Types of Life Policies 08/20

All of the following entities regulate variable life policies EXCEPT A The Guaranty Association. B Federal government. C The SEC. D The Insurance Department.

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

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 A Until the policyowner's age 100, when the policy matures. B For 20 years or until death, whichever occurs first. C Until the policyowner reaches age 65. D For 20 years.

B 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.

When an employee terminates coverage under a group insurance policy, coverage continues in force A Until the employee notifies the group insurance provider that coverage conversion policy is issued. B For 31 days. C For 60 days. D Until the employee can obtain coverage under a new group plan.

B For 31 days. An employee has 31 days under the conversion privilege to convert to an individual policy.

All other factors being equal, the least expensive first-year premium payment is found in A Annually Renewable Term. B Increasing Term. C Decreasing Term. D Level Term.

A 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.

Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary. Concerning Juvenile Life insurance, which of the following statements is INCORRECT? A Juvenile Life is classified as any life insurance purchased by a minor. B Usually a parent or guardian is the applicant for insurance on the life of a minor. C It can be a limited premium payment policy. D Juvenile Life is classified as any life insurance written on the life of a minor.

A 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.

Which type of life insurance policy generates immediate cash value? A Single Premium B Level Term C Decreasing Term D Continuous Premium

A 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.

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A Upon conversion, the death benefit of the permanent policy will be reduced by 50%. B Evidence of insurability is not required. C Most term policies contain a convertibility option. D Upon conversion, the premium for the permanent policy will be based upon attained age.

A Upon conversion, the death benefit of the permanent policy will be reduced by 50%. Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? A The premium for individual coverage will be based upon the insured's attained age. B The insured may choose to convert to term or permanent individual coverage. C The insured would not need to prove insurability for a conversion policy. D The insured may convert coverage to an individual policy within 31 days.

B The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? A The insured may renew the policy for another 10 years at the same premium rate. B The insured may renew the policy for another 10 years, but at a higher premium rate. C The insured must provide evidence of insurability to renew the policy. D The insured may only convert the policy to another term policy.

B The insured may renew the policy for another 10 years, but at a higher premium rate. Policies that are guaranteed renewable and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability.

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? A Straight whole life B Universal life C Variable life D Decreasing term

B Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? A 1 B 3 C 5 D 10

C 5 If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? A 50% of the death benefit B The face amount minus the premiums that would have been collected until the insured reached the age of 100 C A full death benefit D A death benefit equal to the cash value of the policy

C A full death benefit Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

The death benefit under the Universal Life Option B A Increases for the first few years of the policy, and then levels off. B Remains level. C Gradually increases each year by the amount that the cash value increases. D Decreases by the amount that the cash value increases.

C Gradually increases each year by the amount that the cash value increases. Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.

All other factors being equal, which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection? A Most comprehensive B Longest C Greatest D Least

C Greatest Term policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection.

Annually renewable term policies provide a level death benefit for a premium that A Remains level. B Fluctuates. C Increases annually. D Decreases annually.

C Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A Ordinary life policy B Limited pay whole life C Level term D Term to specified age

C Level term A 20-year term policy is written to provide a level death benefit for 20 years.

Which of the following statements about group life is correct? A The group sponsor receives a Certificate of Insurance. B The policy can be converted to an individual term insurance policy. C The cost of coverage is based on the ratio of men and women in the group. D The premiums are higher than in an individual policy because there is no medical exam.

C The cost of coverage is based on the ratio of men and women in the group. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.

A Universal Life Insurance policy is best described as a/an A Variable Life with a cash value account. B Whole Life policy with two premiums: target and minimum. C Flexible Premium Variable Life policy. D Annually Renewable Term policy with a cash value account

D Annually Renewable Term policy with a cash value account A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Which of the following is NOT a type of whole life insurance? A Single premium B Straight life C Limited payment D Increasing term

D Increasing term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Increasing term is a type of term insurance.

An Adjustable Life policyowner can change which of the following policy features? A The mortality expense B The investment account C The insured D The coverage period

D The coverage period Typically, the owner 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 of coverage; or changing the period of protection.

All of the following are true about variable products EXCEPT A The minimum death benefit is guaranteed. B The cash value is not guaranteed. C Policyowners bear the investment risk. D The premiums are invested in the insurer's general account.

D 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.