Life and Health Exam Ch 3-4

If one purchases a 20-Pay Life Policy, with a face amount of $25,000 and dies 15 years later, what amount will the beneficiary receive? a. $25,000 b. $15,000 c. $18,750 d. Total premiums paid plus interest

a. $25,000 All premiums will be paid in 20 years, but the cash value will not be equal to the face amount until age 100. If death occurs at any point prior to age 100, the beneficiary receives the death benefit of $25,000.

What is the time limit on life expectancy for a Viatical Trust candidate? a. 4 years b. 5 years c. 2 years d. 3 years

c. 2 years The time limit of life expectancy for a Viatical Trust candidate is normally a life expectancy of two years or less.

Which of the following riders is used to increase the death benefit if death is the result of an unintended fatal injury, paying a multiple level of the face amount? a. Payor Benefit b. Viatical Trust Settlement Agreement c. Accidental Death d. Living Need Rider

c. Accidental Death If death is ruled to be accidental, the Accidental Death Rider pays a multiple (usually double) of the death benefit of the underlying policy.

The cash received by the policyowner when he/she terminates a policy is known as what? a. Accrued Premium Value b. Loan Value c. Cash Surrender Value d. Paid-Up Insurance Value

c. Cash Surrender Value The Cash Surrender Value is the Nonforfeiture Option that allows the owner to withdraw the cash value upon the surrender of the policy.

Which of the following are types of Whole Life policies? a. Level, Adjustable, Flexible b. Straight, Limited pay, Universal c. Continuous, Limited pay, Single premium d. Level, Straight, Limited pay

c. Continuous, Limited pay, Single premium Since all Whole Life policies mature at age 100, Continuous, Limited Pay, and Single Premium simply describe how long premiums will be paid.

Which Settlement Option pays for a specified period, regardless of who may receive the payments? a. Paid-Up Additions b. One-Year Term c. Fixed Period d. Reduced Paid-Up

c. Fixed Period As the name implies, Fixed Period establishes that the policy proceeds are guaranteed to be paid over a set period (i.e. 30 years) regardless of who may receive the payments, policyowner or beneficiary. The other choices are not Settlement Options.

The interest earned on dividends is: a. Nontaxable b. Tax deductible c. Taxable d. 40% taxable, similar to a capital gain

c. Taxable The dividends themselves are not taxable, but any interest earned on the dividends is taxable.

A ____ Option protects the policyowner against total loss of benefits in the event of a lapsed policy and add flexibility to a cash value policy. a. Nonforfeiture b. Spendthrift c. Dividend d. Settlement

a. Nonforfeiture Nonforfeiture Options are found in life insurance policies that generate a cash value, and protect the owner against total loss of that cash value, if the policy should lapse or it is cancelled.

A retiree elected the Ten Years Certain and Life Income Option. He dies the day after receiving 119 monthly payments. The contingent payee will receive: a. One more payment b. Five more payment c. Ten more payments d. No more payments

a. One more payment Since the retiree died within the period certain (10 years or 120 months), then the contingent payee would receive only one more payment since the retiree has received 119 monthly payments. If the retiree had lived beyond the 10 years, then they would have been paid a benefit as long as they lived.

A Term Insurance Policy with a Convertibility Option may be: a. Converted to another company. b. Converted to cash, after the fifth year. c. Converted to major medical insurance. d. Converted to permanent insurance.

d. Converted to permanent insurance. The Convertibility Option of a Term Policy allows the policy to be converted to a permanent policy without proof of insurability. The premium upon conversion is based upon either attained age or issue age dependent upon the insurer.

If Alvin purchases a Variable Life Policy with a face amount of $250,000, upon his death the amount of benefit payable to the beneficiary must be at least: a. $250,000, minus any loans and loan interest. b. There is no guaranteed death benefit. c. Exceed $250,000. d. Equal to or less than $250,000.

a. $250,000, minus any loans and loan interest. The original face amount (death benefit) is guaranteed under a Variable Life Policy. The amount payable to the beneficiary upon Alvin's death must at least equal $250,000, less any loans and loan interest.

