Chapter 4.1 (Life Insurance)

Pure death protection only is provided by which life insurance policy?

Term life insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. The correct answer is: Term life insurance

Mortgage protection insurance uses what type of life insurance coverage?

With decreasing term life insurance, as the mortgage is paid off, the face amount decreases. The correct answer is: Decreasing term

Which of the following is not a characteristic of decreasing term life insurance?

Premiums are level in a decreasing term life policy. The policy face decreases to zero by the end of the policy period _ on the day of policy expiration, the face amount equals zero. Decreasing term policies are often called _mortgage reduction insurance_ because they are used to insure a mortgage. The correct answer is: The premium decreases to zero by the end of the policy period.

Which of the following policies allows a policyowner to renew a term policy and receive a lower premium by providing proof of insurability?

Reentry term allows a policyowner to renew existing term coverage and receive a lower premium by providing proof of insurability. The correct answer is: Reentry term

What are the benefits of a convertible and renewable term life insurance policy?

Renewable and convertible term life policies allow the insured to renew or convert coverage without needing to provide proof of insurability. The correct answer is: Proof of insurability is not required to convert or renew coverage.

Which of the following characteristics does not describe convertible term life insurance policies?

The original age is the insured's age upon purchase of the term life insurance policy. The correct answer is: The attained age is the insured's age upon purchase of the term life insurance policy.

All of the following statements regarding renewable term life insurance policies are false, EXCEPT:

The perk with renewable term life insurance policies is that the insured has the option of renewing the policy without needing to provide evidence of insurability. The correct answer is: Renewable term life insurance policies are renewable at the insured's option.

All of the following term life insurance policies have level premiums, EXCEPT:

Annual renewable term (ART) provides a level face amount with an increasing premium. The correct answer is: Annual renewable term

Which term policy has increasing premiums and a level face amount?

Annual renewable term has a level face amount and increasing premiums. The correct answer is: Annual renewable term

Which life insurance policy has annual increasing premiums and does not build cash value?

Annual renewable term life insurance has a level face amount with premiums that increase annually. Term life insurance policies do not build cash value. The correct answer is: Annual renewable term

What part of a mortgage reduction policy decreases over time?

A decreasing term policy (used for mortgage reduction insurance) has a decreasing face amount. The correct answer is: Face amount

All of the following are drawbacks of term life insurance, EXCEPT:

A drawback of term life insurance is that there are no living benefits _ term life insurance does not accrue cash value. The correct answer is: Living benefits are available to the policyholder in the form of cash accrual.

All of the following are false regarding convertible term policies, EXCEPT:

Convertible term life policies do not require the insured to show proof of insurability to convert the policy. Not every term life policy has the conversion option, but those that do will specify the new premium rate under the converted policy, which will be based on the insured's original or attained age. If the original age is used, the premiums will be lower than if the attained age is used. The correct answer is: The converted policy's premiums will be based on the insured's attained or original age.

Which of the following life insurance policies is most appropriate for mortgage protection?

Decreasing term is most commonly used to secure a loan or a mortgage. As the mortgage is paid off, the face amount decreases. The face amount always matches the balance of the mortgage. The correct answer is: Decreasing term

Blake just bought a home and needs insurance to cover his mortgage. He does not have a lot of money to spend on this coverage. What policy would you recommend to Blake?

Decreasing term policies have a decreasing face amount and level premiums. Term policies are less expensive than permanent policies. The correct answer is: Decreasing term

Wesley purchases an increasing term life insurance policy. Which of the following elements must increase in Wesley's policy?

In an increasing term life insurance policy, the death benefit increases as time passes. The correct answer is: The death benefit

___________ policies have premiums that fluctuate between the current rate and maximum rate, as stated in the policy.

Indeterminate premium policies have premiums that fluctuate between the current rate and maximum rate, as stated in the policy. The fluctuating premiums account for the insurer's actual mortality expense and investment experience. The correct answer is: Indeterminate premium

Which of the following policies is most appropriate for a 23-year old who wants a year of life insurance protection before getting married?

Interim term coverage is intended for people who plan on purchasing whole life insurance coverage within a year. The correct answer is: Interim term

Which of the following policies has a level face amount with level premiums?

Level premium term, also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. The correct answer is: Level premium term

Which term policy has level premiums and a level face amount?

Level premium term, also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. The correct answer is: Level premium term

All of the following characterize term life insurance, EXCEPT:

Term life insurance provides pure death protection (pays a death benefit only). Whole life insurance (permanent protection) provides life insurance for the entire life of the insured. It also is said to provide a living benefit because it accrues cash value, which is available to the policy owner. The correct answer is: Term life insurance provides living benefits (cash accrual).

Term life insurance provides ________________. Whole life insurance provides _______________.

Term life insurance provides pure death protection only. Whole life insurance provides death protection and living benefits (cash values). The correct answer is: pure death protection; death benefit and living benefits.

Which type of life insurance provides pure death protection?

Term life insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. The correct answer is: Term

Term insurance is categorized by all of the following, EXCEPT:

Term policies do not accrue cash value. They only provide death protection. The correct answer is: Policy cash value grows tax-deferred

All of the following are characteristics of term insurance, EXCEPT:

Term policies do not accrue cash value. They only provide death protection. Premiums increase as the policy is renewed, and the death benefit is only paid out if the insured dies during the policy term. The correct answer is: Cash value

What are the two major types of life insurance?

There are two major types of life insurance: permanent (whole) and temporary (term). The correct answer is: Term and whole

Sheldon wants a life insurance policy with premiums that do not increase over time. Which of the following policies would you not recommend to him?

Upon conversion, a convertible term policy will have higher premiums because permanent protection is more expensive than term protection. The correct answer is: Convertible term

Kara is interested in purchasing a life insurance policy that has steady premiums. She doesn't want to pay higher premiums when she is older. What policy should you not recommend to her?

Upon conversion, a renewable and convertible term policy will have higher premiums. Variable life insurance has fixed level premiums. With increasing and decreasing term, the face amount changes, not the premium. The correct answer is: Renewable and convertible term

All of the following statements are true regarding annual renewable term (ART) policies, EXCEPT:

ART policies are guaranteed renewable (until a certain age) without proof of insurability. The correct answer is: ART is guaranteed renewable on an annual basis with proof of insurability.

Which type of life insurance coverage is used to provide mortgage protection?

As the mortgage is paid off, the face amount decreases. The correct answer is: Decreasing term