215 exam

A $10,000 life insurance policy with a Triple Indemnity clause has been in force for 3 years. Black Cloud, the insured, is injured in a train wreck and dies in a hospital 5 months later. The death proceeds payable under the policy would be:

10,000 Explanation: Only the face amount of the policy would be payable. To receive the accidental death benefit, the insured must die as the result of an accident within 90 days of the accident.

Which of the following is not true concerning the waiver of premium rider?

The definition of disability may change from any occupation to own occupation after two years of the disability Explanation: The definition may change from own occupation to any occupation after two years.

delayed payment provision

The delayed payment provision permits an insurer to postpone payments of cash surrender values after policyowners request payment for a period of: 6 months

Mr. Ramon purchased a $10,000 10-year limited pay life insurance policy on his ten year old son Luis. A payor rider was added for an additional premium. Should Mr. Ramon die when Luis is 15 when would Luis begin making premium payments?

Never Explanation: A ten pay life insurance policy would be paid up in ten years. In this case when Luis was 20 years old. The payor rider will pay the premiums if the policy owner dies until the insured (child) reaches age 25 or until the policy is paid up, whichever occurs first. If the policy would have been a straight whole life policy, then Luis would have begin paying at age 25.

PARTICIPATING policy dividends :

PARTICIPATING policy dividends are not Taxable as current income like any other dividend

Which of the following policies would have a higher premium?

Participating Policies

Which is true concerning a VARIABLE LIFE insurance policy?

Premiums in a variable life policy are fixed. A variable universal life policy has flexible premiums.The cash values are NOT guaranteed, but it does have a guaranteed minimum death benefit.

Which is correct concerning a GRADED PREMIUM WHOLE LIFE policy?

Premiums start low, increasing each year during the early years of the contract and then remain constant for life.

An agent who holds a securities license is called

A Registered Representative Explanation: One who holds either the Series 6 or Series 7 license (FINRA)is called a Registered Representative.

Ordinary Life policies must include all of the following provisions EXCEPT

Accidental Death Rider Explanation: The Accidental Death Rider is an additional benefit that must be paid for, if chosen.

The NON-FORFEITURE OPTIONS include all of the following EXCEPT:

Purchasing one-year term equal to the cash value Explanation: Non-forfeiture options apply to cash values. The one-year term option is a dividend option.

Which Policy below, if issued at age 40, has premiums payable for 60 years, insurance protection for 60 years, and endows at age 100?

Straight whole life policy

What is the purpose of policy exclusions

To keep the premiums lower

The automatic premium loan rider

Which is the only type of rider added at no additional cost to the policyowner?

The entire contract provision contains all of the following except:

medical exam

Family plan

. A policy that is sold in proportioned units to cover the insured, spouse and children is called a:

Variable Life insurance is considered

An insurance and securities contract

The form of insurance designed to cover the liability of a borrower with an amortized loan is a/an

Decreasing Term

Which of the following is an example of a Limited-Pay Life policy?

Life Paid-Up at Age 65

The insuring clause is typically undersigned by:

The president and the secretary of the company

What is not on the face of the contract?

consideration clause Explanation: The consideration clause is usually listed on a separate page.

Which of the following would provide more death benefit for your premium dollar while still accumulating cash value, assuming issue age 25?

whole life

Which of the following dividend options would have a cash value?

paid-up addition

A policy that is sold in proportioned units to cover the insured, spouse and children is called a:

Family plan

The applicant chooses the length of the premium-paying period when selecting the type of policy that should best meet his/her objectives. Which type of policy has the highest initial premium and shortest pay period?

Single premium life policy

The incontestable clause permits insurers to contest a death claim

for material misrepresentations if under 2 years.

A Universal Life insurance policy "unbundles" several components of a typical life insurance policy. Which of the following is NOT one of these components?

The interest option

Where is the insuring clause of a life insurance policy found?

On the cover of the policy

Which of the following types of policies' cash may NOT be affected by stock market/mutual funds?