Albert owned a $100,000 policy that had accumulated a cash value of $9,580, of which he had borrowed $2,500. His beneficiary will receive which of the following amounts? a. The face amount, less the loan and accrued interest b. $107,800 c. $87,920 d. $90,420

a. The face amount, less the loan and accrued interest Any outstanding loans not paid upon the insured's death will be deducted from the face amount (death benefit) along with any interest due.

All members of a family are covered by this contract with Whole Life Coverage on the wage earner and Level Term Coverage on the spouse and children. Which policy has these characteristics? a. Family Income Rider b. Family Policy c. Family Maintenance d. Multiple Protection Plan

b. Family Policy The Family Policy (Family Protection Plan) covers all members of the family with Whole Life Coverage on the head (wage earner) of the family and Level Term Coverage in the form of a rider on the spouse and children.

A beneficiary wants a guarantee that benefits will be paid for a period of ten years before the funds are exhausted, which of the following options should the beneficiary select? a. Fixed Amount b. Fixed Period c. Fixed Time d. Fixed Income

b. Fixed Period Anytime the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, policyowner or beneficiary, is the Fixed Period Settlement Option.

Which of the following are types of Term Policies? a. Single Premium, Level Premium, Decreasing Premium b. Increasing, Decreasing, Re-entry, Level and Life-Expectancy c. Straight, Level, Increasing, Decreasing d. Renewable, Convertible

b. Increasing, Decreasing, Re-entry, Level and Life-Expectancy The question asks about types of Term Policies, not options available to Term Policies. Straight is a type of permanent insurance, not term insurance.

An insured dies within the time limit of an Increasing Term Rider and the beneficiary receives the face amount plus the value of all paid premiums. Which rider is attached to the policy? a. Waiver of Premium b. Return of Premium c. Not allowed, insurers do not return premiums in this manner. d. Return of Cash Value

b. Return of Premium With a Return of Premium Rider, if the insured dies within the period of the term, the beneficiary receives the death benefit of the Whole Life Policy and, through an increasing term rider, the equivalent of the premiums paid on the Whole Life Policy.

Frank's policy lists his wife as beneficiary. Upon Frank's death, she is to receive a stipulated amount until the benefit is exhausted. While he pays premiums, he chooses to have the dividends increase the death benefit. Which of the following Dividend Options was chosen? a. Fixed Amount b. Acceleration of Endowment c. Paid-Up Additions d. Paid-Up Option

c. Paid-Up Additions Frank's objective is to use his dividends to increase the death benefit. Paid-Up Additions purchases single premium additional permanent benefits at the insured's attained age. The additional insurance is added to the face amount and it generates cash values and dividends as if the paid-up additional benefit was part of the original policy.

The Double Indemnity Rider expires within _____ days of the accident. a. 180 b. 365 c. 120 d. 90

d. 90 Death must occur within 90 days of the accident for the Accidental Death (Double Indemnity) Rider benefit to be paid.

If a father were to add a Child Rider to a policy to cover his children, how old must a newborn be before coverage is in force? a. At 14 or 15 weeks of age b. At birth c. At one year of age d. At 14 or 15 days of age

d. At 14 or 15 days of age Children born after the rider is issued are covered automatically after 14 or 15 days, depending on the insurer, at no additional premium.

Which characteristic is unique to a Graded Premium Whole Life Policy? a. Premiums are higher than a typical Whole Life Policy in the early years. b. In the later years, premiums are the same as a typical Whole Life Policy. c. Premiums are flexible throughout the life of the contract. d. Premiums increase each of the early years and remain level thereafter.

d. Premiums increase each of the early years and remain level thereafter. A Graded Premium Whole Life Policy increases in premium each year for a specified period, such as five years, with the premiums becoming level thereafter. This feature makes Permanent Insurance affordable when the cost of traditional Whole Life products might be prohibitive.

