Chapter 3 MO Life insurance

Which of the following best describes an Annual Renewable Term Policy?

A policy with a level death benefit, but with increased premium at each renewal

An insured owns a $50,000 permanent life policy that she purchased 4 years ago that has a disability waiver of premium. The insured becomes disabled and pays premiums during the waiting period until the waiver begins. Once the waiver begins, what happens to the premiums she paid during the waiting period?

insurer refunds it

Variable Whole Life has all of the following features, except:

partial surrenders are not allowed

What type of policy has an endowment date, a face amount, and cash value?

permanent life insurance

Life insurance protection for a specified period of time is provided by what type of policy?

term

If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force.

waiver of premium

A permanent life policy issued 30 years ago would endow at what age?

100

What is a way to provide additional life insurance protection for a temporary period of time without having to acquire an additional life insurance policy?

Add a term rider to a new or existing policy

The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________.

Cash Value

As the cash value increases in a traditional whole life policy, the net amount at risk ____________, but the face amount of the policy would remain the same.

Decreases

Sean has a home with a mortgage. He needs life insurance to protect his family but also wants to leave them without a mortgage payment if he dies. Ideally which of the following riders should he acquire?

Decreasing term rider covers outstanding mortgages

C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. He applies for and receives a $10,000 policy loan from the insurer. All of the following about this transaction are true, except:

If C were disabled, his beneficiaries would receive $70,000, less any outstanding interest charges Policy loans carry a fixed or variable loan interest rate. If the policy is surrendered or a death claim is paid, the proceeds are reduced by the outstanding policy loan and policy loan interest.

All of the following are characteristics of Ordinary Whole Life Insurance, except:

If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner

All of the following are risks to the life settlement purchaser, except:

If the insured dies sooner than expected then the purchaser will achieve a greater return than they had planned on.

Which rider allows a disabled insured policyowner to forgo future premiums on his or her whole life insurance policy while continuing to enjoy full policy benefits?

If the insured policyowner were to become totally disabled, the Waiver of Premium Rider would waive future premiums for the duration of the disability and still allow the cash value and dividends to continue as though the premiums were being paid.

A STOLI/IOLI transaction is best defined as which of the following?

Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash

How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy?

The ability to invest the cash values in various separate accounts

What is the risk to the purchaser in a viatical settlement transaction?

The insured does not die within the time period anticipated

All of the following are characteristics of Universal Life Insurance, except:

The policyowner can choose which investment(s) to place the cash values into from those available

The purchase of a policy from a terminally ill insured by a third party who becomes the new owner is considered a ___________.

Viatical statement

Individual Term policies are generally stand-alone policies, but may be written with other types of policies as a(n):

rider

With a Current Assumption Whole life policy, what can happen if the cash values increase too quickly?

the policy could mature sooner than expected

If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, upon his death the amount of the benefit payable to the beneficiary would be _________ if the policy had $25,000 in cash values.

With an Option B death benefit, the beneficiary will receive the face amount plus the cash value as of the date of death. 275,000

Q has an ordinary straight whole life insurance policy for $100,000. Due to a change in circumstances, Q finds that there is now a need for more coverage, but the budget is not sufficient for another similar policy. What can Q do to satisfy the need for additional coverage at a low price?

add a term rider

The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy.

decreases-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.

A rider is usually requested at the time of ____________.

policy purchase

All of the following are correct regarding renewable term insurance, except:

Evidence of insurability is required to renew the policy

Increases in insurance protection to keep a Current Assumption policy from endowing is provided:

Without evidence of insurability

If the insured of a Whole Life policy is on claim with a Waiver of Premium rider, what happens to the cash values?

Under a Waiver of Premium rider, cash value and dividends continue as if normal premium payments have been made.

Agents must have a FINRA registration as well as an insurance license in order to sell

Variable policies allow policy owners to invest money in separate accounts, which fluctuate in value and may result in a loss of principal. The values of other policy types are held in the insurer's general account. Principal is protected from loss. Even indexed life (sometimes called equity-indexed life) is protected. Performance is tied to the market, but the principal is guaranteed

If Jon dies with an outstanding policy loan of $10,000 on his $100,000 interest-sensitive whole life policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim?

90,000

How is a life settlement transaction similar to a viatical settlement transaction?

A Life Settlement is similar to a viatical settlement in that it is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit.

A convertible term life insurance policy may be converted _____ time(s) for a permanent life policy based on the original or attained age.

A convertible term life insurance policy may be converted 1 time for a permanent policy that provides coverage for the life of the insured.

Which of the following statements about Annual Renewable Term premiums is TRUE?

The premium increases over time as the insured's age increases

All of the following regarding convertible term life insurance is true, except:

conversion can take place at any time