Life Concepts Quiz

8.) A life insurance policy that expires without value if the insured lives beyond the expiration date is: B

A.) A pure endowment. B.) Term Insurance. C.) Variable Life Insurance. D.) Adjustable Life Insurance.

82.) When a Life Insurance policy lapses or is surrendered prior to maturity, any built up cash value may be used to buy a lesser amount of the same type of insurance. When this is done, the new policy would be known as: B

A.) Additional insurance. B.) Paid-up insurance. C.) Extended term insurance. D.) Convertible insurance.

34.) The two types of assignments are: B

A.) Complete, proportionate. B.) Absolute, collateral. C.) Absolute, partial. D.) Complete, partial.

13.) Bob buys a 5-Year Level Term policy with a face amount of $150,000. The policy also contains both a Renewability and Convertibility Option. When Bob renews the policy in five years: A

A.) The premium will increase because Bob will be 5 years older than when he originally purchased the policy. B.) The premium will remain the same for the new 5-year term as it was during the original term. C.) The premium will decrease for the new 5-year term since Bob is now more mature and careful and a less risk to the company. D. The premium will increase each year during the next 5-year term as the face amount increases each year.

54.) A policyowner surrendered a nonparticipating whole life policy for $12,000 cash value. The policyowner had at that time paid premiums totaling $9,000. The federal income tax effect would be: B

A.) $12,000 tax free. B.) $3,000 taxable, $9,000 tax free. C.) $9,000 taxable, $3,000 tax free. D.) $12,000 taxable.

53.) All of the following are characteristics of a Group Life insurance plan, except: C

A.) A minimum number of participants are required in order to underwrite the plan. B.) The cost of the plan is determined by the average age of the group. C.) There is a requirement to prove insurability on the part of the participants. D.) The participants receive a Certificate of Insurance as their proof of insurance.

71.) The name for an insurance plan combining life insurance and equity investments, under which the benefits are not fixed and depend upon performance of the investments, is: B

A.) Adjustable Life. B.) Variable Life. C.) Modified Life. D.) Reversionary Life.

58.) All of the following are true of a Keogh Plan(HR-10) EXCEPT: A

A.) All distributions (principal and interest) are not taxed as current income in the year withdrawn. B.) Plan contributions are not taxable as income to the individual for whom they are made in the year in which they are made. C.) All distributions (principal and interest) are taxed as current income in the year withdrawn. D.) Interest accumulating in the plan is not taxed until withdrawn.

40.) All of the following are false concerning reinstatement of a Life Insurance policy, EXCEPT: C

A.) Back premiums need not be paid prior to granting reinstatement. B.) Proof of insurability is not required. C.) Companies have the right to require medical examinations. D.) Policyowners have the right to request reinstatement up to six years following lapse.

32.) An accidental misstatement of an insured's age was not discovered until death on a policy that had been in effect for three years. The insurer may: B

A.) Cancel the policy. B.) Pay the claim based on what the premiums paid would have purchased at the correct age. C.) Issue a new policy. D.) Collect a fine from the policyholder.

63.) Tax Sheltered Annuities (TSA's) should be for employees of the following kinds of organizations EXCEPT: D

A.) Charitable. B.) Educational. C.) Religious. D.) Labor.

62.) MORTALITY, INTEREST, and EXPENSE are three factors taken into account when: C

A.) Choosing a type of health insurance policy. B.) Classifying an insurance risk. C.) Computing a basic premium for life insurance. D.) Determining the death rate per 1,000 people in any age group.

5.) All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT: B

A.) Conditional. B.) Bilateral. C.) Aleatory. D.) Adhesion.

16.) Which of the following is an example of a Limited-Pay Life policy? B

A.) Continuous Premium Whole Life. B.) Life paid up at age 65. C.) Renewable Term to age 70. D.) Endowment maturing at age 65.

33.) The time period covered by the Ten-Day Free Look provision of a Life insurance contract starts when the: D

A.) Contract is issued and mailed to the agency office from the home office of the insurance company. B.) Contract is received in the agency office and given to the agent. C.) Insured is notified that the policy has been issued. D.) Policyowner receives the contract.

