Life Insurance Policies 8%

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 Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

The LEAST expensive first-year premium is found in which of the following policies? - Annually Renewable Term - Increasing Term - Decreasing Term - Level Term

- Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

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

- The beneficiary Employees must be allowed to select a beneficiary.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid: - Until the policyowner reaches age 65. - For at least 20 years. - Until the policyowner's age 100, when the policy matures. - For 20 years or until death, whichever occurs first.

- For 20 years or until death, whichever occurs first. Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

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

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

What type of premium do both Universal Life and Variable Universal Life policies have? - Decreasing - Increasing - Flexible - Level fixed

- Flexible Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit.

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? - Limited pay whole life - Interest-sensitive whole life - Life annuity with period certain - Increasing term

- Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT: - FINRA registration. - A securities license. - A life insurance license. - SEC registration.

- SEC registration Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? - She can only convert her coverage without proof of insurability if she has the master policy. - She must apply for a new policy, which requires her to provide proof of insurability. - She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. - She will still be covered under the group plan, but will have to pay an individual policy premium.

- She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability.

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs? - Single Premium Whole Life - Interest-sensitive Whole Life - Decreasing Term - Adjustable Life

- Adjustable Life Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. Any increase in face amount requires proof of insurability.

Which of the following would help prevent a universal life policy from lapsing? - Face amount - Adjustable premium - Corridor of insurance - Target premium

- Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

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 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.

Which type of life insurance policy generates immediate cash value? - Continuous Premium - Single Premium - Level Term - Decreasing Term

- Single Premium Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

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

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? - 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 death benefit cannot be increased.

- 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.

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? - The insurer will pay the death benefit minus one month's premium. - The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. - The insurer will pay the full death benefit from the group policy to the beneficiary. - The insurer will pay a reduced death benefit to the beneficiary.

- The insurer will pay the full death benefit from the group policy to the beneficiary. The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

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

- 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.

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

- The recommended amount to keep the policy in force throughout its lifetime The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

What is the purpose of establishing the target premium for a universal life policy? - To accumulate cash value faster - To pay up the policy faster - To cover all policy expenses - To keep the policy in force

- To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which statement is NOT true regarding a Straight Life policy? - It has the lowest annual premium of the three types of Whole Life policies. - Its premium steadily decreases over time, in response to its growing cash value. - The face value of the policy is paid to the insured at age 100. - It usually develops cash value by the end of the third policy year.

- Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

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

- Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

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 for insurance on the life of a minor.

- Juvenile Life is classified as any life insurance purchased by a minor. Juvenile Life insures the life of a minor. It does not need to be purchased by a minor.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? - Joint Life Policy - Survivorship Life Policy - Second-to-Die - Family Income Policy

- Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

An insured 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? - Limited-pay Life - Variable Life - Adjustable Life - Graded Premium Life

- Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

All of the following could own group life insurance EXCEPT: - A debtor group. - A group needing low-cost life insurance. - A group sponsored by an employer. - An alumni group.

-A group needing low-cost life insurance. Groups purchasing group life insurance must be formed for a reason other than purchasing insurance.

Which component increases in the increasing term insurance? - Cash value - Interest on the proceeds - Premium - Death benefit

- Death benefit Increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term.

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

- It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.