Which statement is true of Term Insurance? a. Term is less expensive as the insured's age increases. b. Premiums decrease as the insured's age increases. c. Term insurance usually has cash value when it expires. d. Term may be written for a specified number of years.

d. Term may be written for a specified number of years. Term premiums increase as the insured's age increases. Term is more expensive as the insured's age increases. Term Insurance provides protection, but does not generate a cash value.

When is the Automatic Premium Loan Provision activated? a. At the beginning of the underwriting period. b. At the end of the grace period. c. At the end of the policy period. d. At time of reinstatement.

b. At the end of the grace period The Automatic Premium Loan provision automatically becomes effective at the end of the grace period to prevent the policy from lapsing.

What are the Nonforfeiture Options in a Decreasing Term Policy? a. Increased options b. Reduced Paid-Up only c. There are none d. Same as Whole Life

c. There are none There are no Nonforfeiture Options in a Term Policy, as Term policies do not accumulate a cash value.

Burt named Liz as his beneficiary, however he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits? a. The insurer b. Liz c. Burt's estate, since no Settlement Option was chosen. d. Statutes require the proceeds be paid lump sum when an option is not chosen.

b. Liz If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.

The premiums paid to add the Automatic Premium Loan (APL) Provision has the following effect on a life policy: a. Increases cash value. b. No effect, there is not a premium for APL. c. Pays premium by loan to increase the death benefit. d. Reduces administration cost.

b. No effect, there is not a premium for APL. The Automatic Premium Loan Provision is available on cash value policies only, with no additional premium.

Individual Term policies are generally stand-alone policies, but may be written with other types of policies as a/an: a. Group Contract b. Rider c. Endorsement d. Accidental Death Benefit

b. Rider Through a rider, term coverage may be added to a Permanent Policy. A Term Rider cannot be added to a Term Policy.

Lyle owns a $50,000 20-Pay Life Policy that he lets lapse at the end of the fourth year. The Nonforfeiture Option providing the longest period of coverage would be: a. Extended Term b. Paid-Up Additions c. Reduced Paid-Up d. Paid-Up Option

c. Reduced Paid-Up Reduced Paid-Up provides the longest period of coverage. Extended Term would provide the most protection. The other two answers are not Nonforfeiture Options.

The premium charged for exercising the Guaranteed Insurability Rider is based upon: a. Original Age b. Assumed age c. Issue age d. Attained age

d. Attained age Anytime the Guaranteed Insurability Rider is exercised, the premium charged for the additional amount of insurance is based on the attained age of the insured.

All of the following are characteristics of Term Insurance, except: a. Will expire at an attained age or after a specified period. b. No permanent cash or loan value. c. Can be written separately or with other types of insurance. d. High premium outlay in early years.

d. High premium outlay in early years. Term Insurance is characterized by a low initial premium outlay when the insured is young and increases as the insured's age advances.

Settlement Options may be used if the insured dies or if the insured: a. Pays policy annually. b. Exercises the Irrevocable Option. c. Is covered strictly with Term Insurance. d. Is alive at maturity and receives the face amount.

d. Is alive at maturity and receives the face amount. Settlement options are used when the insured lives to the endowment date or at the insured's death.

What is a characteristic of both Whole Life and Endowment policies? a. They are straight continuous coverage. b. Both mature at age 100. c. Both place more emphasis on savings rather than benefits. d. The shorter the payment period is, the higher the premium is.

d. The shorter the payment period is, the higher the premium is. Endowments and Whole Life policies have the common characteristic that the shorter the premium-paying period is, the higher the premium is.

Compare 3 contracts, all with the face value of $100,000; put them in order from most expensive to least expensive. a. 10-Pay Life, Life Paid-Up in 20 years, Straight Life b. Term, Whole Life, Endowment c. Endowment at age 75, Endowment at age 65, 10-Pay Life d. Straight Life, Endowment, Limited-Pay Life

a. 10-Pay Life, Life Paid-Up in 20 years, Straight Life The proper order from most expensive to least expensive would be 10 Pay Life (all premiums paid up in 10 years; matures age 100); Life Paid-Up in 20 years (all premiums paid up in 20 years; matures age 100); and Straight Life (premiums paid to age 100; matures age 100). The earlier one pays up the premium on a policy, the greater the cost.

