Life Insurance Policies

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 receive from the policy?

$100,000 In joint life policies, the death benefit is paid upon the first death only.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT A. securities license B. a life insurance license C. SEC registration D. FINRA registration

C. SEC registration Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

Which of the following is TRUE about credit life insurance? A. Debtor is the annuitant B. Creditor is the insured C. Debtor is the policy beneficiary D. Creditor is the policyowner

D. Creditor is the policyowner In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.

Which of the following is called a "second to die" policy? A. Family Income B. Juvenile life C. Joint life D. Survivorship life

D. Survivorship life Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.

which of the following is an example of limited pay life policy? A. Life Paid-up at age 65 B. Renewable term to age 70 C. Level Term Life D. Straight Life

A. Life Paid-up at age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

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 If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured.

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. What policy is that?

Joint Life Policy

All of the following statements are correct regarding Credit Life Insurance EXCEPT A. Benefits are paid to the borrower's beneficiary B. The amount of insurance permissible is limited per borrower C. Premiums are usually paid by the borrower D. Benefits are paid to the creditor

A. Benefits are paid to the borrower's beneficiary In Credit Life Insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan.

All of the following entities regulate variable life policies EXCEPT A. The Guaranty Association B. Federal Government C. The SEC D. The Insurance Department

A. The Guaranty Association Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statemins is INCORRECT? A. The insured may choose to convert to term or permanent individual coverage B. The insured would not need to prove insurability for a conversion policy C. The insured may convert coverage to an indivual policy within 31 days D. The premium for individual coverage will be based upon the insureds attained age

A. The insured may choose to convert to term or permanent individual coverage When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.

In a survivorship life policy, when does the insurer pay the death benefit? A. Upon the last death B. Upon the first death C. Half at the first death, and half at the second death D. if the insure survives to age 100

A. Upon the last death Survivorship life pays on the last death rather than upon the first death.

When would a 20-pay whole life policy endow? A. When the insured reaches age 100 B. At the insureds age 65 C. After 20 payments D. In 20 years

A. 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.

A universal life insurance policy is best described as a/an

Annually Renwable Term policy with a cash value account A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

All of the following could own group life insurance EXCEPT A. a debtor group B. a group needing low-cost life insurance C. A group sponsored by an employer D. An alumni group

B. A group needing low-cost life insurance Groups purchasing group life insurance must be formed for a reason other than purchasing insurance.

Which of the following is true regarding the insurance amount in a credit life policy? A. The amount of coverage can be greater than the amount owed B. Creditor can only insure the debtor for the amount owed C. Creditor may insure the debtor for an unlimited amount of coverage D. Allowable amount of coverage is determined by the State Insurance Commissioner

B. Creditor can only insure the debtor for the amount owed Credit life insurance cannot pay out more than the balance of the debt, so that there is no financial incentive for the death of the insured.

Twin brothers are starting a new business. 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 should one of them die? A. Ordinary Life B. Joint Life C. Decreasing Term D. Whole Life

B. Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

Annually renewable term policies provide a level death benefit for a premium that A. Remains level B. Fluctuates C. Increases annually D. Decreases annually

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

In a group life insurance policy, the employer may select all of the following EXCEPT A. The amount of insurance B. The premium payor C. The beneficiary D. The type of insurance

C. The beneficiary Employees must be allowed to select a beneficiary.

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A. Most term policies contain a convertibility option B. Upon conversion, the premium for the permanent policy will be based upon attained age C. Upon conversion, the death benefit of the permanent policy will be reduce by 50% D. Evidence of insurability is not required

C. Upon conversion, the death benefit of the permanent policy will be reduced by 50% Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

Which of the following would help prevent a universal life policy from lapsing? A. Face amount B. Adjustable premium C. Corridor of insurance D. Target premium

D. Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

The policy owner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as A. The previous premium payments were high enough to create an excess of premium B. The policy owner cannot skip premiums without the policy lapsing C. The next month's premium is sufficient to cover both the current premium amount and the skipped amount D. The policy contains sufficient cash value to cover the cost of insurance

D. The policy contains sufficient cash value to cover the cost of insurance In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

Credit Life Insurance

Insures the life of a debtor Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?

Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called

Single premium whole life Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.

Who has the authority to regulate the issuance and sale of variable contracts?

The Superintendent The Superintendent shall have sole authority to regulate the issuance and sale of variable contracts and to issue such reasonable rules and regulations as may be appropriate.

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 and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability.

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

To keep the policy in force/ To prevent the policy from lapsing The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which of the following best describes annually renewable term insurance? A. Neither the premium nor the death benefit is affected by the insured's age B. It provides an annually increasing death benefit C. It is level term insurance D. It requires proof of insurance at each renewal

C. It is level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

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 for this client? A. Limited pay whole life B. Interest-sensitive whole life C. Life annuity with period certain D. Increasing term

A. Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

Which of the following is NOT allowed in credit life insurance? A. Creditor becoming a policy beneficiary B. Creditor requiring that a debtor buys insurance from a certain insurer C. Creditor having a collateral assignment on the policy D. Creditor requiring that a debtor has a life insurance

B. Creditor requiring that a debtor buy insurance from a certain insurer In credit life insurance, creditor may require that the debtor has a life insurance, but they cannot tell you who to buy the insurance from.

Which of the following is generally NOT considered when underwriting group insurance? A. The group's past claim experience B. The size of the group C. The insureds medical history D. The nature of the group

C. THe insureds medical history Group life insurance is written on a group, not individual basis. Each individual completes an application that identifies the participant and beneficiary. Then, the group is judged based on its nature and past claim experience. Generally, medical questions are not necessary.

Which of the following best defines target premium in a universal life policy? A. The maximum amount the policyowner may pay on a policy B. The minimum amount to make sure the policy is annually renewable C. The corridor of insurance D. The recommended amount to keep the policy in force throughout its lifetime

D. The recommended amount to keep the policy in force throughout its lifetime The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which type of life insurance policy allows the policy owner to pay more or less than the planned premium?

Universal Life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

Which of the following Life insurance policies would be considered interest sensitive? A. Increasing term B. Universal life C. Adjustable life D. Whole life

B. Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.

Which of the following statements about group life is correct? A. The premiums are higher than in an individual policy because there is no medical exam B. The group sponsor receives a Certificate of Insurance C. The policy can be converted to an individual term insurance policy D. The cost of coverage is based on the ratio of men and women in the group

D. The cost of coverage is based on the ratio of men and women in the group Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.