22.) A life insurance policy with an indeterminate premium with cash values being credited at current and maximum guaranteed mortality charges that are used to determine the pure cost of insurance, is classified as: C

A.) Economic Whole Life. B.) Enhanced ordinary life. C.) Current Assumption Whole Life. D.) Modified Whole Life.

25.) Which of the following types of policies will guarantee lifetime income to two annuitants? D

A.) Endowment. B.) Whole Life. C.) Joint Life. D.) Joint and Survivor.

46.) Life insurance riders that provide for a "return of premium" or a "return of cash value" are actually: C

A.) Equity investments linked to an insurance policy. B.) Limited forms of endowment insurance. C.) Additional amounts of term insurance. D.) Special savings plans in addition to cash value.

14.) All of the following are true regarding the Convertibility Option under a Term Policy except: D

A.) Evidence of insurability does not have to be proven when the option is exercised. B.) Most term policies contain a convertibility Option. C.) Upon conversion, the premium for the Permanent policy will be based upon attained age. D.) Upon conversion the premium for the Permanent policy will be based upon issue age.

85.) Which of the following is a Nonforfeiture Option that provides continuing cash value buildup? C

A.) Extended Term. B.) Cash Surrender. C.) Reduced Paid-Up. D.) Deferred Annuity.

26.) Gwen and Gene own a Permanent policy which covers both of their lives and pays the face amount of the policy upon the death of the first insured, Gwen and Gene own a: B

A.) Family Income policy. B.) Joint Life policy. C.) Survivorship Life policy. D.) Family policy.

27.) Marty owns a policy in which he is covered as the breadwinner with Permanent insurance and also with Term insurance on the spouse and children. Marty owns a: D

A.) Family Maintenance policy. B.) Family Protection policy. C.) Family Income policy. D.) Family policy.

79.) If a beneficiary wanted a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, from what option would a beneficiary select? C

A.) Fixed Amount. B.) Fixed Income. C.) Fixed Period. D.) Fixed Time.

81.) Viv finds that she is no longer able to pay premiums on her $70,000 Whole Life policy, but feels that she still needs that amount of coverage to protect her family. Which of the Nonforfeiture Options would allow her to do this? D

A.) Fixed Amount. B.) Reduced Paid-up. C.) Paid-up Option. D.) Extended Term.

47.) Key Person Life insurance does not reimburse a company for which of the following? D

A.) For a loss of leadership resulting from a key person's death. B.) For a loss of previous business resulting from a key person's death. C.) For a reduction of profits resulting from a key person's death. D.) For increased pension liability resulting from a key person's death.

39.) In which part of a Life Insurance policy does the company agree to pay to the beneficiary the death proceeds upon receipt of proof of the insured's death prior to the maturity date of the policy? D

A.) Free Look Provision. B.) Incontestable Clause. C.) Assignment Provision. D.) Insuring Agreement.

52.) Death benefits paid in a lump sum from a Universal Life policy are: D

A.) Fully tax deductible. B.) Fully taxable unless owned by a named beneficiary. C.) Fully taxable unless owned by a corporation. D.) Not taxable.

12.) In a universal life policy, the two adjustments usually made to the cash value account are: B

A.) Guaranteed interest and current interest are credited. B.) Cost of insurance protection is charged and current interest is credited. C.) Premium and excess interest are charged. D.) Guaranteed interest is charged and premium is credited.

36.) One benefit rider included in some Whole Life policies grants the policyowner the right to purchase additional insurance of the same type as the original policy on specified dates for specified amounts without supplying evidence of insurability. Such a rider is known as a: B

A.) Guaranteed renewability rider. B.) Guaranteed insurability rider. C.) Noncancellation rider. D.) Waiver of premium rider.

28.) Frank is purchasing a permanent life insurance policy with a face amount of $25,000. While this is all the insurance that he feels he can afford at this time, he wants to be sure that additional coverage will be available in the future, should he need it. He should include in this policy: C

A.) Guaranteed renewable option. B.) Nonforfeiture option. C.) Guaranteed insurability option. D.) Conversion option.

