. Premiums are always higher per $1,000 of coverage D. Convertibility allows the insured to renew the same policy without proving insurability

Answer: D

Tom has both a life agent license as well as a securities license. Thee licenses will allow him to sell: A. Whole life B. Variable life C. Universal life D. Any of the above

Answer: D

Which of the following signifies the difference between Universal life and Variable Universal life? A. Cash Value B. Face amount C. No death benefit D. One requires a securities license to sell

Answer: D