Life and Health 2
New point not in the text: Most states now limit Group Life dependent coverage to 50% of the coverage purchased by the employee. Question: An employee has a $10,000 group life policy. The employee's dependent spouse may purchase a group life policy with a maximum death benefit of:
$5,000
Under federal tax laws, employers may deduct the cost of employee life insurance. However, employees must declare the cost of employee life insurance as taxable income if the amount of the group policy exceeds:
$50,000
Jeremy is interested in purchasing a policy that will pay a lump sum upon his death and provide a stable monthly income for ten years. What should Jeremy purchase?
10-Year Family Maintenance Policy.
Which policy will have the largest annual premium payment?
10-year endowment life
Which of the following policies would have the highest annual premium in the first year for a 30-year old?
15-Year Endowment Life
Assuming the same face value, which of the following policies will have the largest accumulated cash value after 10 years?
A 20-Year Endowment Life policy.
Zela is 30 and wants to buy a $200,000 Life policy. Which of the following will have the highest annual premium?
A 30-Year Endowment Policy
Joyce and Scott are a married couple and have three children, ages 5, 7, and 9. Scott wants a whole life policy on himself, no insurance on Joyce, and extra coverage to pay the money needed for Joyce to finish raising the children to age 23 if Scott dies young. Joyce wants to be able to count on having the same amount of money no matter how many of the children are still living at home if Scott dies young. What do you recommend?
A Family Maintenance Plan
Sandra and Charles want to purchase a policy that will automatically cover newborns at no extra cost. Which policy should they choose?
A Family Policy
Which choice may provide coverage for all the family members in a single policy?
A Family Policy
A grandparent purchases a $1,000 Whole Life insurance policy for a two-year-old grandchild. The producer should suggest including in the policy:
A Guaranteed Insurability Rider
Paula and Sam are an older married couple. If either dies, the other spouse will inherit the other's substantial assets without any death tax. However, when the second spouse dies, the estate may face a huge death tax. What type of insurance should Paula and Sam purchase to pay the death tax due when the second spouse dies?
A Survivorship Life policy.
Which of the following does NOT constitute third party ownership?
A business owner purchases a Life policy to protect her family in case she dies.
Which of the following best describes an Adjustable Life policy?
A policy that may have Whole Life, Term Life, or a combination of the two and has a changeable death benefit.
Which of the following best describes an Adjustable Life policy?
A policy with a unique two-way conversion feature.
A Family Maintenance Policy is a combination of which of the following?
A whole life and level term
ABC Corp. purchases a Key Person Life policy on Suzanne. Each of the following is correct EXCEPT?
ABC Corp. is the assignee of the policy.
Which type of policy has a death benefit called a principal sum?
AD&D Insurance
Which rider protects the life insurance policy's coverage if the Grace Period expires?
Automatic Premium Loan Rider
Which of the following refers to a "Continuation Agreement" by which business owners agree to purchase the ownership interest of a deceased owner?
Buy-Sell Agreement
Which of the following would help a small hardware store continue its business after the death of one of three owners?
Buy-sell agreement
Variable Life Insurance does not have a guaranteed minimum:
Cash Value
A "Family Policy" provides:
Different coverages on different family members.
Which policy will have the greatest cash value at the end of 10 years if sold to an applicant at age 30?
Endow at 40 Endowment Life
Which of the following allows the cash value to grow the quickest?
Endowment Life
Which of the following will endow at the earliest date?
Endowment Life
Which of the following characteristics is found in Universal Life policies?
Flexible premium
A Survivor policy is most often used:
For Estate Planning Purchases
Endowment Life policies:
Have a higher premium than Straight Life, all things being equal.
The owner of an Adjustable Life policy will most likely need Insurer approval to do which of the following?
Increase the death benefit.
Which of the following policies would allow the policy owner the possibility of earning higher returns without the owner making investment decisions?
Interest Sensitive Life
Which of the following is true about a company that uses Key Person Life Insurance?
It may reassure business creditors that the business is well-run and thus a better credit risk.
Which policy would you recommend to a husband and wife who want to buy just one Life Insurance covering both, and want the policy to pay when the first spouse dies?
Joint Life
A "First to Die" policy is known as a:
Joint Life Policy
What is the name of the policy that is designed to protect a company if a key person dies?
Key Person Life Insurance
A Family Maintenance policy combines a Whole Life policy with:
Level Term
Variable Life Insurance:
May only be sold by a producer with both a Life license and a Securities license
Molly quit her job at the factory. The factory had provided a Group Life policy covering Molly, husband Hank, and their daughter Emily. Which is true regarding the issue of conversion to an individual policy?
