Chapter 4- Life Insurance policies, provisions, options, and riders
A renewable term life insurance can be renewed
At a predetermined date or age, regardless of the insured's health status
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
Which type of insurance policy pays the face amount at the end of specified period if insured is still alive?
Endowment policy
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
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
A life insurance policy written on one contract for two people in which its payable upon first death is called
Joint
Which describes result of modified endowment contract failed to meet seven-pay test?
Pre-death distributions are typically taxable.
Under a Modified Endowment Contract, what are the likely tax consequences?
Pre-death distributions will become taxable
The universal policy is not used for....
Separate account investments
The type of mulitple protection coverage that pays on the death of the last person is called
Survivorship life policy
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
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 premium and face amount will remain constant for the 10-year period
What statement best describes relationship between the premiums of a whole life policy the premium payment period?
The shorter the payment period, the higher the premium
A life insurance policy that contains guranteed interest rate with chance to earn a rate that is higher than the guranteed rate is called
Universal life
A partial surrender is allowed in which of the following life policies?
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
What type of policy combines the flexibility of universal life policy with investment choices?
Variable universal life policy
Which type of life insurance offers flexible premiums, flexible death benefit, and choice of how cash value will be invested?
Variable universal policy
A life insurance policy which contains cash values that vary according to its investment performance of stocks is called
Variable whole life
Which statement about whole life insurance is true?
When a whole life policy is surrendered, income taxes may be owed.
Which is a best example of limited pay life insurance policy?
Whole life policy with premiums paid up after 20 years
Index whole life insurance contains a securities component that acts as a(n)
effective hedge against inflation
What example is NOT a characteristic of universal life insurance policy?
fixed surrender value
Which type of life insurance is normally associated with Payor Benefit Rider?
juvenile insurance
When a decreasing term policy is purchased, it contains a decreasing death benefit and
level premiums
A permanent life insurance policy where policyowners pay premiums for specified number of years is called
limited pay policy
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
What type of life insurance are normally used for key employee indemnification?
term, whole, and universal 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
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
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
A single premium cash value policy can be described as
A policy that is paid up after only one payment