Chapter Exam 1
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 year convertible term
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
Which of these is an element of a Variable Life policy?
A fixed, level premium
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
Which statement about a whole life policy is true?
Cash value may be borrow against
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
An ________ term life policy is normally used when covering an insured's mortgage balance?
Decreasing
The combination of whole life and ______ term insurance is referred to as a family income policy?
Decreasing
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
P owns a $25,000 life policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at Age 70
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy
Which of these would be considered a Limited-Pay Life policy?
Life paid-up at age 70
Which of the following information is NOT required to be included in a Whole Life policy?
Policy's guaranteed dividend table
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
A Limited-Pay Life policy has?
Premium payments limited to a specified number of years
What kind of life insurance product covers children under their parent's policy?
Term rider
An _______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
An ______ ______ Life policy combines investment choices with a form of term coverage?
Variable Universal
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
Which statement is correct regarding the premium payment schedule for whole life policies?
Which statement is correct regarding the premium payment schedule for whole life policies
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew?
Without evidence of insurability
How long does the coverage normally remain on a limited-pay life policy?
age 100
Under a Graded Premium policy, the premiums?
are lower during the policy's early years
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
Which of these needs is satisfied by adjustable Life insurance?
insured's need for flexible premiums
When is the face amount paid under a joint Life and Survivor policy?
upon death of the last insured
A term life insurance policy matures?
upon the insured's death during the term of the policy
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay life
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to an?
third-party with no insurable interest
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
Which of these statements describe a Modified Endowment Contract (MEC)?
Exeeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
What does a Face Amount Plus Value Policy pay upon the insured's death?
Face amount plus the policy's cash value.
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called?
Limited pay life
J is issued a life insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?
Modified Premium Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified whole life
Which of these life products is not considered interest-sensitive?
Modified whole life
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT?
The premiums can be lowered or raised, based on investment performance
S, age 40, looking to buy a life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be?
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following life insurance policies combine term insurance with an investment element?
Universal Life
Which policy requires an agent to register with the National Association of Securities Dealer (NASD) before selling?
Variable Life
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called an?
Variable Universal Life policy
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole life policy with an other insured Rider
Variable Whole Life Insurance can be described as
both an insurance and securities product
All of these are characteristics of an Adjustable Life policy. EXCEPT?
face amount can be adjusted using policy dividends
Variable Life products require a producer to?
hold a Life Insurance license and a Securities license
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
What type of life insurance are credit policies issued as?
Term
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Who has the option to renew a Renewable Term policy?
Insured
What type of life policy covers two live and pays the face amount after the first one dies?
Joint life policy
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT?
K's wife dies at age 66
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
All of these insurance products require an agent to have proper FINR securities registration in order to sell them, EXCEPT for?
Modified Whole Life
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax
T has a term policy that allows him to continue after expiration of the initial policy period. What type of term coverage is this?
Renewable
What of the following types of permanent life insurance policies offers the highest initial cash value?
Single premium
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-year Endowment
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is?
The cost
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate when using this phrase?
The duration of premium payments
What advantages does the renewability feature give to a term policy?
The insured may extend the coverage period
Under a Graded Premium Whole life policy?
The premium increases each year during the early years of the contract and remains the same after that time
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment
K purchases a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type policy is known as an ________ life policy?
Universal
The cash value is an ______ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factor?
Universal
Which of the following Life insurance policies combine term insurance with an investment element?
Universal Life
Additional coverage can be added to a Whole life policy by adding an?
decreasing term rider
A variable insurance policy?
does not guarantee a return on investment accounts
A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance, and the?
expense charges
Credit Life insurance is?
issued in an amount not to exceed the amount the of the loan
Which of these characteristics is consistent with a Straight Life policy?
premiums are payable for as long as there is insurance coverage in force
The investment gains from a Universal Life Policy usually go toward?
the cash value
The amount of coverage on a group credit life policy is limited to?
the insured's total loan value
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period?
varies according to the contract
At what point does a Whole Life Insurance policy endow?
when the cash value equals the death benefit
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay life
Under an Interest Sensitive Whole Life policy?
Cash values are determined by interest rates
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT?
Change the policy's interest rate
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
Which of these types of policies may NOT have the automatic Premium Loan provision attached to it?
Decreasing Term
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
Key Person insurance
What kind of premium does a Whole life policy have?
Level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Whole life insurance policies are contractually guaranteed to provide each of the following, EXCEPT?
Partial withdrawal features beyond a surrender change period
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
What type of life insurance gives the greatest amount of coverage for limited period of time?
Term life
In order to sell an _______ life policy, a producer is required to register with the financial industry Regulatory Authority (FINRA)?
Variable
A life policy with a death and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as?
Variable Life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
Variable universal life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life
A life insurance policy that provides a policyowner with cash value along with a level face amount is called?
Whole life
What kind of life policy either pays for the face value upon the death of the insured or when the insured reaches age 100?
Whole life
A policy that becomes a Modified Endowment Contract (MEC)?
Will lose many of its tax advantages
How does a typical Variable Life Policy investment account grow?
through mutual funds, stocks, bonds.
A Universal Life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, expense charges, and the
Cost of insurance