Chapter 4 Practice test

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years

5

Level Term Insurance

The most common type of temporary protection purchased. The word level refers to the death benefit that does not change throughout the life of the policy.

What is a key distinction between variable whole life and variable universal life products?

Variable whole life has a guaranteed death benefit

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

adjusted to the insured's age at the time of renewal

Term insurance has NO ___________?

cash value

Which policy component decreases in decreasing term insurance?

face amount (decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term)

Which Universal Life option has a gradually increasing cash value and a level death benefit?

option a

What determines the cash value of a variable life policy?

the performance of the policy portfolio

The cost of coverage in a group life policy is based on

the ratio of men and women in the group

Define target premium in a universal life policy

the reccommended amount to keep the policy in force throughout its lifetime

What is an example of limited pay life policy

Life Paid-up at Age 65

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy?

Limited pay whole life

What are two components of a universal policy

Insurance and cash account

If an agent wishes to sell variable life insurance policies, what license must the agent obtain

securities

A domestic insurer issuing variable contracts must establish one or more

separate accounts; The insurer must maintain in each separate account assests with a value at least equal to the reserves and other contract liabilities connected to the account

True or false, groups purchasing group life insurance must be formed for a reason other than purchasing insurance

true

When would a 20-pay whole life policy endow?

When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.

Annually renewable term policies provide a level death benefit for a premium that

increases annually (Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured)

The type of term insurance that provides increasing death benefits as the insured ages is called

increasing term

Which component increases in the increasing term insurance?

the death benefit increases (increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term)

An individual purchased a $100,000 joint life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife recieve from the policy?

100,000 dlls. In joint policies, the death benefit is paid on upon the first death only

How are premiums determined in group life insurance?

age, sex and occupation of the entire group

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability

Two brothers are starting a new busines. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit?

Joint Life joint life policy covers two lives and would be the least expensive bc the premiums are based on average age and it would pay a death benefit on at the first death

In a single employer group plan, what is the name of the policy issued to the employer?

Master contract

Which of the following types of policies allows the policyowner to skip the premium payments, provided that there is enough cash value in the policy, to cover the premium amount

Universal Life (The policyowner has the flexibility to increase the amount of premium going to the policy and to later decrease it again)

An employee has a group life insurance through her employer. After 5 years, she decides to leave the company and worl independently. How can she obtain an individual policy

she can convert her group policy to an individual policy without proof insurabilityy within 31 days of leaving the group plan

A return of premium term life policy as written as what type of term coverage

increasing term (RETURN OF PREMIUM life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid)

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?

Join during the open enrollment period

What type of policy would be considered as a traditional level premium contract?

Straight life has a level guareanteed face amount and a level premium for the life of the insured

What does term insurance provide?

Term insurance provides the greatest amount of coverage for the lowest premimum

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

Which of the following best describes annually renewable term insurance?

it is level term insurance

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that

joint life

Do decreasing term policy premiums decline or remain level

premiums remain level Only the face amount decreases

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

the insured may renew the policy for another 10 years, but at a higher premium rate policies that are guaranteed renewable or convertible may be renewed wiithout evidence of insurability for another like term, or may be converted to permanent insurance, without evidence of insurability.

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

the type of investment

at age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accomodate those changes as they occur. Which of the following policies would most fit his needs?

adjustable life Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay the mortality

Which type of insurance policy generates immediate cash value

single premium "lump sum" payment made to the insurer =immediate cash value

Name all of the following entities that regulatie variable life insurance

the insurance department, the federal government, and the SEC

What is generally NOT considered when underwriting group insurance?

the insureds' medical history group insurance is judged based on its nature and past claim experience

What characteristic makes whole life permanent protection?

Coverage until death or age 100

An insured purchased a variable life insurance policy with a face amount of 50,000 dlls. OVer the life of the policy, stock performance declined and the cash value fell to 10,000. if the insured dies, how much will be paid out?

50,000 dlls (The cash value of a variable life insurance policy is not guarateed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount)

Pure Death Protection

(Term/temporary protection) if the insured dies during this term, the beneficiary receives the pay out; if policy is cancelled/expires prior to insured death, there is nothing payable at the end; NO cash value

name the three things an agent needs in order to sell variable life insurance policies

1. a securities license 2. a life insurance license 3. FINRA registration

An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years, what will happen to to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased

In group life insurance policy, the employer may select all of the following

amount of insurance, premium payor, type of insurance

The death protection component of Universal Life Insurance is always

annually renewable term (a Universal policy has two components; an insurance component and a cash account. The insurance component/death protection, of the universal life policy is always annual renewable term insurance)

What type of premium do both Universal Life and Variable Universal Life policies have

flexible premium can be increased or decreased as the policyowner chooses as long as there is enough value in the policy to fund the death benefit

individual underwriting is not needed for what type of insurance?

group insurance

An individual just borrowed 10,000 dollars from his bank on a 5 year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term is a type of policy where the face amount decreases as the amount of debt is reduced