Chapter 4 Life Policies

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

Adjustable Life

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

Death benefit

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

Renewal

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

Separate account investments

Which type of multiple protection policy pays on the death of the last person?

Survivorship life policy

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

Universal Life

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

Variable universal life policy

A single premium cash value policy can be described as

a policy that is paid up after only one payment

A Renewable Term Life insurance policy can be renewed

at a predetermined date or age, regardless of the insured's health

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount

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

Joint

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

Which type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested?

Variable universal policy

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

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

Fixed surrender value

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

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

Decreasing term 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

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

Juvenile

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

Limited pay policy

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

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

All of these statements concerning whole life insurance are false EXCEPT

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

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

level premiums

Term insurance is appropriate for someone who

seeks temporary protection and lower premiums

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

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