Chapter 4 Part 1 Exam Review

borrower

Who normally pays the premiums for group credit insurance?

modified life

A life policy that has premiums that are lower than normal during the early years is called

$16,000 was received tax-free and $4,000 as ordinary income

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

The face amount is determined by the outstanding loan balance

All of these statements about group life insurance are false except

An improvement in future income

An individual who purchases a modified life insurance policy expects

Premiums are averaged over the term of the policy

How are level term policies able to provide premiums?

The gain is treated as taxable income and a penalty tax is imposed on the gain

Peter, age 50, surrenders his modified endowment contract (MEC), How is the gain treated in terms of federal income taxes?

Fluctuate with changes in the cash account

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

Less than the policy's face amount

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

Joint life

What type of life insurance policy covers two or more people 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?

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?

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?

Decreasing Term Insurance

Which of the following is generally a form of group credit life insurance?

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

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

Endowment at age 70

Which of these is not considered a type of limited payment whole life insurance?

Policy can alternate between forms of term and whole life insurance

Which of these statements accurately portrays and adjustable life policy?

Additional premiums may be required under certain conditions

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

Available to the policyowner when the policy has been surrendered

Which statement regarding the cash value of a whole life insurance policy is correct?

30-year decreasing term

Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?