Which best describes a Renewable Term Policy? a. A policy with increased premium at each renewal. b. A policy with decreasing premium at each renewal. c. A policy with increasing cash value at each renewal. d. A policy with an increased face value at each renewal.

a. A policy with increased premium at each renewal. Whether the policy period is one year, five years, ten years, etc., the premium will increase at each renewal to sustain the same specified death benefit that was purchased when the policy was written. The Renewability Option is based upon attained age.

Albert purchased an Adjustable Life Policy that has all of the following characteristics, except: a. An increase in death benefit does not require evidence of insurability. b. Changes and adjustments may be made without adding or converting the existing policy. c. Increased premiums may lengthen the protection period if the policy is in the term range. d. Cash value develops when the premiums paid exceed the cost of the policy.

a. An increase in death benefit does not require evidence of insurability An increase in death benefit usually requires evidence of insurability.

Which of the following terms correctly matches the given definition? a. Paid-Up Option - dividends are used to pay up a policy sooner than scheduled. b. Paid-Up Additions - cash value is used to buy a single premium permanent policy. c. Life Income Period Certain - term insurance cash value distribution. d. One-year Term - cash value is used to buy a single premium term policy.

a. Paid-Up Option - dividends are used to pay up a policy sooner than scheduled. One-year Term and Paid-Up Additions are incorrect as they are Dividend Options, and dividends (not the cash value) are used to fulfill the objective. Life Income Period Certain is incorrect because term insurance has no cash value.

Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect? a. Ordinary Term b. Decreasing Term c. Renewable Term d. Split Level Term

b. Decreasing Term Decreasing Term reduces in death benefit while the policy is in effect.

Which Settlement Option pays a specified dollar amount until benefits are exhausted? a. Fixed Period b. Life Income c. Fixed Amount d. Paid-Up Option

c. Fixed Amount The key words are specified dollar amount. Fixed Amount pays benefits at a specified dollar amount (such as $1,000/month) until the benefits are exhausted.

Mona let her permanent policy lapse. She discovered there was $2,498 in cash remaining in the policy and decided to reduce her debt load. She exercised which Nonforfeiture Option? a. Cash Surrender b. Accumulation at Interest c. Accelerated Endowment d. Fixed Amount

a. Cash Surrender The only Nonforfeiture Option listed is Cash Surrender. Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.

Frieda wants coverage until she has paid back her business loan in ten years. The ideal contract with the least expense would be: a. Decreasing Term b. 10-year Endowment c. 10-pay Life d. Graded Premium

a. Decreasing Term Decreasing Term reduces in death benefit as the loan obligation reduces in balance. It is the least expensive form of term insurance as the insurer's obligation, in the way of death benefit, reduces over the period of the note or loan.

If the policyowner specifies the time over which all installments are to be paid, he/she has chosen which Settlement Option? a. Fixed Period b. Fixed Amount c. Extended Term d. Acceleration of Endowment

a. Fixed Period The key word is time. Anytime the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, policyowner or beneficiary, is the Fixed Period Settlement Option. Acceleration of Endowment is a Dividend Option, and Extended Term is a Nonforfeiture Option.

All of the following are characteristics of Ordinary Whole Life Insurance, except: a. If insured lives to age 100 the lifetime total of all premiums are returned. b. The policy pays the face value if insured dies before age 100. c. Premiums are designed to be paid throughout the life of the insured. d. Premiums remain uniform.

a. If insured lives to age 100 the lifetime total of all premiums are returned. If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value.

What type of policy is a single policy covering two or more lives, resulting in premium savings, that pays benefits upon the death of the first insured? a. Joint Life b. Modified Whole Life c. Joint Survivorship Life d. First Death Policy

a. Joint Life A Joint Life Policy covers two or more lives under a single policy, resulting in a reduction in premium, with the death benefit payable upon the death of the first to die.

