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 the death benefit would be the $500,000 face amount

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 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

Which of the following is considered to be an alternative to a life settlement?

Accelerated death benefit rider

All of these are common exclusions to a life insurance policy EXCEPT

Accidental death

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

Adjustable Life

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?

Can be converted to permanent coverage without evidence of insurability

Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this?

Child term rider

A provision that allows a policy owner to temporarily give up ownership rights to secure a loan called a

Collateral assignment

A waiver of premium rider allows an insured to waive premium payments

Completely and permanently disabled

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

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

Decreasing term life

A life insurance policy owner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability

Disability income rider

What type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Endowment policy

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

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

Face amount

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

Flexible 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

A business will typically use which type of life insurance to cover their employees

Group policy

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

Hedge against inflation

A life insurance policy written on one contract for two people in which it is payable upon the first death is called

Joint

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

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

Level premiums

A limited payment whole life policy provides

Lifetime protection

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

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

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?

Nothing

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

Partial Surrender

A provision that allows a policy owner to withdraw a policy's cash value interest free is a

Partial surrender

A rider that assumed premiums will be paid on a juvenile policy until the child reaches a specific age is called a

Payor rider

Which situation accurately describes a reduced paid-up nonforfeiture option

Policy has a decreased face amount

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

Policy owner has the right to select the investment which will provide the greatest return.

Which of these describe 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 insurability

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

A life insurance policy owner does NOT have the right to

Revoke an absolute assignment

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because

The MEC tends to be an investment vehicle

What is a corridor in relation to a Universal life insurance policy

The amount of interest that has accumulated in the policy's cash value

James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount?

The death benefit paid will be what the premium would have purchased at the correct age

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

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

The statement which best describes the relationship between the premiums of a whole policy and the premium payment period is

The shorter the payment period the higher the premium

A life insurance policy that contains guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called

Universal life

A life insurance policy that is subject to a contract interest rate is referred to as

Universal life

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

Universal life

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 securities license is required for a life insurance producer to sell

Variable life insurance

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called

Variable whole life

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

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

A renewable Term Life insurance policy allows the policy owner the right to renew the policy

Without producing proof of insurability

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

guaranteed insurability rider

Term insurance is appropriate for someone who

seeks temporary protection and lower premiums

The type of multiple protection coverage that pays on the death of the last persona is called

survivorship life policy