19.) Which of the following statements about universal life insurance is/are true? A I. There is a maximum interest rate return on a policy's cash value but no guaranteed minimum return. II. A monthly deduction is made from a policy's cash value for the cost of insurance protection.

A.) II only. B.) I only. C.) Both I and II. D.) Neither I or II.

57.) Scotty changes his Whole Life payment plan from monthly to annually. What happens to Scotty's total premium for the year? C

A.) Increases. B.) Stays the same. C.) Decreases. D.) None of the above.

64.) Your client purchases a single premium annuity with $80,000. However, they die after only receiving $30,000 of principal from the insurance company. At this point the insurance company sends a check for $50,000 to the beneficiary of the annuitant. What kind of annuity did this person purchase? B

A.) Installment Refund Annuity. B.) Cash Refund Annuity. C.) Straight Life Annuity. D.) This is not possible.

69.) Your client purchases a single premium annuity with $80,000. However, they die after receiving only $30,000 in principal. At this point the insurance company continues sending periodic payments to the beneficiary of the annuitant until the $50,000 "balance" is paid out. What kind of annuity did your client purchase? A

A.) Installment Refund Annuity. B.) Cash Refund Annuity. C.) Straight Life Annuity. D.) This is not possible.

72.) In order for Carl to sell a Variable Annuity, he must carry which licenses? D

A.) Insurance license, Federal Trade Commission license, and NASD license. B.) National Security Advisors license and Life, Accident and Health license. C.) Chartered Financial Planners license and Securities and Exchange Commissions license. D.) NASD license and Insurance license.

11.) All of the following statements about Universal Life Insurance policies are true EXCEPT: C

A.) Interest is credited monthly to a policy's cash value. B.) Any withdrawal of a policy's cash value reduces the amount of the death benefit. C.) Interest credited to a policy's cash value is taxable to the policyowner in the year credited. D.) The policyowner can add to a policy's cash value at any time as long as it is not in danger of becoming a MEC.

18.) Concerning Juvenile Life Insurance, which of the following statements is INCORRECT? C

A.) It may increase the death benefit at some point in the future. B.) It can be a Whole Life Policy. C.) It automatically increases the death benefit at the insured's age 15. D.) Usually a parent or guardian is the applicant for insurance on the life of a minor.

43.) Which of the following statements is true about a policy assignment? C

A.) It permits the beneficiary to designate the person or persons to receive the benefits. B.) It is valid during the insured's lifetime only, because the death benefit is payable to the named beneficiary. C.) It transfers the owner's rights under the policy to the extent expressed in the assignment forms. D.) It is the same as a beneficiary designation.

42.) Which of the following statements about the Reinstatement provision is true? C

A.) It provides for reinstatement of a policy regardless of the insured's health. B.) It guarantees the reinstatement of a policy that has been surrendered for cash. C.) It requires the policyowner to pay, with interest, all premiums that are in arrears in order for the policy to be reinstated. D.) It permits reinstatement within 10 years after a policy has lapsed.

80.) The type of Settlement Option which pays throughout the lifetimes of two or more beneficiaries is called: B

A.) Joint Life. B.) Joint and Survivorship. C.) Fixed Period. D.) Fixed Amount.

66.) The form of Life Annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called: C

A.) Joint and Survivorship. B.) Joint Life Annuity. C.) Life Income with period certain. D.) Life Income with refund.

24.) While the policy is in effect, each of the following provides a constant face amount EXCEPT: A

A.) Jumping Juvenile Policy. B.) Level Term Policy. C.) Whole Life Policy. D.) Endowment Policy.

37.) The rider "Waiver of Monthly Deductions" would normally apply to which type of policy? D

A.) Medicare Supplement. B.) Hospital Income. C.) Long Term Care. D.) Universal Life.

4.) The life insurance policy clause that prevents an insurance company from denying payment of a death benefit after a specified period of time is known as the: B

A.) Misstatement of Age Clause. B.) Incontestability Clause. C.) Reinstatement Clause. D.) Insuring Clause.

