Insurance License Training: Life Insurance Policies

Attained age

the insured's age at the time the policy is renewed or replaced

Level premium

the premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of policy

Level premium

the premium that does not change throughout the life of a policy

Accumulate

Build up

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A. Equity Indexed Universal Life B. Variable Universal Life C. Universal Life- Option A D. Universal Life- Option B

C. Universal Life- Option A

Term Insurance (Pure Life Insurance)

a temporary protection because it only provides coverage for a specific period of time. Provides the greatest amount of coverage for the lowest premium, but has no cash value

Securities

Financial instruments such as stocks, bonds, and mutual funds that are traded on a stock exchange.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A. Option B B. Corridor option C. Variable option D. Option A

A. Option B

Variable life insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

Cash value

created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100 (the policy maturity date), and is paid out to the policyowner.

Death benefit

the death benefit is guaranteed and also remains level for life.

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? A. Universal life B. Whole life C. Decreasing term D. Variable life

C. Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy: A. Required a premium increase each renewal. B. Built cash values. C. Required proof of insurability every year. D. Decreased death benefit at each renewal.

A. Required a premium increase each renewal.

What type of premium do both Universal Life and Variable Universal Life policies have? A. Increasing B. Flexible C. Level fixed D. Decreasing

B. Flexible

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? A. Limited pay whole life B. Interest-sensitive whole life C. Life annuity with period certain D. Increasing term

A. Limited pay whole life

Living benefits

The policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A. The death benefit can be increased by providing evidence of insurability. B. The death benefit cannot be increased. C. The death benefit can be increased only when the policy has developed a cash value. D. The death benefit can be increased only by exchanging the existing policy for a new one.

A. The death benefit can be increased by providing evidence of insurability.

Which of the following types of policies allows for a flexible premium and a variable investment component? A. Variable whole life insurance B. Whole life insurance C. Variable universal life insurance D. Guaranteed issue variable life insurance

C. Variable universal life insurance A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.

An insured's has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? A. Limited-pay Life B. Variable Life C. Adjustable Life D. Graded Premium Life

A. Limited-pay Life

Lapse

policy termination due to nonpayment of premium

whole life insurance

provides lifetime protection, and includes a saving element (or cash value). This policy endows at the age 100.

All of the following are characteristics of group life insurance EXCEPT: A. Amount of coverage is determined according to nondiscriminatory rules. B. Individuals covered under the policy receive a certificate of insurance. C. Certificate holders may convert coverage to an individual policy without evidence of insurability. D. Premiums are determined by the age, sex, and occupation of each individual certificate holder.

D. Premiums are determined by the age, sex, and occupation of each individual certificate holder.

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: A. Modified Endowment Contract (MEC) B. Level term life C. Graded premium whole life D. Single premium whole life

D. Single premium whole life

What type of life insurance policy generates immediate cash value? A. Single Premium B. Level Term C. Decreasing Term D. Continuous Premium

A. Single premium

The premium of a survivorship life policy compared with that of a joint life policy would be: A. Lower B. Higher C. As high D. Half the amount

A. Lower

Which of the following best describes annually renewable term insurance? A. It requires proof of insurability at each renewal. B. Neither the premium nor death benefit is affected by the insured's age. C. It provides an annually death benefit. D. It is level term insurance

D. It is level term insurance

All the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT: A. Upon completion, the death benefit of the permanent policy will be reduced by 50% B. Evidence of insurability is not required C. Most term policies contain a convertibility option D. Upon conversion, the premium for the permanent policy will be based upon attained age

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

Which of the following entities regulates variable life policies? A. Financial Industry Regulatory Authority and the State Guarantee Association B. The Insurance Department only C. The Federal Government only D. Securities and Exchange Commission and the Insurance Department

D. Securities and Exchange Commission and the Insurance Department

Vision, Inc. employs 500 people. The company offers group life insurance to its employees after 90 days of service. Who is considered the policyholder of the life insurance policies Vision, Inc. offers? A. Each individual employee B. The beneficiaries of insurance policies C. The insurance company D. Vision, Inc.

D. Vision, Inc.

All of the following are true regarding a decreasing term policy EXCEPT: A. The contract pays only in the event of death during the term and there is no cash value B. The face amount steadily declines throughout the duration of the contract C. The payable premium amount steadily declines throughout the duration of the contract D. The death benefit is $0 at the end of the policy term

C. The payable premium amount steadily declines throughout the duration of the contract Premiums remain level with a decreasing term policy; only the face amount decreases

Deferred

withheld or postponed until a specified time or event in the future

Endow

to have the cash value of a whole life policy reach the contractual face amount

Which of the following is an example of limited-pay life policy? A. Level Term Life B. Straight Life C. Life Paid-up at Age 65 D. Renewable Term to Age 70

C. Life Paid-up at Age 65

Which of the following policies would be classified as a traditional level premium contract? A. Adjustable Life B. Universal Life C. Variable Universal life D. Straight Life

D. Straight Life

Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? A. Increasing term life B. Credit term life C. Decreasing term life D. Variable universal life

D. Variable universal life Variable universal life policies have cash value, so they allow policy loans. Term insurance policies do not have cash value.

In a group life insurance policy, the employer may select all of the following EXCEPT: A. The premium payor. B. The beneficiary. C. The type of insurance. D. The amount of insurance

B. The beneficiary.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? A. Ordinary Life B. Joint Life C. Decreasing Term D. Whole Life

B. Joint Life

All of the following are true regarding a decreasing term policy EXCEPT: A. The death benefit is $0 at the end of the policy term. B. The contract pays only in the event of death during the term and there is no cash value. C. The face amount steadily declines throughout the duration of the contract. D. The payable premium amount steadily declines throughout the duration of the contract.

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

All of the following statement are TRUE concerning Debtor Groups EXCEPT: A. An insurer may exclude any debtors as to whom evidence of individual insurability is not satisfactory to the insurer. B. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor. C. The debtors eligible for insurance under the policy shall all the debtors of the creditor(s). D. The premium for the policy shall be paid either from the creditor's funds, or from charges collected from the insured debtors, or from both.

B. The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor.

Cash value

a policy's savings element or living benefit

Nonforfeiture values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Policy maturity

in life policies, the time when the face value is paid out

Which of the following is called a "second-to-die" policy? A. Juvenile life B. Joint life C. Survivorship life D. Family income

C. Survivorship life

Which of the following are generally NOT considered when underwriting group insurance? A. The group's past claim experience B. The size of the group C. The insureds' medical history D. The nature of the group

C. The insureds' medical history

Face amount

the amount of benefit stated in the life insurance policy