Modified Whole Life

Patches owns a 30-Pay Life policy that he purchased at the age of 30. The policy will endow at age:

100

All of the following are true about an ENDOWMENT policy EXCEPT:

It is a form of Whole Life insurance. Explanation: Whole life is designed to last until age 100. Endowment policies endow prior to that.

collateral assignment

Joe the Ragman buys a $100,000 policy. He has a $50,000 mortgage from the bank. He assigns his policy as collateral to the bank, with the remaining balance, if any, to be paid to his wife Josephine. Joe has set up a/an:

A person who desires protection permanently but does not want to pay premiums indefinitely would purchase which of the following?

Limited pay life

All the below are true about GUARANTEED RENEWABLE TERM insurance EXCEPT:

The premium cost cannot be increased at renewal.

Which of the following features applies to decreasing term insurance

The premiums do not decrease as the protection decreases

Maurice takes a $500 loan against a $10,000 whole life policy with a 5% interest rate. Maurice dies one year later and had not repaid the loan. How much will the benefit be?

9475 Explanation: The loan plus the interest (5%) must be subtracted from the death benefit. 5% of $500 is $25... $500 (loan) plus $25 (interest) is $525.... $10,000 minus $525 is $9475

Which of the following policies allow for withdrawals:

Universal Life and Variable Universal Life Explanation: Only Universal Life and Variable Universal Life allow for withdrawls. Other policies allow for loans but not withdrawals.

Ernest has a life insurance policy with a death benefit of $100,000, consisting of $50,000 whole life and a $50,000 level term rider. His agent has informed him that electing the extended term non-forfeiture option would provide him with a death benefit of how much?

Correct Answer: $50,000 Explanation: All supplementary benefits are dropped when a nonforfeiture benefit is elected,

All of the following are true about JUVENILE Policies EXCEPT:

Evidence of insurability is not required Explanation: The parents need to prove insurability on the children.

The incontestable clause applies to

Fraud

Universal Life, Option 1

If the growing cash value-to-total death benefit ratio exceeds a certain percentage fixed by federal law, an additional amount of pure insurance, called the "corridor", is added to maintain the minimum death benefit. This statement pertains to which of the following:

Universal life option one

If the growing cash value-to-total death benefit ratio exceeds a certain percentage fixed by federal law, an additional amount of pure insurance, called the "corridor", is added to maintain the minimum death benefit. This statement pertains to which of the following:

When someone other than the insured is the owner of a life insurance policy, the owner may do all of the following without the insured's consent EXCEPT:

Increase the amount of insurance

The Waiver of Premium

Is an option that may be

Which of the following is a non-forfeiture option that provides continuing cash value buildup

Reduced Paid-Up Explanation: Non-forfeiture options pertain to cash values. These options protect the insured's cash value in the event that he/she decides to stop paying premiums. The insured may use these options in one of three ways. He/she may "cash in" the policy and receive the full cash value. He/she may use the cash value and buy a reduced death benefit that will be completely paid up. ( The cash value in the reduced policy will continue to grow and aventually endow at age 100.) Or, he/she may turn the policy into a term policy , keeping the death benefit at the original amount but for a limited amount of time.

The increase in an increasing term policy is tied to which of the following?

Specific amounts or a percentage of the face value Explanation: The increase each year will be tied to either specific amounts or a percentage of the face value. Depends on the company. Protects against inflation.

Dividend projections may be included in a proposal for a life insurance policy when which of the following is true

There is a clear statement that payment of future dividends is not guaranteed. Explanation: Policy dividends are not guaranteed. There must be clear statements to this fact on the proposal for insurance. Policy dividends are defined by the I.R.S. as a return of premium and are not taxed. The distribution of dividends hinges on several factors, including positive operating expenses or fewer insureds having died than were expected, also known as a divisible surplus

Sue lost her job. Times were hard. She could not afford to pay the premiums on her life insurance policy. Which of the following non-forfeiture options should she elect to maximize her death benefits?

extended term Explanation: An extended term gives her the most insurance, but for a limited amount of time. A 1-year term is not a non-forfeiture option, but is a dividend option. Reduced paid-up gives her the longest amount of time, but the benefit is reduced. Sue desires maximization of her death benefit.

Increasing term insurance will automatically increases the death benefit based on all of the following except:

long-term care costs Explanation: Increasing term insurance will automatically increase the benefit to cover the loss off value of the benefit due to inflation, but has nothing to due with long-term care. The policyowner may choose to have the benefit increase based on CPI, a flat dollar amount each year, or a flat percentage amount each year.