3.) Kim, an agent with ABC Insurance Company takes an application for a life policy and accepts a check for the first premium. The application and check are mailed to the insurer, who discovers the check is not signed. When will coverage for this policy go into effect? B

A.) Never, the policy will not be issued. B.) When the policy is issued, delivered and the premium is paid. C.) When the application and unsigned check are received by the insurer. D.) The date of the postmark on the envelope that contained the application.

50.) The Employer for the Sudsy Soap Company provided a Group Life policy covering each employee for $25,000. Twenty days after being terminated from his job. Amos was killed in an auto accident. How much will A's beneficiary receive? C

A.) Nothing. B.) $25,000 less the premium required for 20 days of coverage. C.) $25,000. D.) $12,500.

67.) Under a Straight Life Annuity, an income is payable by the company: D

A.) Only until the principal and interest are exhausted. B.) For a guaranteed period of time, whether or not the annuitant survives to the end of that period. C.) For as long as either the annuitant or a named beneficiary is alive. D.) Only so long as the annuitant is alive.

83.) With which option does the policyowner use dividends as a single premium to purchase an insurance contract which is the same type as the original policy? C

A.) Paid-up option. B.) Reduced paid-up. C.) Paid-up additions. D.) Prepay premiums.

45.) When Y's life insurance policy is issued, she will have 10 days to review the policy and if dissatisfied for any reason, return the policy to the insurer for a full refund of premium. To start the free look period, the insurer may accomplish this by: D

A.) Personal delivery by their agent, with a signed receipt. B.) Registered or Certified Mail. C.) First Class Mail, with a signed receipt of delivery. D.) All of the above.

15.) The most significant characteristic of a single premium whole life insurance policy is that: C

A.) Policy matures more rapidly due to the high initial premium. B.) Death benefit will increase when the cash value exceeds the face amount. C.) Entire cost of the policy is paid up at the time of purchase. D.) Cash value may not be borrowed because it is needed to earn interest which is used to cover future premium costs.

41.) The Automatic Premium Loan Provision is activated at the end of the ______________ . B

A.) Policy period. B.) Grace period. C.) Both A and B. D.) Neither A nor B.

55.) In a Group Life policy, an employee's evidence of his/her participation is the: B

A.) Policy. B.) Certificate. C.) Application. D.) Master Contract.

86.) When Life insurance is written on a participating basis, dividend options may be selected by the: A

A.) Policyowner. B.) Insurance Company. C.) Beneficiary. D.) Insured Person.

60.) Which of the following is FALSE of a Noncontributory group plan? C

A.) Premiums are based on the experiences of the group as a whole. B.) The employers pays 100% of the premiums. C.) The employers pays 100% of the premiums. D.) They require 100% employee participation.

17.) Whole lie policies have all of the following characteristics EXCEPT: A

A.) Premiums increase as the insured gets older. B.) It is considered permanent insurance. C.) It provides a savings element. D.) It will provide payment of the face amount upon insured's death.

76.) The purpose of Life Insurance nonforfeiture options is to: B

A.) Prevent policy lapse when premiums have not been paid on time. B.) Protect the policyowner's rights in cash values. C.) Allow a beneficiary to defer benefits for income tax purposes. D.) Maximize the amount of insurance if the insured becomes disabled.

49.) Statements made by an applicant for a life insurance policy which are supposed to be true are referred to as: A

A.) Representations. B.) Facts. C.) Warranties. D.) Information.

73.) After being laid off at work, Harry discovers that he is unable to pay his Life insurance premium by the end of the grace period. Harry could prevent the policy from lapsing by: B

A.) Requesting a Waiver of Premium. B.) Borrowing the premium from the cash value if there is a sufficient amount to cover the premium payment. C.) Request a binder from the insurer. D.) Giving the insurer a promissory note.