Beth owns a 20-Pay Life participating policy. She has chosen the Settlement Option that guarantees payments over a specified period and the dividends are applied toward future premiums. Which Dividend Option did she choose? a. Premium Reduction b. Paid-Up Option c. Fixed Period d. Fixed Amount

a. Premium Reduction The Dividend Option that allows the dividends to be applied toward the next premium due is Premium Reduction. Fixed Period and Fixed Amount are Settlement Options.

Bess received information in regard to her individual Term Insurance explaining that she could convert the policy by agreeing to which of the following conditions? a. Sign the conversion application agreeing to pay premiums computed at her attained age. b. Proof of insurability is not required and pay premiums computed at a higher rate class. c. Prove insurability and pay premiums based on her current health status. d. Prove insurability and pay the same level premium.

a. Sign the conversion application agreeing to pay premiums computed at her attained age. Bess does not have to prove insurability to convert her individual Term Policy, but she will pay a higher premium with the conversion application because she is older than when she purchased the Term Policy, and is converting to a Permanent Policy.

Which rider allows a disabled insured policyowner to forgo future premiums while continuing to enjoy policy benefits? a. Waiver of Premium b. Return of Cash Value c. Cost of Living Benefit d. Accidental Death

a. Waiver of Premium If the insured policyowner were to become totally disabled, the Waiver of Premium Rider would waive future premiums for the duration of the disability and still allow the cash value and dividends to continue as though the premiums were being paid.

If an insured becomes totally disabled, normally after a six-month elimination period, premiums are waived for the duration of the disability if the _______ Rider is attached. a. Waiver of Premium b. Waiver of Payors Premium c. Living Need d. Waiver of Premium/Disability Income

a. Waiver of Premium The Waiver of Premium Rider would waive premiums for a disabled insured. If the insured also wanted to replace income due to disability, then they would purchase the Waiver of Premium/Disability Income Rider.

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy and exercise the Extended Term Option. Ted's term benefit will be: a. $47,000 b. $50,000 c. $25,000 d. Varies from company to company

b. $50,000 The Extended Term Option uses the present cash value of the policy, upon its lapse, to buy a single premium term policy of the same face amount.

David's Family Income Policy will provide an income for 10 years. If David dies on the policy's seventh anniversary, how many years will the family receive an income benefit? a. 10 years b. 3 years c. 7 years d. 0 years

b. 3 years If the insured dies during the income period, a specified monthly income is paid from the date of the insured's death until a specified future date. Since David died seven years into the ten-year income period, his family would receive an income for three years.

Which statement is false? a. Under Variable Life policies, the policyowner assumes the investment risk. b. A Joint Survivorship Life Policy pays the death benefit upon the first insured's death. c. Juvenile Insurance is any policy written on the life of a minor. d. When separate account(s) are used in a Life Insurance Policy, a securities license is required in addition to a life license.

b. A Joint Survivorship Life Policy pays the death benefit upon the first insured's death. A Joint Survivorship Life Policy pays the death benefit upon the death of the last insured to die.

An investor receives ample income each month from the interest earned while retaining his/her principal. This is referred to as which of the following? a. Conservative Earnings b. Capital Conservation c. Capital Gains d. Net Capital

b. Capital Conservation The Interest Option of settlement leaves the principal (capital) with the insurer, thus conserving the capital, and the interest income generated is taxed as ordinary income.

There are considerable differences in life insurance policies. Which of the following helps to establish basic continuity? a. Rates b. Options c. Beneficiaries d. Premiums

b. Options Life insurance policy options (Settlement, Nonforfeiture, and Dividend) establish basic continuity to the interpretation of life insurance policies.

All of the following are Settlement Options, except: a. Life Income Joint and Survivor b. Reduced Paid-Up c. Fixed Period d. Interest Only

b. Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option, not a Settlement Option.

Which is not a Dividend Option? a. Accumulate at Interest b. Reduced Paid-Up c. Paid in Cash d. Paid-Up Additions

b. Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option; the other answer choices are Dividend Options.

