Types of Policies & Riders

A Viatical Settlement is an agreement between a policyowner and a third-party buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less than how many months remaining life expectancy? A. 48 B. 24 C. 60 D. 36

A Viatical Settlement is an agreement between a policyowner and a third-party buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less than 24 months remaining life expectancy.

A _________ policy is one that is written on the life of a minor. A. Juvenile B. Joint Life C. Equity-Indexed Whole Life D. Joint Survivorship Life

A. A juvenile policy is a policy written on the life of a minor to pay for any funeral costs, protect future insurability, and to build up cash value.

What happens to the overall annual premium cost once a term rider expires? A. It decreases B. It stays the same C. It increases D. It begins to vary

A. A term rider is added to another policy at an additional cost. Once the rider has expired, the premium for that rider ends. Therefore, the overall annual premium cost will decrease.

Annually renewable term life insurance's premiums increase every: A. Year B. 5 years C. 10 years D. 15 years

A. Annually renewable term life insurance premiums increase every year to reflect the increase in risk to the company.

The Double Indemnity Rider requires that the insured die within _____ days of the accident. A. 90 B. 120 C. 180 D. 365

A. Death must occur within 90 days of the accident for the Accidental Death (Double Indemnity) Rider benefit to be paid.

What type of term life insurance policy has a policy premium that can be increased to a new premium level for the remainder of the term? A. Non-guaranteed level B. Flexible C. Adjustable D. Indeterminate

A. Non-guaranteed level premium has premiums that can be increased to a new premium level for the remainder of the term.

Credit life insurance automatically names who as the beneficiary? A. The debtor B. The debtor's estate C. The creditor D. The debtor's spouse

C. Credit life insurance automatically names the creditor as the beneficiary.

While a Guaranteed No-lapse Rider relieves the policyowner of the responsibility of monitoring the policy's cash value what is required of him/her to make sure that the policy's no-lapse rider remains in effect? A. Remain in good health B. Keep his/her address up-to-date with the insurer C. Do not change to a more hazardous occupation D. Pay the premium in full and on time

D. A Guaranteed No-lapse Rider relieves the policy owner of the responsibility to monitor the policy's cash value and comes with a required payment schedule, as long as the policyholder adheres to the payment schedule, the policy will not lapse.

Which of the following Whole Life insurance policies has the lowest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal? A. Ordinary Straight Whole Life B. Limited Pay Ordinary Whole to age 85 C. 30-Pay Ordinary Life D. 20-Pay Ordinary Life

A. The longer the premium-paying period, the lower the annual premium. A $100,000 Ordinary Straight Whole Life Policy spreads the payments out over a longer period of time than a limited premium payment policy.

What is the name of a single policy covering two or more lives that pays benefits upon the death of the first insured? A. Joint Survivorship Life B. Joint Life C. Universal Life D. Accidental Death

B. A Joint Life Policy covers two or more lives under a single policy, resulting in a reduction in premium, with the death benefit payable upon the death of the first to die.

All of the following are life insurance disability riders, except: A. Waiver of Premium B. Jumping Juvenile C. Disability Income Benefit D. Payor Benefit

B. A payor benefit can be added to a jumping juvenile policy.

How is Variable Whole Life different from Variable Universal Life? A. Cash values can be invested in a separate account B. The policy has a guaranteed minimum face amount C. The policyowner takes on all of the investment risk D. It is designed to provide a hedge against inflation

B. Generally speaking, Variable Whole Life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a Variable Universal Life policy has no guaranteed death benefit.

C has a $250,000 30-year term life insurance policy with a waiver of premium rider at age 45. The base policy costs $500 and the rider $50. The rider expires at age 65. If C renews the policy beyond age 65, what is the total cost of the policy to C? A. $450 B. $500 C. $550 D. $600

B. The Waiver of Premium rider, along with its cost, drops at an age stipulated in the contract, such as age 65.

The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy. A. Increases B. Remains the same C. Decreases D. Varies

C. As the cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon the death of the insured. It is a way to keep the premiums affordable as the insured ages and the risk of death increases.