61.) Who among the following would definitely NOT be eligible to set up a Keogh retirement plan? D

A.) Scotty, who works full-time for a public company and part-time as an independent musician. B.) Julie, a full-time freelance writer. C.) Steven, who runs his own painting company D.) Christy, who participates in her employer's retirement plan and has no other source of income.

10.) Which type of Whole Life policy begins with relatively low rates, then automatically takes one step up to higher whole life rates? B

A.) Single Premium Life. B.) Modified Life. C.) Graded Premium Life. D.) Adjustable Life.

7.) Which of the following individuals would probably NOT have an insurable interest in the life of an insured? D

A.) Spouse. B.) Son. C.) Employer. D.) Neighbor.

56.) Business partnerships are exposed to special risks because the death of any partner legally dissolves the partnership. Life insurance is often used to back up contractual agreements for settlement, restructuring, and business continuation in the event of a partner's death. Each of the following arrangement may be used by a partnership for this purpose, EXCEPT: A

A.) Stock purchase plan. B.) Entity-purchase plan. C.) Cross-purchase plan. D.) Buy-sell agreement.

68.) Nan is planning to retire. She has accumulated $124,000 in a retirement annuity. She wants to select the benefit option that will pay the largest monthly amount for as long as she lives. Her agent should recommend: A

A.) Straight Life. B.) Life income with period certain. C.) Installment refund. D.) Joint/Survivor.

59.) Sue is insured under her employer's group life insurance plan at her place of employment. All of the following statements about her coverage are TRUE, EXCEPT: A

A.) Sue could choose what type of insurance her conversion policy provided, (term or permanent.) B.) Sue would not need to prove insurability for a conversion policy. C.) Should Sue convert her coverage, the premium will be based upon her attained age. D.) If Sue quits, she may, within 31 days, request that her coverage be converted to an individual policy.

44.) Which of the following statements about a typical Suicide clause in a Life insurance policy is true? B

A.) Suicide is excluded as long as the policy is in force. B.) Suicide is excluded for a specified period of years and covered thereafter. C.) Suicide is covered for a specified period of years and excluded thereafter. D.) Suicide is covered as long as the policy is in force.

20.) An endowment can pay its face amount at any of the following times EXCEPT: A

A.) Surrender prior to maturity. B.) The completion of a specified number of years. C.) The attainment of a specified age. D.) The death of the insured.

84.) Life Insurance issued on a participating basis entitles a policyowner to a share of any dividends declared. Dividends may be received in a variety of different forms. Which of the following is NOT a typical dividend option? C

A.) Take the dividends in cash. B.) Use dividends to buy paid-up additional amount of insurance. C.) Allow dividends to accumulate to extend an endowment period. D.) Apply dividends to reduce premium payments.

75.) The sole beneficiary of a Life Insurance policy dies before the policyowner. If the policyowner fails to change the beneficiary before her own death, the proceeds of the policy will go to: B

A.) The beneficiary's estate. B.) The policyowner's estate. C.) Probate. D.) The state.

38.) Alex takes a loan out of the cash value of his Life policy, and then dies. The insurance company will typically pay: D

A.) The death benefit of the policy. B.) The death benefit minus the interest due. C.) No Death Benefit. D.) The death benefit minus Interest and Loan amount.

35.) If the insured and the policyowner are NOT the same person, then who has the right to borrow the cash value? C

A.) The insured. B.) Both the insured and the policyowner. C.) The policyowner. D.) No one.

70.) Rob, age 35, asks his agent to recommend a life insurance policy that would provide protection to his family and also allow him to accumulate a sizeable amount of cash value. His agent recommended that, at Rob's age, a Variable Life Policy would be a good choice. This is an equity product and all the following statements are TRUE, EXCEPT: D

A.) The policy may have several investment options. B.) Rob may choose more or less than the planned premium, so long as there is enough cash in the policy to fund the death benefit. C.) The face amount of the policy may fluctuate. D.) Rob's agent would not need a securities license to sell him this product.

29.) A policy with a 31-day grace period implies: A

A.) The policy remains in force without penalty for 31 days even though the premium due has not been paid. B.) The policyholder has a 31-day free look. C.) The policy lapses if premium is not paid 31 days before it is due. D.) If something happens within 31 days the insurer does not pay.

