Life Insurance Basics

Generally, the insurer allows the policyowner to convert his or her Term Life insurance policy in using two methods. What are they?

(1) Attained Age Method (2) the Original Age Method.

What are the three main features of the ISWL?

(1) a guaranteed death benefit that does not decrease (2) a minimum guaranteed cash value (3) possible additional cash growth through the use of higher interest rates.

What are the four main advantages of a variable life policy?

1. The minimum death benefit is guaranteed. 2. It allows the policyowner to participate in various types of investment options while not being taxed on the earnings until the policy is surrendered. 3. The value of the contract increases in the cash accounts with the fortunes of the investments. 4. The policyowner has the ability to apply the interest earned on investments toward the premiums, potentially lowering the amount the policyowner pays

What are the two main types of limited-pay whole life policies?

10-Pay, 20-Pay, and 30-Pay, (etc). Life Paid-up at Age 55, 60, or 65, (etc).

When did the life insurance industry initially introduce Universal Life policies?

1970s

A 20-year Level Term policy is good for ______

20 years and then expires

What is another name for Juvenile Life policy?

Jumping Juvenile policy

Although ______________ policies are easier to budget, the policy can be disadvantageous because consumers pay more for their mortality risk in the early years to compensate for paying less for their mortality risk in later years

Level Term Life

what is a pure endowment?

This is an Endowment policy that will only pay the face amount if the insured lives to the maturity date of the policy. This contract does not contain a mortality based death benefit as the other Endowment contracts previously discussed.

What are the two types of Variable Life policies?

Variable Life and Variable Universal Life (VUL)

A Whole Life policy provides a death benefit for the insured's life typically up to age __________ .

one-hundred (100)

which conversion method allows the policyowner the right to have the new life insurance policy premiums be based on the age of the insured when the Term Life insurance policy was originally issued?

original age method

What is the most expensive type of insurance?

variable life this is because it allows the policyowner to allocate a portion of the premium dollars to a separate account comprised of various investment funds within the insurance company's portfolio such as stocks and bonds

In Universal Life Option A, the death benefit ________ throughout the contract

remains level

Variable Life is an investment oriented ___________ insurance policy that provides a return linked to an underlying portfolio of securities. This portfolio typically is a group of mutual funds established by the insurer in a separate account.

whole life

What policy is described below: A level death benefit guaranteed to a specified age, The policy premiums will not increase, Guaranteed cash value benefit. (The accumulated cash values are referred to as Non-forfeiture Values which will be discussed in detail later in the course.)

whole life

What types of policies are associated with level premium payment methods?

Level premiums are generally associated with some Term Life insurance contracts, some Whole Life insurance contracts and Endowment contracts.

The _________ allows the policy owner to renew the Term Life insurance contract for another stated period of time and does so without regard to any changes in the insured's health. This means that the insurance company cannot deny the renewal throughout the term based on the insured's change of health that may have occurred during the term of coverage.

Right to Renew provision

What is the difference between an insurer's General account and an insurer's Separate account when dealing with variable life policies?

Separate account is not guaranteed and is much riskier General account is fully guaranteed

What two license exams must someone wishing to sell variable life insurance pass in addition to NC requirements?

Series 6 and Series 63 Through FINRA?

What are the disadvantages of a multiple protection policy?

Since the doubling or tripling of the death benefit is tied to a time frame, there is no option to continue the Term insurance coverage for a longer period if needed.

A Term to Age 65 policy expires _____

after the insured reaches the age of sixty-five (65)

B purchased a $50,000 Endowment at Age 60 insurance policy in 1989 at his age of 40. He purchased the policy to help with his retirement at age 65. How long did he pay premiums before the policy endowed? a. 20 years b. 40 years c. 60 years d. To age 100

B was 40 when he purchased the policy that will mature at his age 60. He will pay premiums for a period of 20 years. After 20 years he will receive the proceeds of the policy which will be $50,000.

What are the advantages of a multiple protection policy?

Because Term Life insurance is part of the death benefit, the premium would be typically lower than if the policy had been all Whole Life insurance.

True or False: A Limited Death Benefit policy has a level death benefit for the life of the policy

False Some Limited Death benefit polices may gradually increase the death benefit over a stated period such as two (2) years. For example, at the end of the first six (6) months 25% of the death benefit is paid, at the end of twelve (12) months 50% is paid, at the end of eighteen (18) months 75% is paid and after twenty-four (24) months the full death benefit would be paid

What is an example of the Face Amount Plus Return of Premium policy?

