Chapter Exam: Life Insurance - Types of Policies

Which of the following is a life insurance policy that does NOT require a physical exam? a. Non-medical b. Graded c. Substandard d. Noncancelable

a. Non-medical Non-medical life insurance policies are written without a physical exam.

Which of the following statements do NOT apply to child coverage in a family policy? a. Child coverage is convertible to permanent insurance b. Child coverage comes in the form of term insurance c. Children are covered up to an age stated in the policy d. Only children born prior to policy's issue date may be included

d. Only children born prior to policy's issue date may be included Children born AFTER the policy's issue date may be covered in a family policy.

In a modified endowment contract, the penalty tax imposed on premature withdrawals is a. 10% b. 20% c. 30% d. 40%

a. 10% The penalty tax imposed on amounts received from a modified endowment contract is 10%

A business will typically use which type of life insurance to cover their employees? a. group policy b. adjustable life policy c. whole life policy d. Endowment policy

a. group policy A type of life insurance policy most commonly used by businesses for employees is a group policy.

Which of the following is a life insurance policy that does NOT require a physical exam? a. non-medical b. Graded c. substandard d. Noncancelable

a. non-medical non-medical life insurance policies are written without a physical exam.

In a renewable term life insurance policy, the contract will usually a. require a higher premium payable at each renewal b. require a lower premium payable at each renewal c. keep the same premium level at each renewal d. Stipulate a higher cash value at each renewal

a. require a higher premium payable at each renewal If a term life insurance policy is renewable, the renewal period usually states that a higher premium is payable at each renewal.

A life insurance policy where the insured can choose where the cash valued can be invested is called a. whole life b. variable life c. modified life d. universal life

b. variable life Variable life allows the insured to choose where the assets backing the cash value are invested.

A life insurance policy written on one contract for two people in which it is payable upon the first death is called a. split b. shared c. joint d. survivorship

c. joint A joint life insurance policy covers the lives of two people and is payable upon the first death.

Which of the following types of life insurance is normally associated with a mortgage loan? a. Adjustable term b. Level term c. Increasing term d. Decreasing term

d. Decreasing term Decreasing term insurance is commonly used to protect an insured's mortgage.

What is the proper order of initial life insurance premiums, from lowest to highest? a. Ordinary life, single premium, modified premium b. Modified premium, ordinary life, single premium c. Single premium, modified premium, ordinary life d. Ordinary life, modified premium, single premium

b. Modified premium, ordinary life, single premium The order of initial premium for life insurance policies, form lowest to highest, is the following: modified premium, ordinary life, single premium.

A life insurance policy's limit of liability would be a. determined by the Department of Insurance b. the policy's face amount c. the total premiums paid d. determined by insurance company's re-insurer

b. the policy's face amount The face amount of the policy is the limit of liability in a life insurance policy.

Which of the following is NOT a true description of non-medical life insurance? a. quicker processing of life insurance application b. less cost involved with underwriting the application c. Applicants are not required to answer medical questions on the application d. Demand on the medical profession reduced

c. Applicants are not required to answer medical questions on the application Medical questions can still be asked on an application of non-medical life insurance.

Lynn owns a life policy that guarantees the right to renew the policy each year, regardless of health, but an increased premium. What kind of policy is this? a. Universal life b. Renewable whole c. Renewable term d. Endowment

c. Renewable term A renewable term life insurance policy guarantees a policy owner the right to renew the policy, without evidence of inseparability, but at an increased premium.

Which of the following is NOT a true description of non-medical life insurance? a. quicker processing of life insurance application b. less cost involved with underwriting the application c. applicants are not required to answer medical questions on the application d. Demand on the medical profession reduced.

c. applicants are not required to answer medical questions on the application Medical questions can still be asked on an application of non-medical life insurance.

Which of he following is NOT true regarding a family policy that covers children? a. additional children can be added at no cost b. adopted children can be covered c. conversion of child's coverage to permanent insurance requires evidence of insurability d. Term insurance is used for the children's rider d.

c. conversion of child's coverage to permanent insurance requires evidence of insurability Conversion of child's coverage to permanent insurance does NOT require evidence of insurablity.

Which of the following types of life insurance combines a saving element along with a flexible premium option? a. joint life b. whole life c. universal life d. Endowment

c. universal life Universal life combines a savings element along with a flexible premium option.

Scott has just purchased a new house. He is now shopping for a life insurance policy that provides a death benefit that matches the projected outstanding debt of his mortgage. Which life policy would best suit his needs? a. Variable b. Universal c. Adjustable d. Mortgage redemption

d. Mortgage redemption Mortgage redemption insurance is a decreasing term life policy taken by a debtor to repay the balance on a mortgage loan if he or she dies before repayment.

John and Mary have a handicapped child that is financially dependent upon them. The death of one of the parents would not be financially disastrous, however the death of both likely would be. Which policy would be best suited for them? a. payor protection policy b. Family income policy d. Second-to-die policy e. First-to-die policy

d. Second-to-die policy a second-to-die policy covers two lives, but the benefit is paid upon the death of the last surviving insured.

An insurance policy written after 1988 that fails to pass the seven-pay test is known as a. an endowment policy b. a modified life policy c. a single premium contract d. a modified endowment contract

d. a modified endowment contract An insurance policy written after 1988 that fails to pass the seven-day test is known as a modified endowment contract.

A life insurance policy that pays the face amount if the insured survives to a specified period of time is called a. Universal life b. endowment insurance c. modified life d. whole life

b. endowment insurance An endowment policy pays the face amount if the insured survives to a specified period of time.

All of these are characteristics of a universal policy EXCEPT a. flexible death b. fixed surrender value c. flexible premiums d. Builds cash value

b. fixed surrender value A fixed surrender value is NOT a characteristic of a universal life insurance policy.

The type of policy which pays on the death of the last person is called a. joint life b. survivorship life c. dual life d. shared life

b. survivorship life A survivorship life policy pays on the death of the last person.

Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a a. joint life policy b. Family income policy c. survivorship life policy d. Modified endowment contract

a. joint life policy A joint life policy covers two or more people and prays the face amount at the first insured's death.

Mark, age 45, has a Modified Endowment Contract (MEC). What is the tax penalty for taking a loan against this policy prior to age 59 1/2? a. 5% b. 10% c. 15 % d. 25 %

b. 10% Penalty taxes (10%) on premature distributions prior to age 59 1/2 from a modified endowment contract (MEC) normally apply to policy loans.

What is the proper order of initial life insurance premiums, from lowest to highest? a. ordinary life, single premium, modified premium b. Modified premium, ordinary life, single premium c. Single premium, modified premium, ordinary life. d. Ordinary life, modified premium, single premium

b. Modified premium, ordinary life, single premium The order of initial premiums for life insurance policies, from lowest to highest, is the following: modified premium, ordinary life, single premium.