Ch 4 Life Insurance Policies

How would you describe a "rider"? 1. It is an endorsement to a life contract providing supplemental benefits 2. It is designed for farm and ranch "key employees" 3. It can be a supplemental term policy added to a whole life policy a) 1 and 3 b) 2 and 3 c) 1 only d) All of the above

(A) Another word for endorsement is rider. Riders can provide additional benefits or limit an insurance company's liability

Adding an accidental death benefit to a cash value policy will increase the premium, and this premium does not add to the policy's cash value. a) True b) False

(A) Supplemental benefits add nothing to the cash value of a policy

If a term policy contains a "convertible" clause in it, it allows the policy holder to convert to permanent insurance from temporary insurance: a) Without evidence of insurability b) With evidence of insurability c) Never

(A) The purpose in purchasing a convertible policy is so that it can be converted without evidence of insurability at the same rate classification as the term policy

The premiums charged for whole life insurance do not increase over time. Thus, they are called "level" premiums. a) True b) False

(A) The reason whole life was invented was to allow the premiums to remain level over the life of the policy

How are limited payment whole life policies different from ordinary whole life policies? a) Limited payment policies will have a shortened premium payment period b) Limited payment policies contain a provision that allows them to be in force no more than 10 years c) Limited payment policies will endow and/or end coverage at a specific age, usually at or around 80

(A) This is one of the differences limited payment and whole life

Credit life can only be written as individual plans, not group plans. a) True b) False

(B) Credit life can be written as individual group plans

Which of the following is not correct about a "whole life" policy? a) Coverage lasts for the "whole life" of the insured b) Requires a single premium payment

(B) It is not practical because most of the premiums would be very large and very few people could afford to purchase insurance

All of the following statements are true about variable life insurance, except: a) It is subject to state insurance regulations and federal securities regulations b) The insurance company assumes the investment risk c) The policy holder can choose, based on company options, where the cash value is invested d) It can be structures as either a whole life or a universal policy

(B) The insurance company assumes none of the investment risk

Which of the items listed can be associated with adjustments made to universal life insurance cash values? 1. Interest is credited and termed "current" 2. Both guaranteed and current interest are credited 3. Excess interest is charged 4. Premium is charged a) 1, 3, and 4 b) 1 and 4 c) 1 and 3 d) 2, 3, and 4

(B) These are 2 of the characteristics of a Universal Life Policy

Which of the following choices relate to whole life insurance? a) Will pay the face amount when the insured reaches 65 and combines nonforfeiture values with protection b) Will pay the face amount when the insured reaches 100 and combines nonforfeiture values with protection c) Will pay the face amount when the insured reaches 100 and does not combine nonforfeiture values with protection

(B) These are characteristics of whole life

Which of the following best describes a term a term insurance policy? a) A death benefit is not payable, but cash value is generated b) A death benefit is payable, but there is no cash value c) Premiums, based on $1,000 of insurance, are higher overall than other types of policies d) A living insured receives the funds

(B) This is a description of term insurance

When using the guaranteed insurability rider on a contract an agent can state that the policy owner is allowed to purchase more insurance: 1. Only on dependents 2. On their own life 3. Anytime 4. On certain dates or ages 5. With insurability requirements 6. Without insurability requirements a) 1, 4, and 6 b) 2, 3, and 5 c) 2, 4, and 6 d) 2, 4, and 5

(C) An insured always has an insurable interest in their own life. This rider is insurance to guarantee that the insured can buy more insurance without evidence of insurability

Assuming all of the following would have an equivalent face amount, which would have the lowest premium in the first year if the insured were 22 years old? a) Whole life insurance b) An endowment policy c) Five-year term insurance d) Fifteen-year term insurance

(C) Of the term insurance offered, the one with the shortest premium paying period would be the lowest cost

Of the following, choose which is correct about a non-participating whole life policy. 1. Endows at age 65 2. Endows at age 100 3. Is paid up at a certain time 4. Will have lower premiums than term insurance 5. Will have higher premiums than term insurance a) 1, 3, 5 b) 2, 3, 4 c) 2, 3, 5 d) 1 and 5

(C) The answer contains the characteristics of whole life

Family income policies combine two types of insurance together to form a contract often used for all family members. What two types are used? a) Endowment, term b) Team, industrial c) Whole life, term

(C) The types of insurance that make up a Family Income policy must be memorized

Each of the following statements is correct about universal life insurance, except: a) It is transparent and unbundled, which means that the policy owner can identify how premium funs are allocated b) Neither the death benefit nor premium level is fixed c) There is a tremendous amount of flexibility available to the policy holder d) Just a small minimum premium payment is required each year

(D) A Premium payment may or may not be required each year depending on the performance of the policy

Which of these categories of insurance combine insurance protection together with cash accumulation? a) Convertible term insurance b) Mortgage protection insurance c) Buy-self insurance d) Permanent insurance contracts

(D) Permanent insurance builds cash value

From the selections below, choose what is true about term insurance: 1. It contains no cash value 2. It is helpful for temporary insurance needs 3. It pays the death benefit if the insured dies within the protection period a) 3 only b) 1 and 3 c) None of the above d) All of the above

(D) These are characteristics of term insurance

When children are covered under a family life insurance policy: a) Only those children that are not adopted are protected under the policy after policy issue b) Those children will increase the premium c) Whole lie will typically be applied for them d) Evidence of insurability is not required if conversion is made to permanent insurance for those children

(D) This is one of the characteristics of the child coverage under a Family Insurance Plan

The type of life insurance policy which will pay the face amount to a beneficiary if the insured dies during the policy's term, or will pay the face amount to the insured who is living at the end of this period of time is a/an: a) Mortgage redemption policy b) Term insurance policy c) Illegal contract d) Endowment policy

(D) This is the definition of an endowment policy