Beth exercised an owner's option on a life policy to stop paying premiums but continue to be covered until she was age 100. Which Nonforfeiture Option did she choose? a. Paid-Up Option b. Reduced Paid-Up c. Application to Reduce Premiums d. Extended Term

b. Reduced Paid-Up The Nonforfeiture Option that would allow Beth to stop making premium payments and continue to be covered to age 100, but for a reduced face amount, is Reduced Paid-Up. Application to Reduce Premiums and Paid-Up Option are Dividend Options.

Mary decides to convert her Term Policy to permanent protection. Which of the following statements is true regarding the conversion? a. She may convert if her health has not deteriorated. b. She may convert without evidence of insurability. c. Premiums and the amount of coverage remain the same. d. She may convert after proof of insurability.

b. She may convert without evidence of insurability. The Conversion Option of a Term Policy allows conversion to a Permanent Policy without evidence of insurability.

The face amount of a Whole Life Policy is: a. The amount of premiums and cash value. b. The amount payable to the beneficiary upon the insured's death. c. The amount available for policy loans. d. The sum of all premiums plus the cash value.

b. The amount payable to the beneficiary upon the insured's death. Face amount is the same as the death benefit. In other words, the face amount is the amount payable to the beneficiary upon the insured's death.

Which of the following statements regarding Whole Life is incorrect? a. It has a level premium and a level face amount. b. The longer the premium paying period, the higher the annual premium. c. Provides protection for life and may augment retirement income for the insured. d. An insured that lives to maturity (age 100) will receive the face amount.

b. The longer the premium paying period, the higher the annual premium. The shorter the premium-paying period, the higher the annual premium, a $100,000 Limited Pay Policy at Age 65 will have a higher annual premium than a $100,000 Straight Whole Life Policy, because the Limited Policy at Age 65 will be paid-up, in terms of premium, at age 65 as opposed to age 100. Both policies will mature at age 100.

What happens to the nonforfeiture values when a policy lapses for nonpayment of premium? a. The insurer considers them for profit sharing. b. The values are returned to the policyowner. c. Coverage is rescinded. d. Values are recalculated by actuaries.

b. The values are returned to the policyowner Nonforfeiture means not to be given up. The purpose of Nonforfeiture Options is to protect the policyowner against total loss of benefits if the policy should lapse or if it is cancelled.

A life insurance premium is paid each month; the insurer subtracts a mortality charge and expenses from the policy's cash value. This describes a: a. Variable Life b. Universal Life c. Adjustable Whole Life d. Whole Life

b. Universal Life All premiums paid to a Universal Life Policy are placed in the policy's cash value account. The mortality charge (cost of protection) and expenses are then deducted from the cash value account.

Under which rider are the insured and owner two different individuals? a. Waiver of Premium/Disability Income b. Waiver of Payors Premium c. Accelerated Death Benefit d. Waiver of Premium

b. Waiver of Payors Premium Under the Waiver of Payors Premium Rider, the insured is typically a child and the owner is the adult parent. If the adult owner and premium payor becomes disabled, the premiums are waived, sparing the policy from lapse.

Alice finds she no longer is able to pay premiums on her $50,000 Whole Life Policy, but needs that amount of protection for her family. Which Nonforfeiture Option provides this protection? a. Paid-Up Option b. Fixed Amount c. Extended Term d. Reduced Paid-Up

c. Extended Term Extended Term would allow the present cash value of the policy to buy a single premium term policy of the same face amount for as long a period as it will buy. Fixed Amount is a Settlement Option, and Paid-Up Option is a Dividend Option.

If an insured has a Life Paid-Up at 75 Policy (a limited-pay life paid-up at age 75), what would the beneficiary receive if the insured died at age 68? a. Cash value b. There would be no death benefit payable for seven additional years c. Face amount d. Face amount minus the cash value

c. Face amount The full-face amount (death benefit) is payable to the beneficiary anytime death occurs while the policy is in force.