77.) Zed applied for a Life Insurance policy. He included payment for the first premium with the application. Which of the following statements is correct? B

A.) The policy will not be in effect until a policy is issued and Zed accepts the policy. B.) If the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect the date of the application, provided Zed is found insurable. C.) If the company issues a conditional receipt, the coverage is in effect whether or not Zed is insurable. D.) The coverage would be in effect for accidental death only.

2.) John applied for a life insurance policy. He included payment for the first premium with the application. Which of the following statements is correct? B

A.) The policy will not be in effect until a policy is issued and john accepts the policy. B.) If the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect the date of the application, provided John is found insurable. C.) If the company issues a conditional receipt, the coverage is in effect whether or not John is insurable. D.) The coverage would be in effect for accidental death only.

65.) All of the following are TRUE about annuities EXCEPT: C

A.) They are used to payout a principal sum on a periodic basis. B.) They may be used to provide a lifetime income. C.) They have all the same characteristics as life insurance. D.) They may be used to provide income for a fixed period of time.

78.) Which of the following statements is most correct concerning the changing of an Irrevocable Beneficiary? C

A.) They can never be changed. B.) They may be changed only on the anniversary date of the policy. C.) They can be changed only with the written consent of that beneficiary. D.) They can be changed at any time.

74.) The owner of a Life Insurance policy does not have to be the insured person. A policyowner is the person responsible for paying the premium and has a number of legal rights. A policyowner has all of the following rights, EXCEPT: A

A.) To change the person who is insured. B.) To designate or change a beneficiary. C.) To select settlement options. D.) To assign or transfer the policy to a new owner.

6.) The policyowner of a life insurance contract does not have to be the insured person. A policyowner is the person responsible for paying the premium and has a number of legal rights. A policyowner has all of the following rights EXCEPT: A

A.) To change the person who is insured. B.) To designate or change a beneficiary. C.) To select settlement options. D.) To assign or transfer the policy to a new owner.

48.) Under which of the following types of receipts is it that coverage begins immediately for a specified length of time even if the applicant is found to be uninsurable? A

A.) Unconditional (Binding) Receipt. B.) Approval Conditional Receipt. C.) Insurability Conditional Receipt. D.) None of the above.

23.) A young father would like Life Insurance coverage on all five family members at the lowest cost. Which type would he most likely buy? C

A.) Universal Life Policy. B.) Family Income Policy. C.) Level Term Policy. D.) Family Policy.

21.) A difference between a whole life insurance policy and a universal life insurance policy is which of the following? D

A.) Universal life policies are pure insurance protection, while whole life insurance policies are combined insurance protection. B.) Universal life policies require a level premium payment for the lifetime of the policy, while whole life policies do not. C.) Universal life policies at termination have no cash value, while whole life polices have accumulated cash value. D.) Universal life policies allow partial withdrawal from the cash value account, whole life policies will allow cash value loans.

1.) When does coverage for a life policy go into effect? A

A.) Upon date of application provided first premium is paid and insured proves insurable. B.) When application is signed. C.) When the policy is delivered and the premium is paid. D.) When the policy is approved by the agent.

30.) Paula has been out of work for ten months due to a disability. Her agent should have sold her a _____ rider for her Life Insurance policy: A

A.) Waiver of Premium. B.) Guaranteed Insurability. C.) Double Indemnity. D.) Joint Ownership.

9.) Which of the following policies typically combines insurance and savings with a date of maturity earlier than age 100, and is very expensive? D

A.) Whole Life. B.) Straight Life Annuity. C.) Joint Life Annuity. D.) Endowment at age 65.

51.) An IRA can be which of the following? D

A.) Whole Life. B.) Term Insurance. C.) Endowment. D.) None of the above.

31.) A provision which states that the policy, a copy of the application and any attached riders constitutes the contract between the owner and the insurer is called the: C

A.) Whole contract clause. B.) Complete contract clause. C.) Entire contract clause. D.) Comprehensive contract clause.