xcel chapter 4

Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy?

$4,000

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

500,000.00

Which policy feature makes a universal life policy different from a whole life policy?

A flexible premium schedule

A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than the IRS will allow

All of these are valid options for an Adjustable Life Policy EXCEPT

A nonforfeiture option can be used to increase the death benefit

If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?

A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age

Which of these is considered to be a Living Benefit option in a life insurance policy?

Accelerated death benefit

A policyowner may change two policy features on what type of life insurance?

Adjustable Life

An error was made on Mary's life insurance application. Which of the following areas do errors commonly occur on applications and for which the incontestable clause does NOT apply?

Age

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

Coverage is eliminated

Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)?

Death benefit

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

Decreasing term insurance

What is the name of the provision which states that a copy of the application must be attached to the policy when issued?

Entire Contract

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?

Equity index whole life

A spouse and child can be added to the primary insured's coverage as what kind of rider?

Family term

Which of these riders will pay a death benefit if the insured's spouse dies?

Family term insurance rider

All of these are characteristics of a universal life insurance policy EXCEPT

Fixed surrender value

An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period?

Grace period

Barbara's policy includes a rider which allows her to purchase additional insurance at specific dates or events without evidence of insurability. This rider is called a(n)

Guaranteed insurability rider

Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake?

Incontestable clause

Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?

Interest only

Which type of life insurance is normally associated with a Payor Benefit rider?

Juvenile insurance

What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death?

Last Survivor Life insurance

Which of these is NOT considered to be a common life insurance nonforfeiture option?

Life income annuity

Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?

Net death benefit will be reduced if the loan is not repaid

An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called

Partial Surrender

What is an insurer required to do when faced with an error made under the Misstatement of Age provision?

Pay age-corrected benefits

Which type of rider will waive the premium on a child's life insurance policy if the parent paying the premium dies?

Payor benefit

What is an insurance policy's grace period?

Period of time after the premium is due but the policy remains in force

Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?

Policyowner has the right to select the investment which will provide the greatest return

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test?

Pre-death distributions are typically taxable

Which of the following is a reinstatement condition?

Proof of insurabiilty

All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT

Reduction of premium

A policyowner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?

Reduction of premium dividend option

Which of the following are the premium payments for a Universal life policy NOT used for?

Separate account investments

What does the word "level" in Level Term describe?

The face amount

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true?

The face amount and premium will remain constant over the 10-year period

Under a life insurance policy, what does the insuring clause state?

The insurer's obligation to pay a death benefit upon an approved death claim

Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?

The policy may be paid up early by using policy dividends

Which of these is NOT a characteristic of the Accelerated Death Benefit option?

There may be a dollar limit on the maximum benefit

Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy's cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this?

Universal Life policy

A partial surrender is allowed in which of the following life policies?

Universal life

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable universal life policy

All of these statements concerning whole life insurance are false EXCEPT

When a whole life policy is surrendered, income taxes may be owed

Which of these would be the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years

Life insurance policies will normally pay for losses arising from

commercial aviation

A waiver of premium rider allows an insured to waive premium payments if the insured is

completely and permanently disabled

When a decreasing term policy is purchased, it contains a decreasing death benefit and

decreasing premiums

The least expensive option to pay off a 30-year mortgage balance would be

decreasing term life

Matt is applying for life insurance and requests a double indemnity rider. A double indemnity benefit will be payable to Matt's beneficiary if Matt

dies instantly from a car accident

All of these are standard exclusions found in a life insurance policy EXCEPT

disability

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)

guaranteed insurability rider

Index whole life insurance contains a securities component that acts as a(n)

hedge against inflation

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)

limited pay policy

A life insurance policy that has premiums fully paid up within a stated time period is called

limited payment insurance

The premium for a Modified whole life policy is

lower than the typical whole life policy during the first few years and then higher than typical for the remainder

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid

minus indebtedness and without interest

A provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n)

nonforfeiture provision

A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)

partial surrender

Decreasing term life insurance is often used to

provide coverage for a home mortgage

In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST

provide evidence of insurability to the insurer

What is the automatic continuance of insurance coverage referred to as?

renewal

A life insurance policyowner does NOT have the right to

revoke an absolute assignment

An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)

rider

The type of policy which pays on the death of the last person is called

survivorship life

An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if

the insured outlived the beneficiary

If an insured dies during the grace period with no premiums paid

the policy would be payable, minus the premium amount

Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,

the protection ends

The free-look provision gives the policyowner

the right to return the policy for a full refund within a specified number of days

A securities license is required for a life insurance producer to sell

variable life insurance

Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds

will no longer provide insurance protection