Chapter Exam 1- Insurance Life Policies

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Which of these statements describe a Modified Endowment Contract? (MEC)

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

Term insurance has which of the following characteristics?

Expires at the end of the policy period

What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?

Face amount plus the policy's cash value

P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?

Family Maintenance Policy

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?

Family Maintenance Policy

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 death benefit

Which of the following types of Term Life policies most likely contains a renewability feature?

10 year convertible term

A 15-year mortgage is best protected by what kind of life policy?

15-year decreasing term

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

20-Pay Life accumulates cash value faster than Straight Life

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20-pay life

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Decreasing term

Which of these types of policies may NOT have the automatic Premium loan provision attached to it?

Decreasing term

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Decreasing term policy

P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?

Endowment at age 70

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level of risk. Which product would S be advised to purchase?

Equity index insurance

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Family Maintenance Policy

Which of these needs is satisfied by Adjustable Life insurance?

Insured's need for flexible premium

What type of life policy covers two lives and pays the face amount after the first one dies?

Joint Life Policy

K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT

K's wife dies at age 66

An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?

Key Person insurance

D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

Level term

Which of these would be considered a Limited-Pay Life policy?

Life Paid-Up at Age 70

Life insurance that covers an insured's whole life with level premiums paid over a limited time is called

Limited Pay Life

Which type of policy is considered to be overfunded, as stated by the IRS

Modified Endowment Contract

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

Modified Endowment Contract (MEC)

J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?

Modified Premium Life

K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?

Straight life

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

Ten-Year Endowment

Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?

Term life

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term life

What kind of life insurance product covers children under their parent's policy?

Term rider

The investment gains from a Universal Life policy usually go toward

The cash value

The most important factor to consider when determine whether to convert term insurance at the insured's attained age or the insured's original age is

The cost

Whole Life insurance is sometimes referred to as "straight life". What does the word "straight" indicate when using this phrase?

The duration of premium payments

What advantage does the renewability feature give to a term policy?

The insured may extend the coverage period

All of these statements about Equity Indexed Life Insurance are correct, EXCEPT

The premiums can be lowered or raised, based on investment performance

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds

S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be

Universal Life

A term life insurance policy natures

Upon the insured's death during the term of the policy

A(n) ______ life policy offers the owner investment in products such as money-market funds, long-term bonds and equities

Variable

In order to sell a (n)____ Life policy, a producer is required to register with financial Industry Regulatory Authority (FINRA).

Variable

A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as

Variable Life

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

Variable Life

Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?

Variable Life

Which of the following policies is characterized by a flexible premium and death benefit and allows the policy owner control of the investment aspect of the plan?

Variable Universal Life

S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?

Variable Whole Life

Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?

Variable life

A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)

Variable universal life policy

At what point does a Whole Life Insurance policy endow?

When the cash value equals the death benefit

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date, whichever happens first

What type of insurance offers permanent life coverage with premiums that are payable for life?

Whole Life

A life insurance policy that provides a policy owner with cash value along with a level face amount is called

Whole life

How long does the coverage normally remain on a limited-pay life policy?

age 100

Under a Graded Premium policy, the premiums

are lower during the policy's early years

Variable Whole Life Insurance can be described as

both an insurance and securities product

A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the

cost of insurance

A(n)______ term life policy is normally used when covering an insured's mortgage balance

decreasing

The Combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy

decreasing

Additional coverage can be added to a Whole Life policy by adding a(n)

decreasing term rider

A variable insurance policy

does not guarantee a return on its investment accounts

A universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the

expense charges

All of these are characteristics of an Adjustable Life policy EXCEPT

face amount can be adjusted using policy dividends

Variable Life products require a producer to

hold a Life Insurance license and a Securities license

Credit Life insurance is

issued in an amount not to exceed the amount of the loan

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?

level

What kind of premium does a Whole Life policy have?

level

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

whole life

If a 10-Year Term Life policy contains a Renewability provision, the policy will renew

without evidence of insurability

Credit life insurance is typically issued with which of the following types of coverage?

Decreasing term

N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?

30 Pay Life

Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?

A Whole Life Policy with an Other Insured Rider

Which of these is an element of a Variable Life policy?

A fixed, level premium

Which statement is TRUE regarding a Variable Whole Life policy?

A minimum guaranteed Death benefit is provided

Which of the following types of policies pays a benefit if the insured goes blind?

AD&D

Which statement about a whole life policy is true?

Cash value may be borrowed against

Under an Interest Sensitive Whole Life policy

Cash values are determined by interest rates

S is covered by a whole life policy. Which insurance product can cover his children?

Child term rider

Which provision allows the policy owner to change a term life policy to a permanent one without providing proof of good health?

Conversion

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Conversion Privilege

When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?

Conversion provision

What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

Convertible Term

All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for

Modified Whole Life

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

Payor provision

Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?

Policy owner

Which of the following information is NOT required to be included in a Whole Life policy?

Policy's guaranteed dividend table

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment

Which of these characteristics is consistent with a Straight Life policy?

Premiums are payable for as long as there is insurance coverage in force

Which statement is correct regarding the premium payment schedule for whole life policies?

Premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured

Which of the following actions is NOT possible with a Universal Life policy?

Premiums may be applied as a credit against income tax

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

Renewable

Which of the following types of permanent life insurance policies offers the highest initial cash value?

Single Premium

Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT

partial withdrawal features beyond a surrender charge period

A Limited-Pay Life policy has

premium payments limited to a specified number of years

The amount of coverage on a group credit life policy is limited to

the insured's total loan value

Under a Graded Premium Whole Life policy,

the premium increases each year during the early years of the contract and remains the same after that time

Under a Renewable Term policy,

the renewal premium is calculated on the basis of the insured's attained age

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n)

third-party with no insurable interest

K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.

universal

The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

universal

When is the face amount paid under a Joint Life and Survivor policy?

upon death of the last insured


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