Chapter 4- Life Insurance Policies; Provisions, Options and Riders (Exam 1)

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Which statement concerning an adjustable life insurance policy is FALSE?

Evidence of insurability is required when there is a change in premium

A life policy that has premiums that are lower than normal during the early years is called

Modified life

Which of these statements accurately portrays an adjustable life insurance policy?

Policy can alternate between forms of term and whole life insurance (Adjustable life insurance allows the policyowner to adjust the policy's face amount, premium, and type of protection without having to complete a new application or exchange policies. Example: converting a term policy to whole life or vice versa)

Which of the following is a TRUE statement regarding universal life insurance?

Policy indicates how much of each premium is used toward company expenses.

Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?

Provide supplemental income in 35 years.

What would be considered an advantage of purchasing term life insurance?

The initial premium is lower compared to the same amount of whole life coverage

Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?

The person insured

An advantage of owning a flexible premium life insurance policy would be

The policy owner can make policy changes without difficulty

Which is an accurate description of the premium in a graded premium life insurance policy?

Annual increases in premium for a stated number of years then levels off for the remainder of the contract

Which of the following is generally a form of group credit life insurance?

Decreasing term insurance

How long does one premium payment cover in a single premium whole life policy?

Entire life of the policy

Straight whole life insurance can be accurately described in all of these statements EXCEPT

Policy protection expires at age 65

Which of the following would NOT be a reason for purchasing life insurance on a child's life?

Provide benefits for the child if the parent dies

A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value?

$16,000 was received tax-free and $4,000 as ordinary income

Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?

Fluctuate with changes in cash account

These are all accurate statements regarding universal life insurance EXCEPT Mortality charge is ded

Policy loans are not permitted

Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for

the Policy is surrendred for less than what was paid into it

What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?

Less than the policy's face amount

Which statement regarding an adjustable life insurance policy is NOT true?

Policy loans are not permitted

How are level term policies able to provide level premiums?

Premiums are averaged over the term of the policy.


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