Which of the following policies requires a producer to have both a life and securities license to sell? A. Universal B. Equity-Indexed C. Variable Universal D. Indeterminate Premium

C. Both Variable Life and Variable Universal Life require a securities and life license to sell. A securities license is not required for Adjustable Life, Universal Life, or Equity-Indexed Life.

All of the following riders will waive the premiums in the event of a disability, except: A. Waiver of Premium B. Disability Income C. Guaranteed Insurability D. Payor Benefit

C. Guaranteed insurability provides the insured with the right to buy coverage at specified times in the future.

What is the name of the life insurance policy that is written on the life of a minor, is owned and paid for initially by a parent, and whose face amount increases to 5 times its original amount at age 21? A. Variable Universal Life with death benefit option B B. Universal Life with death benefit option B C. Jumping Juvenile D. Whole Life with an increasing term rider

C. Juvenile insurance is any policy written on the life of a minor. A popular type is commonly called 'Jumping Juvenile' because it automatically increases the face amount at a given age (usually age 21 to 25) without evidence of insurability.

Which of the following best describes the return of premium rider? A. A level term rider in the amount of 20 annual premiums B. An increasing term benefit that matches the cash value accumulation C. An increasing term benefit that matches the cumulative premiums paid D. A benefit similar to waiver of premium, but is free of charge

C. The return of premium rider is an increasing term policy which allows the insurer to pay out the policy's death benefit plus the cumulative premiums paid.

All of the following are considered fraudulent life settlements, except: A. Presenting or preparing false material information, or concealing material information, with respect to life settlement solicitations, applications, underwriting, premiums, claims, and change of ownership B. Entering into stranger-originated life insurance (STOLI) C. Employing any device to defraud in the business of life settlements D. Offering to negotiate a life settlement contract between an owner of a life insurance policy and life settlement providers

D. A Life Settlement Broker, for a fee or commission, offers to negotiate life settlement contracts between an owner of a life insurance policy and life settlement providers.

A life insurance premium is paid each month. The insurer then subtracts a mortality and expense charge from the policy's cash value. This best describes which of the following life insurance policies? A. Whole Life B. Adjustable Whole Life C. Variable Whole Life D. Universal Life

D. All premiums paid to a Universal Life Policy are placed in the policy's cash value account. The mortality charge (cost of protection) and expenses are then deducted from the cash value account.

What type of term life insurance policy has its policy premium guaranteed to remain level throughout the term of the policy? A. Adjustable B. Indeterminate C. Non-guaranteed level D. Guaranteed level

D. Guaranteed level premium term life insurance is a policy whose premium is guaranteed to remain level throughout the term of the policy.

All of the following are characteristics of Ordinary Whole Life Insurance, except: A. Premiums are designed to be paid throughout the life of the insured B. Premiums remain uniform C. The policy pays the face value if the insured dies before age 100 D. If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner

D. If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value.

If the cash value of a traditional whole life policy equals the face amount, what is that referred to? A. The cash payout feature B. The premium refund provision C. The policy's expiration date D. The policy's endowment

D. When the cash values equal the face amount, the policy endows.

When credit life insurance is used to protect against the unpaid balance of a mortgage, it is commonly referred to as: A. Creditor protection insurance B. Mortgage redemption insurance C. Decreasing term life insurance D. Debtor estate protection insurance

B. When credit life insurance is used to protect against the unpaid balance of a mortgage, it is commonly referred to as Mortgage Protection or Mortgage Redemption Insurance, as such, the amount of protection decreases along with the outstanding balance of the mortgage.

A Life Settlement Contract is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for how much? A. 80% of the face value of the policy if the insured is between the ages of 65 and 70 B. 3 times the cash value C. More than the cash surrender value and less than the face value D. 2 times the premium paid into the policy

C. A Life Settlement Contract is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for more than the cash surrender value and less than the face value.