Chapter 3
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay life
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-pay life accumulates cash value faster than straight life
Which statement is TRUE regarding a Variable Whole Life Policy?
A minimum guaranteed Death benefit is provided
Which statement is TRUE regarding a Variable Whole life policy?
A minimum guaranteed Death benefit is provided
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?
A whole life policy with other insured rider
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
Which of these statements describe a Modified Endowment Contract (MEC)?
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 don't meet 7-pay test are considered MECs
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy - pays monthly income from date of death of insured to the end of preselected period. payment of the face amount of policy payable at end of preselected period
Which of the following statements is CORRECT about the period in which a Term Policy can be converted?
It varies according to the contracts
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life - covers 2+ people and pays death benefit after first insured's death
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
L's spouse dies at age 66
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited Pay Life
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
Modified Premium Life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
Modified whole 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?
Modified whole life policy
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured
What type of life insurance are credit policies issued as?
Term
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
There is a flexible premium payment
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
Universal Life
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
Universal life - characterized by flexible premiums and an adjustable death benefit
A(n) ___ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities
Variable Life policy
Which of the following policies combines investment choices with a form of Term coverage?
Variable Universal Life
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole life
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole life
Which of these is an element of a Variable Life Policy?
a fixed, level premium
Variable Whole Life insurance can be described as:
both an insurance and securities product
A Whole Life insurance policy endows when the:
cash value equals the death benefit
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums
Variable Life products require a producer to:
hold a life insurance license and a securities license
What kind of premium does a Whole Life policy have?
level
A Limited-Pay Life policy has:
premium payments limited to a specified number of years
The investment gains from a Universal Life Policy usually go toward:
the cash value
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:
the cost
When applied to Whole Life insurance, the word "straight" denotes
the duration of premium payments
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
How does a typical Variable Life Policy investment account grow?
through mutual funds, stocks, bonds
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured