types of life insurance polices quiz

All of the following elements of an adjustable life policy are adjustable EXCEPT A)the cash value B)the premium C)the policy loan rate D)the face amount

C)the policy loan rate

The party to whom the life insurance policy cash values belong is A)the insured B)the beneficiary C)the policyowner D)the insurer

C)the policyowner

Decreasing term insurance could be recommended for all of the following EXCEPT A)for protection while a business loan is outstanding B)to protect a family while children are growing up C)to build a retirement fund D)for mortgage protection

C)to build a retirement fund

Which of the following statements about a 1-year renewable term policy is CORRECT? A)It renews with an increase in premium based on the insured's age. B)It has a premium that remains the same, no matter how many times it is renewed. C)It may not be renewed more than once. D)Its premium increases each year on the basis of the insured's health.

A)It renews with an increase in premium based on the insured's age.

An individual wishes to purchase whole life insurance but does not wish to pay premiums past retirement age. Which of the following policies should the person buy? A)Limited-pay B)Graded premium C)Single premium D)Modified life

A)Limited-pay

Which of the following provides for an enhanced death benefit on a universal life policy? A)The corridor B)Option B C)Option A D)The cost basis

B)Option B

Willa purchases a 5-year $50,000 level term policy with an option to renew. Which of the following statements about the policy's renewability is CORRECT? A)The premium for the renewal period will be the same as the initial period, but a onetime service charge will be assessed upon renewal. B)The premium for the renewal period will be lower than the initial period. C)The premium for the renewal period will be the same as the initial period. D)The premium for the renewal period will be higher than the initial period.

D)The premium for the renewal period will be higher than the initial period.

A policy loan is generally available with all of the following types of life insurance policies EXCEPT A)level term life insurance B)variable life insurance C)universal life insurance D)modified premium whole life insurance

A)level term life insurance

Universal life is distinguished from whole life insurance in that A)partial withdrawals can be taken from the cash value account B)no withdrawals can be made from the policy's cash value account C)complete withdrawals of the cash value can be taken D)policy loans can be taken from the policy

A)partial withdrawals can be taken from the cash value account

Which of the following statements about variable universal life insurance is NOT correct? A)It offers flexibility in premium payments and face amounts dependent on investment performance. B)It guarantees a minimum cash value in the investment account. C)It pays a death benefit to a named beneficiary and offers the insured tax-deferred cash value investment options. D)It allows the insured to make withdrawals or to borrow from the policy during the insured's lifetime.

B)It guarantees a minimum cash value in the investment account.

If a policyowner purchases a $250,000 single premium whole life insurance policy and needs additional funds for retirement 6 months later, A)he can take a withdrawal but not a loan from the policy B)he can draw on the cash value to supplement his retirement income C)he cannot access the policy's cash value because there has not been enough cash value accumulation buildup in the policy D)he can take a loan from the policy to supplement his retirement income but must repay it within 1 year

B)he can draw on the cash value to supplement his retirement income

For which of the following reasons would a domestic insurer set up separate accounts? A)To simplify its bookkeeping system and allow for variables B)To pay claims to individual claimants for different classes of insurance C)To justify the volatility of investment returns D)To provide for annuities to be payable in fixed or variable amounts or for variable life insurance

D)To provide for annuities to be payable in fixed or variable amounts or for variable life insurance

Variable universal life policies provide all of the following EXCEPT A)a flexible premium capability B)a death benefit C)cash values D)fixed premiums

D)fixed premiums

All of the following are distinguishing characteristics of straight whole life policies EXCEPT A)insurance protection to age 100 B)level premiums C)cash values D)option to renew

D)option to renew

When he was 45, Frank purchased a $40,000 5-year level term policy. When he died at age 52, his beneficiary received A)$40,000 B)the cash value of the policy C)nothing D)$20,000

C)nothing

In contrast to traditional whole life insurance policies, term life insurance A)offers tax-advantaged borrowing and withdrawals B)provides both pure insurance protection and cash value C)provides pure insurance protection only D)cannot be renewed

C)provides pure insurance protection only

Withdrawals from a universal life policy A)are taxed as ordinary income B)only decrease the cash value C)only decrease the death benefit D)do not require repayment

D)do not require repayment

All of the following are purposes of juvenile insurance EXCEPT A)covering the medical expenses of a child B)providing permanent life insurance protection for the child C)providing funds for a child's final expenses D)beginning a life insurance program for a child at a low premium rate

A)covering the medical expenses of a child

Equity index life insurance policy values are determined by a specified participation rate and A)indirect links to a stock market index B)flexible premium payments C)dividends from stocks in a particular stock market index D)aggressive investment in the stock market

A)indirect links to a stock market index

Juan owns a 5-year $50,000 term life insurance policy, and Maria owns a $50,000 whole life insurance policy. Which of the following statements is CORRECT? A)Maria's policy, but not Juan's, may have an option to renew. B)Juan's policy, but not Maria's, may have an option to convert. C)Juan and Maria will receive the cash surrender value if they cancel their policies. D)Both policies provide living benefits to the policyowners while alive.

B)Juan's policy, but not Maria's, may have an option to convert.

Mark purchased a 20-year $100,000 level term life insurance policy and a $250,000 straight whole life insurance policy. Which of the following statements is CORRECT? A)If Mark takes a loan from either policy that is still outstanding when he dies, the amount of the loan plus interest due will be subtracted from the death benefit. B)Premiums for both policies are set at the time of policy issue and remain level throughout the term of the policies. C)The whole life insurance policy will mature when Mark reaches age 65; the term life insurance policy will expire in 20 years. D)Mark can take a policy loan from either policy, provided the loan is paid back within the 20-year period.

B)Premiums for both policies are set at the time of policy issue and remain level throughout the term of the policies.

Which of the following statements pertaining to a whole life policy is NOT correct? A)It provides both insurance protection and living values. B)The face amount may be paid as a lump sum at the policyowner's selected retirement age. C)It is designed to mature or endow at the insured's age 100. D)The policy offers insurance protection to age 100.

B)The face amount may be paid as a lump sum at the policyowner's selected retirement age.

David has a $300,000 nonrenewable 5-year term policy. The premium he pays for this policy would be A)the same as for a $300,000, 5-year renewable term policy B)less than for a $300,000, 5-year renewable term policy C)more than for a $300,000, 5-year renewable term policy D)increased each year during the 5-year period

B)less than for a $300,000, 5-year renewable term policy

A significant feature of adjustable life insurance is that A)the policyowner may make retroactive adjustments in the policy's provisions B)the policyowner need not pay premiums after the policy has been in force for a certain number of years C)the premiums may be increased or decreased from time to time by the policyowner D)the cash value is 3 times greater than in traditional whole life insurance

C)the premiums may be increased or decreased from time to time by the policyowner

Darlene owned a $100,000 whole life policy that had a $75,000 cash value when she died at the age of 75. The amount paid by the insurance company as a death benefit was A)$100,000 B)nothing C)$175,000 D)$75,000

A)$100,000

Madge took out a $100,000 10-year convertible term policy at age 30. At age 36 she decides to convert the policy to permanent insurance of the same amount on an original-age basis. Which of the following statements is NOT correct? A)She must make up the difference in premiums for the period between ages 30 and 36. B)Conversion will be contingent upon her evidence of insurability. C)The new policy will build cash values at a faster rate than if she converts at her attained age. D)A higher premium will be charged for the new policy.

B)Conversion will be contingent upon her evidence of insurability.

Which of the following policies endows at age 100? A)Level term and whole life B)Endowment and decreasing term C)Whole life and limited-pay life D)Any endowment policy

C)Whole life and limited-pay life

Which of the following statements about a modified whole life policy is NOT correct? A)It is basically an endowment policy. B)Cash value builds until the insured reaches age 100 so long as the policy is in force. C)Premiums are uniformly lower during the early years of the contract. D)The premium-paying period continues to age 100.

A)It is basically an endowment policy.

Of the following, which best describes a need that decreasing term insurance is often used to meet? A)Providing funds to pay off an outstanding loan at a reasonable premium B)Providing long-term coverage at a reasonable premium C)Providing funds for final expenses at a reasonable premium D)Providing funds to pay off an outstanding loan at a high premium

A)Providing funds to pay off an outstanding loan at a reasonable premium

Sean has a young family and needs affordable whole life insurance. He is looking for a policy with lower initial premiums but is not averse to paying more at a later time. What type of whole life insurance variation would be suitable for him? A)Single pay B)Life paid-up at 65 C)Graded premium D)20-pay life

C)Graded premium

Jorge would like to purchase a life insurance policy that offers level premiums from the time the policy is issued until his death. He also wants a policy that combines death protection with a savings element that can eventually be used for retirement purposes. Jorge should consider purchasing which of the following plans? A)A 30-year term life insurance policy B)A family maintenance policy C)A single premium whole life insurance policy D)A straight whole life insurance policy

D) A straight whole life insurance policy

Ken, the insured, purchased a $40,000 5-year level term policy and a $100,000 whole life insurance policy when he was 49. When he died at age 56, his beneficiary received A)$140,000 B)$40,000 C)nothing D)$100,000

D)$100,000

Which of the following statements applies to universal life insurance? A)It is similar to endowment insurance. B)The policy involves a cash account and increasing term insurance coverage. C)A rate of interest higher than that paid on whole life is paid for the term of the policy. D)Premiums generally may be increased or decreased at the policyowner's option.

D)Premiums generally may be increased or decreased at the policyowner's option.

Assume 4 individuals, all age 30, purchase the following life insurance policies. If all policies are still in force 10 years later, who will have the largest cash value in his policy? A)Dennis, who has a $100,000 life paid-up at 65 policy B)Luis, who has a $100,000 straight whole life policy C)Jack, who has a $100,000 life paid-up at 55 policy D)Rajesh, who has a $100,000 20-pay life policy

D)Rajesh, who has a $100,000 20-pay life policy

Which of the following life insurance policies with the same face value would have the highest premium if issued to the same person? A)10-year renewable and convertible level term B)10-year nonrenewable level term C)10-year renewable level term D)10-year decreasing term

A)10-year renewable and convertible level term

Of the following, which statement best describes a 10-year renewable term life insurance policy? A)A 10-year renewable term is a policy in which both the premium and face amount remain level for the term of the policy. B)A 10-year renewable term is a policy with a fixed face amount and a premium that increases at each 10-year renewal period. C)A 10-year renewable term is a policy in which the premium and face amount increase at the end of each 10-year period. D)A 10-year renewable term is a policy with a level premium and a corresponding decreasing face amount.

B)A 10-year renewable term is a policy with a fixed face amount and a premium that increases at each 10-year renewal period.

Which of the following statements pertaining to variable life insurance is CORRECT? A)In a variable life insurance policy, cash values and the death benefit are not guaranteed. B)Variable life insurance cannot be proposed in a sales situation unless the proposal is preceded or accompanied by a prospectus. C)The benefits of variable life insurance vary according to the amount of premiums paid. D)With a variable life insurance policy, the insurance company assumes the investment risk.

B)Variable life insurance cannot be proposed in a sales situation unless the proposal is preceded or accompanied by a prospectus.

Nora, age 25, just started working and would like to purchase life insurance to ensure that her spouse and child are protected if she dies prematurely. She has very limited funds but would eventually like to have permanent protection. Nora should consider purchasing A)whole life insurance B)level term life insurance C)variable life insurance D)limited-pay whole life insurance

B)level term life insurance

Which of the following statements regarding current assumption whole life insurance is NOT correct? A)It is also known as interest-sensitive whole life. B)Premium adjustments are usually made on an annual basis. C)During a period of relatively high interest rates the premiums could be increased. D)During a period of relatively high interest rates the premiums could be reduced.

C)During a period of relatively high interest rates the premiums could be increased.

