Life insurance - ch. 3

Securities

Financial instruments that may trade for value (stocks, bonds, options)

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... - modified endowment contract (MEC) - level term life - graded premium whole life - single premium whole life

single premium whole life - requires the entire premium to be paid in one lump sum at the policy's inception

Which of the following policies would be classified as a traditional level premium contract? - Variable universal life - Straight life - Adjustable life - Universal life

straight life - straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured

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

the death benefit can be increased by providing evidence of insurability - the policyowner (insured) would need to prove insurability for the amount of the increase

Endow

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

In a survivorship policy, when does the insurer pay the death benefit? - upon the first death - upon the last death - half at the first death, and half at the second death - if the insured survives to age 100

upon the last death

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years late, he died in an automobile accident. How much will his wife receive from the policy? - Nothing - $50,000 - $100,000 - $200,000

$100,000 - in Joint Life policies, the death benefit is only paid upon the first death only

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

Concerning Juvenile Life insurance, which of the following statements is INCORRECT? - It can be a limited premium payment policy - Juvenile Life is classified as any life insurance written on the life of a minor - Juvenile Life is classified as any life insurance purchased by a minor - Usually a parent or guardian is the applicant on the life of the minor

Juvenile Life is classified as any life insurance purchased by a minor (it does not need to be purchased by a minor)

Which of the following is an example of a limited-pay life policy? - Level Term life - Straight life - Life paid-up at age 65 - Renewable Term to Age 70

Life paid-up at age 65 - limited pay whole life premiums are all paid by the time the insured reaches age 65 - the policy endows when the insured turns 100 - it is the premium paying period that is limited, not the maturity

Lapse

Policy termination due to nonpayment of premium

Nonforfeiture values

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

All of the following entities regulate variable life policies EXCEPT - The Insurance Department - The Guaranty Association - Federal Government - The SEC

the guaranty association - variable life insurance is regulated by both state and federal government, insurance department & the SEC

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? - universal life - whole life - decreasing term - variable life

decreasing term - a decreasing term policy's face amount decreases as the amount of debt is reduced

Which of the following types of insurance policies is most commonly used in credit life insurance? - whole life - equity indexed life - decreasing term - increasing term

decreasing term - credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor - it is usually written as decreasing term insurance

Face amount

the amount of benefit stated in the life insurance policy

Attained age

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

Level premium

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

Policy maturity

the time when the face value is paid out (in life policies)

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.... - Required a premium increase each renewal - Built cash values - Required proof of insurability every year - Decreased death benefit at each renewal

required a premium increase each renewal - they are adjusted each year to the insured's attained age - may be guaranteed renewable - death benefits remain level - any term policy has NO CASH VALUE

Deferred

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

When an employee terminates coverage under a group insurance policy, coverage continues in force.... - until the employee can obtain coverage under a new group plan - until the employee notifies the group insurance provider that coverage conversion policy is issued - for 31 days - for 60 days

31 days - this is under the conversion privilege to convert to an individual policy

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

the insureds' medical history - group life insurance is written on a group, not individual basis - each individual completes an application that identifies the participant and beneficiary - the group is called on its nature and past claim experience - generally, medical questions are not necessary

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

the recommended amount to keep the policy in force throughout its lifetime - target premium covers the cost of insurance protection & to keep the policy in force throughout its lifetime

A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was too expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why? - the purpose of life insurance was to purchase life insurance - their profession poses too high of a risk for the insurer - There are not enough people in the group to qualify for group life insurance - the group has not been established for long enough

the purpose of the group was to purchase life insurance - in order to qualify for small group life insurance, a group must be formed for a purpose other than attaining life insurance