Ed purchased policies on behalf of his grandchildren. He wanted to be certain they could purchase additional policies at specified ages. He was able to do this by adding which rider? a. Children's Rider b. Cost of Living Rider c. Guaranteed Insurability Rider d. Waiver of Premium Rider

c. Guaranteed Insurability Rider The Guaranteed Insurability Rider would allow his grandchildren at future specified dates, ages, or events to purchase additional amounts of insurance without evidence of insurability.

A working couple conveys to you that upon a premature death, the survivor would need money to maintain the present living standard. Which of the following policies would you suggest? a. Family Maintenance Policy b. Universal Life c. Joint Life d. Survivorship Life

c. Joint Life Under a Joint Life Policy, the proceeds are paid upon the death of the first to die so that the surviving spouse has the policy proceeds to maintain a present living standard, among other objectives.

Which of the following is not a trait of an Endowment Policy? a. The shorter the premium-paying period, the higher the premium. b. Policy builds cash, loan, and nonforfeiture values prior to age 100. c. Places more emphasis on the death benefit than the savings element. d. Normally, premiums are higher than the premium for other types of life insurance.

c. Places more emphasis on the death benefit than the savings element. Endowment policies place greater emphasis on savings than on the death benefit.

Ned insures his grandchild with a Variable Life Policy that will increase in value as the child gets older. This policy has all of the following traits, except: a. Policy has a guaranteed minimum face amount. b. It is designed to provide a hedge against inflation. c. Policy has a guaranteed minimum cash value. d. Premiums are paid into separate investment accounts.

c. Policy has a guaranteed minimum cash value. Under a Variable Life Policy, the policyowner has no control over the investment fluctuations, but assumes the investment risk.

Which statement is correct? a. Term Insurance must be used to protect a home mortgage. b. Term Insurance is always used with another type of coverage. c. Term rates are based on the insured's age. d. Term Insurance is permanent protection.

c. Term rates are based on the insured's age Term Insurance provides temporary, not permanent, protection. Term Insurance may (not must) be used to protect a home mortgage. Term Insurance can be written stand-alone as well as with another type of coverage.

All of the following statements regarding the Living Need Rider are true, except: a. It could also include nursing home benefits and dreaded disease benefits. b. At death, the early payment is deducted from the beneficiary's benefit. c. The annual report must include the amount of benefit remaining. d. Allows a partial payment of the face amount before death if the insured becomes terminally ill.

c. The annual report must include the amount of benefit remaining A monthly report details the benefit amount remaining, not an annual report.

Which of the following is not a characteristic of a Universal Life policy? a. The policyowner may determine the amount and mode of premium payments and adjust the face amount to reflect needs as they change. b. Each month a mortality charge is deducted from the policy's cash value for the cost of the insurance protection and expenses. c. The owner receives a biannual statement detailing expenses, mortality, and earnings. d. It is a combination of life insurance and a current interest savings plan.

c. The owner receives a biannual statement detailing expenses, mortality, and earnings. The owner of the policy receives an annual statement detailing expenses, mortality, and interest earnings

Which of the following statements is true? a. Dividends are declared under nonparticipating policies only. b. Dividends can only be withdrawn at certain specified intervals. c. There are several dividend options. d. Dividends are guaranteed and taxable as income when received.

c. There are several dividend options. Dividends are declared under participating policies; they are not guaranteed; if received the dividend itself is not taxable; and they can be withdrawn anytime there is an accumulation.

This policy's premium and death benefits are flexible, the excess cash is placed in a separate account(s), and the insurer allows the policyowner to switch from one account to another during the life of the policy. This describes a/an: a. Adjustable Life b. Modified Variable Universal Life c. Variable Universal Life d. Universal Life

c. Variable Universal Life The characteristics as stated in the question are descriptive of Variable Universal Life, offering the ultimate in flexibility of the flexible design policies.