All of the below are true features of VARIABLE LIFE Insurance EXCEPT:

Variable Life compensates for inflation by having the face value indexed to the CONSUMER PRICE INDEX Explanation: The face amount and the cash values are directed and invested by the policy owner into mutual funds. Click Here, online supplemental course

Features that may be included in most Term policies include which of the following?

1, 2, and 3 Explanation: The waiver of premium may be included in permanent or term policies.

Universal life has 2 optional death benefits. They are:

1. Death benefits include the cash value and the pure amount at risk (level death benefit). 2. Death benefits remain a constant amount at risk plus any cash value (increasing death benefit). Option 1 is a level death benefit, the cash value is part of the death benefit. Option 2 is an increasing death benefit, the cash is in addition to the death benefit.

JOINT LIFE insurance policies insure two lives for a single death benefit on one policy. They may be written in which of the following ways?

1. Joint Life pays the face at the first death 2. Joint Life pays the face at the SECOND death.

What is the maximum interest rate an insurance company can charge the policyowner for a fixed or adjustable rate

10% for a fixed rate, for an adjustable the rate will be tied to Moody's Bond Index

Forrest owns a 30-Pay Life policy that he purchased at the age of 30. The cash value will equal the face amount of the policy when he reaches the age of:

100

A life insurance policy provides a straight coverage of $100,000 for a period of five years. Which of the following terms correctly apply to this policy?

2 and 3 Explanation: Level term insurance provides a level amount of protection for a specified period, after which the policy expires. The premiums remain level during this period.

Gullible, age 27, is advised by his agent to purchase life insurance to cover a 20-year, $50,000 amortized business-improvement loan. Which of the following plans would adequately protect Gullible at the minimum premium outlay?

50,000 Decreasing Term policy for 20 years

A Waiver of Premium rider generally remains in effect until the insured reaches age:

60 or 65

Which of the following statements about the Reinstatement Provision is not true?

A new suicide period begins at reinstatement

If the insured understated his/her age and the error is discovered after the insured's death, the insurance company will:

pay an amount equal to that which the premium would have purchased at the correct age Explanation: If the error is discovered before death the insured would have the option of adjusting the premium.

Which of the following nonforfeiture options has a cash value?

reduced paid-up Explanation: Remember that the phrase "paid-up" should be associated with whole life insurance for the purposes of the exam. The cash surrender option means that there would be no more insurance, and therefore no cash value, and term insurance doesn't have a cash value at all.

The owner of a business is insured under a $100,000 Key Employee Life policy that contains a Double Indemnity clause and a Suicide clause. The business has paid the annual premium of $2,000. Six months after the inception date of the policy, the insured commits suicide. The insurance company's liability for payment is:

2,000 Explanation: The claim is denied and the insurance company will return the premium.

Cash values must be present in life policies:

3 ordinary 5 industrial

Ibey Broke, age 62, has been paying premiums for many years on his Whole Life policy, which now has a cash value of $9,850. If Ibey decided to drop the policy, which of the following would apply?

9850

. All of the following statements regarding Modified Endowment Contracts are true except?

: It is the responsibility of the insured to make sure the policy does not become a MEC. Explanation: A life policy must meet the 7-pay test. Simply put, take the total amount of premiums necessary to pay the policy in full during the first seven years. Let's say $21,000. Now, divide that by seven, ($3000). That is the most you could pay into the policy in any given year. For example, in year 1, the most you could pay in would be $3000. Year 2, because you have paid in the most ($3000) in the prior year you can only pay in another $3000. But let's say in year 3, you only pay in $2000, now the next year you can pay in $4000. In this example the $3000 is a guideline that you can not pay in any more than the cumulative totals. To continue, if at the end of year five you had paid a total of $14,000 (you could have paid a total of $15,000... $3000 x 5.... you could pay in no more than $4000. If you pay in any more than this, it will become a MEC and subject to taxation on any loans or withdrawals.

Double Indemnity applies to which of the following?

Accident Explanation: Only accidents and death must occur with-in 90 days of the accident.

20-Pay Life will accumulate cash value faster

At age 30, OohJay wishes to purchase a Whole Life policy. His agent explains that he can pay for the policy in several ways. One method is called 20-Pay Life, and another Straight Life. OohJay wishes to know which plan will accumulate cash value at a faster rate in the early years of the policy. Which of the following would be the agent's most appropriate response?

The provision in a life insurance policy that provides protection against unintentional policy lapse is known as the

Automatic Premium Loan provision

Replacement

Max has a $100,000 life insurance policy with cash value totaling $20,000. The loan rate is a fixed 8%. The agent suggests that Max strip his policy of the cash value and invest this money in a high yielding single premium annuity. This could be called:

All of the following are a parts of a life insurance policy EXCEPT:

Conditional receipt Explanation: Receipts are given when the application and premium is taken, so the policy hasn't even been issued yet

An applicant with heart problems denied this material fact and died within the 2-year incontestable period. However, the death was the result of a traffic accident. The insurance company will take which course of action?

Denied the death benefit and return premiums

An insured commits suicide within the first two years of the life insurance policy, which course of action will Ibey could elect to surrender his policy for a lump-sum cash payment of $9,850, less any policy indebtedness. insurance take?

Deny the claim and return the premium

Which of the following policies was used to accumulate funds for education?

Endowment

An insured misrepresented a material fact on his application. The policy was issued but the application was not attached to the policy. The insured died shortly after the policy was issued. The company must pay the claim because of which provision?

Entire Contract Provision

Which of the following statements is true about a policy assignment?

It transfers the owner's rights under the policy to the extent expressed in the assignment form.

In what respect do LIMITED PAY Life policies differ from STRAIGHT WHOLE Life policies?

Limited pay life policies have a shorter premium paying period.

Which of the following statements concerning an insurance company's separate account is not true?

Separate account funds are guaranteed

The fifth dividend option will purchase

Term insurance not to exceed the cash value Explanation: The fifth dividend option allows one to apply the dividend each year (if declared and paid) to be used to buy annual renewable term insurance not to exceed the cash value. If the cost to provide this benefit is less than the dividend paid, then other choices can be applied. For ex. receiving the balance of the dividend in cash. If the cost of providing this added benefit is more than the dividend paid, the dividend will buy as much A.R.T. as it can. This is always done at the insured's attained age.

A standard risk male is insured under a WHOLE LIFE Policy with an ACCIDENTAL DEATH RIDER. Which of the following is/are true?

The accidental death benefit is often equal to, or may be twice, the face value of the policy, depending on the contract.

The amount and frequency of premium payments are contained in which clause of a life insurance policy?

The consideration clause Explanation: The consideration clause specifies the amount and frequency of the premium payments.

How is a policy loan repaid if the policy pays a death claim?

The loan, plus any interest due, is deducted from the death benefit.

Which of the following statements is not true about exercising a Guaranteed Insurability option

The new insurance is available at the original issue age rate Explanation: The Guaranteed Insurability rider allows the insured to purchase additional insurance at standard rates, regardless of current health conditions. This protects the insured's insurability. These options will be exercised at attained age rates. The ages are stipulated in the contract. Every 3 years beginning at age 25 and ending at age 40. If you purchased the policy at age 36, there would be 2 options left. Age 37 and 40.

$2,000

The owner of a business is insured under a $100,000 Key Employee Life policy that contains a Double Indemnity clause and a Suicide clause. The business has paid the annual premium of $2,000. Six months after the inception date of the policy, the insured commits suicide. The insurance company's liability for payment is:

The following statements about UNIVERSAL LIFE are true, except:

The policy reserves may be invested in mutual funds

Step rate

When term insurance is renewed, the premium amount rises to reflect the increased mortality risk due to the insured's increased age. What phrase best describes this approach to increasing premiums?

A UNIVERSAL Life Insurance policy has all the following features EXCEPT:

Without its adjustable features it resembles an Endowment policy.

Which of the following must exist before a non-forfeiture option can be elected?

Cash Value Explanation: Non-forfeiture options apply to the policyowner's rights to the cash value. Term policies have no cash value, so there are no non-forfeiture options available. Click Here, online supplemental course

Rusty buys a 20-pay whole life policy on his ten year old daughter with a payor provision. Rusty dies in year 10. What happens to the policy?

Premiums paid until 25