type of insurance policy review

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 -Term pay to 70 -Universal life -adjustable life

30 pay life (limited pay who life have leveled premiums that are limited to a certain period)

Which of the following combination plans is designed to protect and insured from an unpaid mortgage balance upon premature death? -survivorship life -family plan -joint life -whole life and level term rider

Joint life (a joint life policy covers two or more people. Using some type of permanent insurance (as opposed to term) it pays the death benefit at the first insured's death)

Which of the following statements are true regarding a variable whole life policy? -a minimum guaranteed death benefit is provided -It is a combination of endowment and increasing term policy -its premiums and benefits are variable -it has guaranteed dividends

a minimum guaranteed death benefit is provided

If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase -an estate builder policy -a whole life policy with extended term -a whole life policy with other insured rider -a whole life policy with a payor benefit

a whole life policy with other insured rider

How long does the coverage normally remain on a limited pay life policy? -age 65 -age 100 -when premium payments stop -at the discretion of the insurer

age 100 (even though the premium payments are limited to a certain period, the insurance protection extends until the insured's death or age 100)

A Whole Life insurance policy endows when the: -premium paid equals death benefit -death proceeds are paid -cash value equals death benefit -cash value plus dividends equals death benefit

cash values equals the death benefit (A whole life insurance policy endows when the cash value equals the death benefit)

K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies? -limited pay life -term to age 65 -whole life paid up at age 65 -endowment at age 65

endowment at age 65 (an endowment policy is characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date (before age 100)

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 -endowment -graded whole life policy -return of premium policy

equity index insurance

Which of the following describes a Modified Endowment contract? -falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract -exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract -the 7 pay test is used to determine the minimum death benefit of the policy -the 7 pay test is used to determine the maximum death benefit of the policy

exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract (policies that doe not meet the 7 pay test are considered MECs and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid up policy before the end of a seven year period)

What kind of special need would a policyowner require with an Adjustable Life insurance policy? -level premiums -flexible premiums -flexible nonforfeiture options -level death benefit

flexible premiums (as financial needs and adjustments change a policy owner can make adjustments to the premium and/or face amount)

What kind of premium does a Whole Life policy have? -decreasing -adjustable -level -deferred

level

Life insurance that covers an insured's whole life with level premiums paid over a limited time is called? -adjustable life -renewable term -limited pay life -joint life

limited pay life (life insurance that covers and insured's whole life with level premiums paid over a limited time is limited pay 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? -variable life -adjustable life -graded premium whole life -modified whole life

modified whole life

Which of the following is consistent with a straight life policy? -owner can adjust both premium and death benefit -premiums are lower for the first 5 years, and increase the 6th year then levels off for the remaining length of the contract -owner has the option of converting to term insurance -premiums are payable as long as there is insurance coverage in force

premiums are payable as long as there is insurance coverage in force (straight whole life provides permanent level protection with level premiums from the time the policy is issued until the insured's death (or age 100)

When applied to Whole Life insurance, the word "straight" denotes -the absence of dividends -option to reduce or withhold premium payments -the mode of premium payments -the duration of premium payments

the duration of premium payments (the word "straight" denotes the duration of premium payments, usually for the rest of the owner's life)

All of these statements about equity indexed life insurance is correct EXCEPT? -cash value has a minimum rate of accumulation -if the gains of the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index -the premiums can be lowered or raised, based on investment performance -tied to an equity index such as S&P 500

the premiums can be lowered or raised, based on investment performance (equity indexed life insurance is permanent life insurance that allows the policy holder to tie accumulation values to a stock market index)

A 42 year old executive wants to purchase life insurance that will allow for increases and decreases to coverage as his/her needs change. Which of the following policies will best meet this need? -endowment at age 75 -universal life -graded benefit whole life -modified whole life

universal life (universal life flexible premiums and adjustable death benefit)

A term life insurance policy matures: -upon endowment of the contract -upon death of the insured -when the cash value equals the death benefit -upon the insured's death during the term of the policy

upon the insured's death during the term of the policy (Term life can only mature (payout the face amount) if death occurs during the term of the policy)

Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase? -joint life -joint survivor policy -whole life policy with other insured rider -whole life policy with guaranteed insurability rider

whole life policy with other insured rider