A prospect with a young family needs affordable whole life insurance. As a rising young executive, it is likely that the prospect's current limited resources will increase substantially over the next 15 years. What type of whole life insurance variation would you recommend? A)20-pay life B)Single pay C)Modified life D)Straight Whole Life

C)Modified life

Patrick owns an adjustable life policy. Which of the following statements is CORRECT? A)The company has a right to raise or lower the premium on the basis of its investment earnings. B)Decreasing the premium shortens the premium-paying period. C)Upon showing evidence of insurability, Patrick can increase the face amount of his policy. D)Any adjustments made on the policy will have retroactive effects on the policy's provisions.

C)Upon showing evidence of insurability, Patrick can increase the face amount of his policy.

Jenna owns a policy in which the premium at the inception of the policy is lower than the continuous premium whole life rate and then increases each year for the first 5 years of the policy period. After 5 years, the premium levels off. What type of policy does Jenna own? A)Step-rate premium life B)Modified whole life C)Minimum deposit whole life D)Graded premium whole life

D)Graded premium whole life

Which of the following individuals can access the cash value of her life insurance policy to provide extra retirement income? A)Rosa, who owns a $50,000 25-year level term policy B)Judith, who is covered by a $500,000 key-person life insurance policy C)Mai, who owns a $200,000 decreasing term policy D)Harriet, who owns a $100,000 single premium whole life policy

D)Harriet, who owns a $100,000 single premium whole life policy

Which of the following $50,000 limited-pay life policies will have the highest premium for an applicant who is age 30? A)Life paid-up at age 65 B)25-pay life policy C)20-pay life policy D)30-pay life policy

C)20-pay life policy

Gerald, a 40-year-old building contractor, wants financial protection for his family while $150,000 of his assets are tied up in a building project for about 5 years. Which of the following types of life insurance policies would give him that protection at the lowest cost? A)Single premium whole life B)Life paid-up at 45 C)Straight whole life D)5-year level term

D)5-year level term

Michelle, age 31, just purchased a $50,000 variable life insurance policy. Which of the following statements is NOT correct? A)The death benefit of $50,000 is not guaranteed. B)Her premium payments will be fixed and level for the duration of the contract. C)The cash value growth of her policy will depend on how the investments supporting those values perform. D)She directs the insurer as to how her cash values are to be invested.

A)The death benefit of $50,000 is not guaranteed.

In contrast to traditional whole life insurance policies, with variable life insurance products A)contract cash values are not guaranteed B)premiums are invested in an insurer's general account C)the insurer assumes the investment risk D)investments match the insurer's contractual guarantees and liabilities

A)contract cash values are not guaranteed

Which of the following statements pertaining to modified whole life and graded premium whole life policies is NOT correct? A)Modified whole life contracts build cash values and have premium-paying periods to age 100. B)The premium for graded premium whole life increases each year during the first few years after policy issue. C)Graded premium whole life policies build cash values and have premium-paying periods to age 100. D)The premium for modified whole life increases each year after the first few years of policy issue.

D)The premium for modified whole life increases each year after the first few years of policy issue.

Roland is 45 years old and married. He has a 19-year-old son who is in his first year of studies at a local university. He also has an 8-year-old daughter. A decreasing term policy could be recommended for Roland for which of the following reasons? A)To provide an emergency source for loans B)To guarantee that his son's college tuition will be covered C)To supplement Roland's retirement income D)To provide a future college education for his daughter

B)To guarantee that his son's college tuition will be covered

Which of the following statements regarding universal life is INCORRECT? A)Withdrawals and policy loans are taken from the cash value account. B)UL premiums are fixed, however the policyowner may increase or decrease the death benefit. C)UL premiums are flexible and the policyowner may increase or decrease the death benefit. D)Death benefits are flexible, subject to insurability requirements.

B)UL premiums are fixed, however the policyowner may increase or decrease the death benefit.

Which of the following statements regarding limited-pay life insurance is NOT correct? A)Limited-pay policies endow when the insured is 100 years old. B)Limited-pay policy death benefits remain level for the duration of the policy. C)Limited-pay policies mature more quickly than do continuous premium whole life policies. D)Cash value grows more quickly in limited-pay life policies than it does in continuous premium whole life policies.

C)Limited-pay policies mature more quickly than do continuous premium whole life policies.