ExamFx Chapter 2: Types of Life Policies

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called AGraded premium whole life. BSingle premium whole life. CModified Endowment Contract (MEC). DLevel term life.

Single premium whole life.

Which of the following policies would be classified as a traditional level premium contract? AVariable Universal Life BStraight Life CAdjustable Life DUniversal Life

Straight Life

The death protection component of Universal Life Insurance is always AWhole Life BAdjustable Life CIncreasing Term DAnnually Renewable Term

Annually Renewable Term

All of the following statements are correct regarding Credit Life Insurance EXCEPT ABenefits are paid to the borrower's beneficiary. BThe amount of insurance permissible is limited per borrower. CPremiums are usually paid by the borrower. DBenefits are paid to the creditor.

Benefits are paid to the borrower's beneficiary.

What kind of policy issues certificates of insurance to insureds? AAny insurance BGroup insurance CIndividual insurance DNonqualified annuity

Group insurance

Which of the following is true regarding the insurance amount in a credit life policy? AThe amount of coverage can be greater than the amount owed. BCreditor can only insure the debtor for the amount owed. CCreditor may insure the debtor for an unlimited amount of coverage. DAllowable amount of coverage is determined by the State Insurance Commissioner.

Creditor can only insure the debtor for the amount owed.

What does "level" refer to in level term insurance? ACash value BInterest rate CFace amount DPremium

Face amount

Both Universal Life and Variable Universal Life have a AFlexible premium. BLevel fixed premium. CDecreasing premium. DIncreasing premium.

Flexible premium.

A Return of Premium term life policy is written as what type of term coverage? AIncreasing BDecreasing CRenewable DLevel

Increasing

Credit Life insurance AHas a maximum term for insurance of 20 years. BInsures the life of a debtor. CIs purchased on an installment basis. DInsures the life of a creditor.

Insures the life of a debtor.

Which of the following best describes annually renewable term insurance? ANeither the premium nor the death benefit is affected by the insured's age. BIt provides an annually increasing death benefit. CIt is level term insurance. DIt requires proof of insurability at each renewal.

It is level term insurance.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? ALevel term BTerm to specified age COrdinary life policy DLimited pay whole life

Level term

Which of the following is an example of a limited-pay life policy? ALevel Term Life BStraight Life CLife Paid-up at Age 65 DRenewable Term to Age 70

Life Paid-up at Age 65

Which of the following is an example of a limited-pay life policy? ALife Paid-up at Age 65 BRenewable Term to Age 70 CLevel Term Life DStraight Life

Life Paid-up at Age 65

All of the following are characteristics of a Universal Life policy EXCEPT AThe insurance company reserves the right to adjust the mortality charges and/or interest rate. BThe cash account accumulates on a tax-deferred basis. CUniversal Life is a combination of term insurance and a separate savings account joined in a single contract. DThe planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.

The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.

What are the two components of a universal policy? AMortality cost and interest BSeparate account and policy loans CInsurance and cash account DInsurance and investments

Insurance and cash account

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT AMost term policies contain a convertibility option. BUpon conversion, the premium for the permanent policy will be based upon attained age. CUpon conversion, the death benefit of the permanent policy will be reduced by 50%. DEvidence of insurability is not required.

Upon conversion, the death benefit of the permanent policy will be reduced by 50%.

In a survivorship life policy, when does the insurer pay the death benefit? AIf the insured survives to age 100 BUpon the last death CUpon the first death DHalf at the first death, and half at the second death

Upon the last death

What do Modified Life and Straight Life policies have in common? ASame amount of premium BGraded premium CTemporary protection DAccumulation of cash value

Accumulation of cash value

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called AMultiple Protection insurance. BCredit life. CCredit health. DDecreasing whole life.

Credit life.

If an agent wishes to sell variable life policies, what license must the agent obtain? ASurplus Lines BPersonal Lines CSecurities DAdjuster

Securities

Which of the following determines the cash value of a variable life policy? AThe performance of the policy portfolio BThe company's general account CThe policy's guarantees. DThe premium mode

The performance of the policy portfolio

W owns a policy in which she is covered as the bread-winner with permanent insurance and with decreasing term insurance in the form of a rider. What type of policy is this? AFamily Protection Policy BFamily Income Policy CFamily Policy DFamily Maintenance Policy

Family Income Policy

Variable Life insurance is based on what kind of premium? AIncreasing BDecreasing CGraded DLevel fixed

Level fixed

A Universal Life Insurance policy is best described as AVariable Life with a cash value account. BWhole Life policy with two premiums: target and minimum. CFlexible Premium Variable Life policy. DAn Annually Renewable Term policy with a cash value account.

An Annually Renewable Term policy with a cash value account.

An applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract. Which type should he buy? AAny type of annuity BFixed CPermanent DVariable

Fixed

All of the following are true regarding a decreasing term policy EXCEPT AThe contract pays only in the event of death during the term and there is no cash value. BThe face amount steadily declines throughout the duration of the contract. CThe payable premium amount steadily declines throughout the duration of the contract. DIt has a lower premium than level term.

The payable premium amount steadily declines throughout the duration of the contract.

Which of the following best defines target premium in a universal life policy? AThe corridor of insurance BThe recommended amount to keep the policy in force throughout its lifetime CThe maximum amount the policyowner may pay on a policy DThe minimum amount to make sure the policy is annually renewable

The recommended amount to keep the policy in force throughout its lifetime

All other factors being equal, the least expensive first-year premium payment is found in ALevel Term. BAnnually Renewable Term. CIncreasing Term. DDecreasing Term.

Annually Renewable Term.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? AUniversal Life - Option A BUniversal Life - Option B CEquity Indexed Universal Life DVariable Universal Life

Universal Life - Option A

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? ALower BHigher CAs high DHalf the amount

Lower

Which of the following would be the beneficiary in credit life insurance? ABorrower BCreditor CInsured DCompany

Creditor

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? AThe insured may renew the policy for another 10 years at the same premium rate. BThe insured may renew the policy for another 10 years, but at a higher premium rate. CThe insured must provide evidence of insurability to renew the policy. DThe insured may only convert the policy to another term policy.

The insured may renew the policy for another 10 years, but at a higher premium rate.

Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase the premiums will AContinue to increase. BReturn to the initial premium amount. CDecrease again. DBe level thereafter.

Be level thereafter.

Which of the following is NOT allowed in credit life insurance? ACreditor having a collateral assignment on the policy BCreditor requiring that a debtor has a life insurance CCreditor becoming a policy beneficiary. DCreditor requiring that a debtor buys insurance from a certain insurer

Creditor requiring that a debtor buys insurance from a certain insurer