Quentin has terminal cancer with a life expectancy of one year. XYZ Inc. purchased his policy for less than the face amount and is now the policyowner and premium payor. This was which of the following transactions? a. Long Term Care Agreement b. Buy/Sell Agreement c. Viatical Trust Settlement Agreement d. Waiver of Premium Disability Income claim

c. Viatical Trust Settlement Agreement A Viatical Trust Settlement Agreement is a transaction between a business firm (XYZ Inc.) and a life insurance policyowner (Quentin) insuring the life of an individual with a life threatening or terminal illness

Which provision allows an insurer to borrow from the cash value of a policy to pay premiums due and prevent the lapse of coverage? a. Partial Withdrawal b. Spendthrift Clause c. Nonforfeiture Option d. Automatic Premium Loan

d. Automatic Premium Loan The Automatic Premium Loan Provision enables the insurer to borrow automatically from the policy's cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.

With Joint Life Insurance policies, the age is based on: a. The age of the premium payor. b. Age of the youngest insured. c. Age of the oldest insured. d. Average age of both insureds.

d. Average age of both insureds. The premium on a Joint Life Policy is calculated on the average age of both insureds.

All of the following are characteristics of a Family Income Policy, except: a. Provides a specified monthly income from the date of the insured's death until a specified future date. b. At the end of the income period, the Whole Life face amount is payable. c. It is a combination of Whole Life and Decreasing Term insurance. d. Family Income is more expensive than Family Maintenance.

d. Family Income is more expensive than Family Maintenance. Family Income would be less expensive than Family Maintenance for a like amount of insurance because it uses Decreasing Term as opposed to Level Term to accomplish its objective. In addition, the term benefit is payable only until a specified future date as opposed to a selected period of years beginning with the insured's death.

Which policy could be used when a married couple wants to defer the estate taxes until both are deceased? a. Medicare Supplement b. Family Maintenance Policy c. Modified Whole Life d. Joint Survivorship Life

d. Joint Survivorship Life Joint Survivorship Life pays upon the death of the last to die, and for this reason is a popular policy with couples who want to defer estate taxes until both are deceased.

Fred owns a 40-Pay Life Policy. He designated his wife, Ethel, as primary beneficiary. Upon Fred's death, Ethel receives a set amount for life. Fred chose which Settlement Option? a. Paid-Up Additions b. Fixed Period c. Joint Life d. Life Income Only

d. Life Income Only Life Income Only guarantees payment for the lifetime of the recipient. Paid-Up Additions is a Dividend Option.

What effect, if any, does the Dividend Option-Acceleration of Endowment have on a policy? a. This is not a Dividend Option b. None c. Increase premium outlay d. Makes the endowment date sooner

d. Makes the endowment date sooner Acceleration of Endowment uses dividends to reduce (shorten) the period for the policy to mature or endow.

Angela bought a policy from her friend. After looking it over thoroughly, Angela only has one question. Will she receive dividends? Yes, if it is which of the following? a. Accumulating b. Cash Value c. Nonparticipating d. Participating

d. Participating Dividends are declared under participating policies, are paid as declared, and are not guaranteed. The dividends are a return of excess premiums paid.

What is the main difference between a Whole Life Policy and a Universal Life Policy? a. Whole Life is rated by age and gender and Universal Life is not rated by gender. b. Whole Life is purchased by units and a Universal Life policy is purchased by multiple units. c. There is not any difference. d. Universal Life premium is flexible and a Whole Life premium is fixed.

d. Universal Life premium is flexible and a Whole Life premium is fixed. Universal Life offers a flexible premium feature, whereas with Whole Life the premium is level and fixed.

Your client wants a policy that provides good coverage, but lets her choose where she might invest her excess premiums. Which of the following policies is best for her situation? a. Level Term b. Reentry Term Plan c. Family Income Policy d. Variable Universal Life

d. Variable Universal Life The concern is for the owner to be in control of where she might invest the excess premiums. Of the choices given, the only one that allows this flexibility is Variable Universal Life through the separate account(s).

All of the following are Dividend Options, except: a. Paid-Up Additional Insurance b. Cash c. One-Year Term d. Waiver of Premium

d. Waiver of Premium Waiver of Premium is a rider available to most life insurance policies.