Types of ins policies

Which of the following best describes annually renewable term insurance?

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

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

Which of the following types of policies allows for a flexible premium and a variable investment component?

Variable universal life insurance

The LEAST expensive first-year premium is found in which of the following policies?

annually renewable term

What types of life insurance are normally used for key employee indemnification?

term, whole, and universal life insurance

Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be

$500,000 In this situation, the death benefit would be the $500,000 face amount.

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100 Whole life insurance policies mature when the insured reaches the age of 100. The cash value at that time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

At the end of 20 years, the policy's cash value will equal $100,000.

An Adjustable Life policyowner can change which of the following policy features?

The coverage period. - typically, the policyowner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium paying period; increasing or decreasing the face amount coverage or changing the period of protection.

What is a corridor in relation to a Universal Life insurance policy?

The gap between the total death benefit and the policy cash value

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

Credit life. Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. 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.

Which component increases in the increasing term insurance?

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

A Return of Premium term life policy is written as what type of term coverage?

Increasing- pays an additional death benefit to the beneficiary equally to the amount of the premiums paid

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

Variable Whole Life insurance is based on what type of premium?

Level fixed Variable Whole Life insurance is a level fixed premium investment-based product.

Which of the following is NOT a type of whole life insurance?

Level term

Which of the following are generally NOT considered when underwriting group insurance?

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. Then, the group is judged based on its nature and past claim experience. Generally, medical questions are not necessary.

Which of the following statements is correct regarding a whole life policy?

The policyowner is entitled to policy loans Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

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 (Premium payments will cease at her age 65, but coverage will continue to her death or age 100.)

An insured has a life insurance policy that reqfires 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

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT

SEC registration

A domestic insurer issuing variable contracts must establish one or more

Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.

All of the following entities regulate variable life policies EXCEPT

The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC