Ch 4 - Life Types of ins policies TEST

Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be

$500K face amt

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider? 1. Can be converted to permanent coverage without evidence of insurability 2. Coverage can be different for each child 3. Premiums on this rider are not required until the limiting age is reached 4. Increases the policy's overall cash value

1. Can be converted to permanent coverage without evidence of insurability

Level premium permanent insurance accumulates a reserve that will eventually 1. equal the face amount of the policy 2. pay a dividend to the policyowner 3. require the policyowner to make periodic withdrawals 4. become larger than the face amount

1. equal the face amount of the policy

Index whole life insurance contains a securities component that acts as a(n) 1. hedge against inflation 2. premium stabilizer 3. means to lowering taxes on earnings 4. incentive to purchase more coverage

1. hedge against inflation

Which of these riders will pay a death benefit if the insured's spouse dies? 1. guaranteed insurability rider 2. family term insurance rider 3. family whole insurance rider 4. payor benefit rider

2. family term insurance rider

*** All of these are characteristics of an Adjustable Life policy EXCEPT 1. flexible death benefit 2. fixed surrender value 3. flexible premiums 4. builds cash value

2. fixed surrender value

*** all of these are characteristics of a universal life ins. policy EXCEPT 1. flexible death benefit 2. fixed surrender value 3. flexible premiums 4. builds cash value

2. fixed surrender value

When a decreasing term policy is purchased, it contains a decreasing death benefit and 1. increasing premiums 2. level premiums 3. decreasing premiums 4. variable premiums

2. level premiums

Which of these describes the result of a modified endowment contract that failed to meet the seven pay test? 1. policy loans are disallowed 2. the premium payments will be tax deductible 3. pre-death distributions are typically taxable 4. withdrawals will be prohibited

2. the premium payments will be tax deductible

All of these statements concerning whole life insurance are false EXCEPT 1. policyowner can take out a policy loan up to the face amount 2. when a whole life policy is surrendered, income taxes may be owed 3. coverage is normally temporary 4. the death benefit is not affected by outstanding loans

2. when a whole life policy is surrendered, income taxes may be owed

*** Which of these would be the best example of a limited pay life insurance policy ? 1. Whole life policy that pays out its cash value over a 20 year period 2. whole life policy with premiums paid up after 20 years 3. term life policy that returns cash value after 20 years 4. term life policy with premiums paid up after 20 year

2. whole life policy with premiums paid up after 20 years

*** All of these are valid options for an Adjustable Life Policy EXCEPT 1. The policy's premium can be increased or decreased 2. The policy's death benefit can be increased or decreased 3. A non-forfeiture option can be used to increase the death benefit 4. The policy's protection period can be modified

3. A non-forfeiture option can be used to increase the death benefit

All of these are valid options for an Adjustable Life Policy EXCEPT 1. The policy's premium can be increased or decreased 2. The policy's death benefit can be increased or decreased 3. A nonforfeiture option can be used to increase the death benefit 4. The policy's protection period can be modified

3. A nonforfeiture option can be used to increase the death benefit

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this? 1. Modified Endowment Contract 2. Current assumptive whole life 3. Credit life insurance 4. Equity index whole life

4. Equity index whole life

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true? 1. The policy automatically converts to whole life after the 10-year period 2. The face amount will remain constant and the premium will increase over the 10-year period 3. The premium will remain constant and the face amount will increase over the 10-year period 4. The face amount and premium will remain constant over the 10-year period

4. The face amount and premium will remain constant over the 10-year period

The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is 1. The shorter the payment period, the lower the premium 2. The longer the payment period, the higher the premium 3. The shorter the payment period, the higher the premium 4. The payment period has no affect on the premium payment

4. The shorter the payment period, the higher the premium

which of these is NOT subject to a income taxation under a MEC (Modified endowment contract?) 1. loan against the cash value 2. policy withdrawal 3. policy dividend 4. death benefit

4. death benefit

Variable Life insurance and Universal Life insurance are very similar. Which of these features are held exclusively by variable universal life insurance ? 1. Policy-owner may increase or decrease the premium payments 2. policy-owner may increase or decrease the face amount 3. policy owner can contribute large sums of money 4. policy owner has the right to select the investment which will provide the greatest return.

4. policy owner has the right to select the investment which will provide the greatest return.

Which of the following are the premium payments for Universal Life policy NOT used for? 1. death benefits 2. cash value 3. loading cost 4. separate account investments

4. separate account investments

A renewable term life insurance policy allows the policy-owner the right to renew the policy.... 1. at anytime the policyowner chooses 2. as many times as the policyowner chooses 3. paying the same premium as before the renewal 4. without producing proof of insurability

4. without producing proof of insurability

*** A Modified Endowment (contract) MEC is best described as

A life ins. contract which accumulates cash values higher than the IRS will allow

Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this?

Child term rider

Which type of insurance policy pays the face amt at the end of the specified period if the insured is still alive ?

Endowment

A business will typically use which type of life ins. to cover their employees ?

Group life

A life insurance policy written on one contract for two people in which it is payable up on the first death is called:

Joint

What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death.

Last survivor life ins

*** What does the word "level" in LEVEL TERM describe?

The face amt

What is a corridor in relation to a Universal Life insurance policy?

The gap between the total death benefit and the policy's cash value

*** A life insurance policy that is subject to a contract interest rate is referred to as

Universal Life

*** A partial surrender is allowed in which of the following life policies?

Universal Life

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

Universal Life

Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy's cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this?

Universal Life Policy

A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called.

Universal life

*** which type of life insurance offers flexible premiums, a flexible death benefit and the choice of how the cash value will be invested

Variable Universal Life

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable Universal Life policy

Which type of life insurance offers flexible premiums, a flexible death benefit and the choice of how the cash value will be invested ?

Variable Universal Policy

*** A life insurance policy which contains cash values that vary according to its investment performance of stocks is called

Variable Whole Life

A single premium cash value policy can be described as

a policy that is paid up after only one payment

A policyowner may change two policy features on what type of life insurance ?

adjustable life

A renewable term life ins policy can be renewed

at a predetermined date or age, regardless of the insured's health

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

coverage is eliminated

Which of these is NOT subject to taxation under a MEC? (modified endowment contract)

death benefits

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

decreasing term insurance

The least expensive option to pay off a 30-year mortgage balance would be

decreasing term life

which life insurance policy pays the face amount at the end of the specified period if they insured is still alive ?

endowment policy

A spouse and child can be added to the primary insured's coverage as what kind of rider?

family term

Which rider will pay a death benefit if the insured's spouse dies ?

family term insurance rider

Which policy feature makes a universal life policy different from a whole life policy? 1. A fixed cash value 2. A flexible premium schedule 3. A fixed death benefit 4. The ability to take out a policy loan

flexible premium schedule

*** Which type of insurance is normally associated with a Payor Benefit rider?

juvenile insurance

a LIMITED payment whole life policy provides

lifetime protection

a permanent life ins policy where the policy-owner pays premiums for a specified number of years is called

limited pay

*** A permanent life ins. policy where the policyowner pays premiums for a specified number of years is called an:

limited pay policy

*** A life ins. policy that has premiums fully paid up within a stated time period is called

limited payment insurance

The Premium for a modified whole life policy is

lower than the typical whole life policy during the first few years and then higher than typical for the remainder.

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?

nothing

An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called

partial surrender

Under a Modified Endowment Contract, what are the likely tax consequences?

pre-death distributions will become taxable

decreasing life term insurance is often used to

provide coverage for a home mortgage

How are survivorship life insurance policies helpful in estate planning?

provide funds to help pay taxes

What is the automatic continuance of ins coverage referred to as?

renewal

term insurance is appropriate for someone who

seeks temporary protection and lower premiums

Which type of multiple protection policy pays on the death of the last person?

survivorship life

the type of policy which pays on the death of the last person is called

survivorship life

The type of multiple protection coverage that pays on the death of the last person is called a(n)...

survivorship life policy

Which of the policy DOES NOT build cash value?

term

*** What types of life insurance are normally used for key employee indemnification?

term, whole and universal life insurance

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment than other life insurance policies because

the MEC is an investment vehicle

A partial surrender is allowed in which of the following life policies ? 1. adjustable whole life 2. universal life 3. decreasing term life 4. limited whole life

universal life

*** A securities license is required for a life insurance producer to sell

variable life ins.

Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds 1. will no longer provide insurance protection 2. will go to Mike's estate 3. will be divided by probate 4. will not be paid until the last brother dies

will no longer provide insurance protection