Molly, Hank, and Emily may, within a set time, request to convert to individual Whole Life Policies.
A company provides a noncontributory Group Term Life Insurance plan for its employees. Each eligible employee has $35,000 in coverage. What portion of the premium payment is taxable as income to the employee?
None
The death benefit from an individual Life Insurance policy is:
Paid to the beneficiary tax free
Key Person Life Insurance is designed to do which of the following?
Protect the company in case an insured employee dies prematurely.
Bill and his wife June are very successful doctors. They are worried about estate taxes. They should:
Purchase a Survivorship Life policy for the amount of estate taxes they expect will be due when they die.
Agnes quit her job on March 3rd and her group life coverage terminated on that date. Her company does not inform her of her right to convert her Group Life policy. On April 10th Agnes applies for conversion. What will happen?
She will be issued a standard Whole Life policy for the original face amount because she made the request within the 60 day limit.
Which of the following would permit an Insured's wife to purchase life insurance?
Spouses Rider
Which involves a life policy used to provide funds to purchase the stock of a deceased shareholder?
Stock Redemption Play
A "Last to Die" policy is known as a:
Survivorship Life Policy
All things being equal, which type of Life Insurance will have the least expensive first year's premium?
Term Life
All of the following must sign an application for Key Employee Life Insurance
The agent, the key employee, and the applicant
Which is true regarding taxation of group life insurance in an employment setting?
The beneficiary is not taxed on the death benefits.
Who is the payor under a Key Employee Life policy?
The business
Universal Life Insurance
The cash value is interest-sensitive. The policy owner can increase, decrease, or even skip premium payments. The policy involves the use of permanent term insurance with coverage to age 100.
Variable Universal Life
The cash value is invested at the owner's direction and the premium schedule is flexible.
Justin was fired from his job on August 8th and his company promptly informed him on that date that he had the right to convert his Group Term Life policy. On September 24th, Justin decided he would like to convert. What will happen?
The conversion privilege is no longer available because he waited beyond 31 days. No policy will be issued.
With an individual life policy, which of the following is true regarding taxation?
The death benefit is not taxable to the beneficiary.
Which document triggers the Free Look provision in an Adjustable Life Policy?
The delivery receipt
A 20-Year Endowment policy's cash value is equal to which of the following after 20 years?
The face value.
Variable Universal Life
The investments are controlled by the policy owner.
Which of the following statements regarding conversion of a Term Life policy from a Group plan to an individual policy is correct?
The new converted policy will likely be Whole Life.
What happens at the age or date of endowment with an Endowment Life policy?
The owner will receive the proceeds
Which is correct regarding a Family Policy?
The policy consists of a Permanent policy on the breadwinner and Term policies for the other family members.
Each of the following statements regarding Endowment Life Insurance is correct EXCEPT?
The policy provides coverage to age 100
Each of the following statements about Variable Universal Life is correct
The premium schedule is flexible. The premium funds are placed in a separate asset account. The investments are selected by the policy owner
Endowment Life Policies are primarily concerned with:
The rapid build up of cash value.
Which statement regarding childrens' policies under a Family Policy is true?
They are convertible Term policies.
What is the contestable period for Group Life?
Two Years
Molly does not want to make the investment decision on her policy's cash value account. She does, however, want the potential to earn more than a guaranteed minimal interest rate. You should recommend:
Universal Life
Which of the following is an interest-sensitive Permanent Life policy?
Universal Life
Which of the following policies allows premium costs to be deducted from the separate asset account?
Universal Life
When does an Endowment Life policy mature?
Upon the death of the Insured during the endowment period.
With which of of the following is the cash value account measured in "investment units" rather than dollars?
Variable Life or Variable Universal Life
A Variable Life policy differs from an Adjustable Life policy in what way?
Variable Life policy allows the owner to select from a list of investments and Adjustable Life does not.
A securities license is required to sell which of the following?
Variable Universal Life
Which of the following policies has a cash value that may fluctuate with the values of common stocks?
Variable Universal Life
Which policy combines stock market investments chosen by the policyowner with a form of Term Life coverage?
Variable Universal Life
When does an Endowment Life policy mature?
When the Insured dies or reaches the age or date of endowment.
Which of the following endows only when the Insured reaches age 100?
Whole Life
Which type of insurance is most likely used for either a Joint Life policy or a Survivorship Life policy?
Whole Life
An adjustable life policy is unique in that it allows for adjustment of the:
premium
With Variable Universal Life:
the death benefit may increase or decrease within limits
Which of the following may be included in an Adjustable Life policy?
whole life and term life