For example, R has a policy that states that death must occur within twenty (20) years of the date of issue to receive the return of premium portion. His policy has a $25,000 Whole Life death benefit. He has had the policy for ten (10) years and he has paid premiums of $2,000. If R died, the death benefit would be $27,000. If he had the policy for one (1) day past the twenty (20) years, the policy would only pay $25,000.

What are the two types of insurer accounts associated with Variable Life policies?

General account Separate account

What is another name for a Limited Death Benefit?

Guaranteed Issue policy

What happens at age 100 (or the specified age) in a whole life policy?

If the insured does not die prematurely, the cash account matures (endows) at an age indicated in the policy (such as age 100). At maturity, the insurer pays the policyowner a cash amount equal to the death benefit listed on the Declarations Page

How does a level premium payment plan work?

Life insurance policies using level premiums require the same premium throughout the contract Under this arrangement, the insured is typically overpaying in the early years to compensate for the increasing mortality (death) risk in later years

How does a graded premium payment plan work?

Life insurance policies using this type of premium allow premiums to increase gradually over a stated period of time Similar to the Modified Premium policies, the initial premium rate is essentially the rate charged for Term Life insurance policies. Premiums gradually increase for the first 3 ─ 5 years and then are level for the remainder of the contract.

How is Universal Life policy Option A different than Option B?

Option A - the policy's death benefit is always a combination of a decreasing amount at risk for the insurer and an increasing cash account. Option B - features an increasing cash account and premium requirements. The policy's proceeds are equal to the death benefit plus the policy's cash value Option A contracts offer greater cash accumulation while Option B contracts offer a greater death benefit

The two Universal Life policy options are referred to as ____________

Option A and Option B

Which Universal Life policy Option requires greater premiums over time?

Option B

What is a term life insurance rider?

Term Life insurance riders may be added to permanent life insurance policies such as a Whole Life insurance policy. The intention of the rider is to increase the policy death benefits on the insured. The rider may also be used to add coverage to a person not insured as the primary insured. For example, a person gets married and wants to add his or her spouse onto the existing life insurance policy. This could be done through a Spouse rider.

What are the two interest rates associated with Universal Life policies?

The current interest rate which is a combination of: a guaranteed interest rate that will be paid by the insurer for the duration of the contract AND an excess interest rate that is determined by the insurance company periodically based on the insurance company's earnings

What is the Face Amount Plus Return of Premium policy?

The policy is issued as a Whole Life policy with an Increasing Term rider. It is very similar to the Face Amount Plus Cash Value policy with one big difference. The Increasing Term rider increases in value equal to the amount of the premiums that have been paid on the policy, not the amount in the cash value account. Also, death must occur during a specified period of time in order for the beneficiary to receive the return of premium portion.

How does an ISWL policy work?

The policy is purchased the same as any other Whole Life policy. The insurance company uses part of the premium to apply to investments that may create excess cash that was deposited into the cash value account. The death benefit is a combination of the face amount and the excess cash that exceeded the guaranteed cash value. If the policyowner pays additional premium, the insurance company can use the additional premium to earn more cash value. If the cash account increases are sufficient, the insurance company could eliminate (vanish) the premiums at a younger age.

What are the advantages of a Joint Life policy?

The policy premiums will be less than the premiums if separate individual policies had been purchased. To accomplish the lower premium, the insurance company averaged the ages of the insureds.

What is the family policy?

This life insurance policy is designed to provide economical (low cost) life insurance coverage for all immediate members of a family ─ mom, dad and the kids The Family Policy consists of Ordinary Whole Life insurance that is written on the person that is referred to as the primary insured spouse. The primary insured spouse can be either the male or the female parent. Added to the policy is a Level Term Life insurance rider that provides coverage on the non-primary insured spouse and on all the children of the family who are within specified age limits. This death benefit coverage on each person is generally less than the primary insured's death benefit

What are the advantages of the Face Amount Plus Cash Value policy?

This policy form provides increased death benefit over the policy period without an increase in premiums.

Ordinary Whole Life insurance, also known as ______________

Traditional, Straight or Continuous Premium Whole Life

What is a Separate account when dealing with variable life policies?

Variable product accounts generally consist of a portfolio of common stock and other securities based on investments in mutual funds. Deposits into separate accounts are not commingled with the insurer's general account. The nature of the separate account will not allow the insurance company to guarantee the investments.

How is the target premium in a Universal Life policy calculated?

When an individual purchases a Universal Life insurance policy, he or she may choose the amount of death benefit, the premium paying period, and the amount of cash value accumulation desired. The insurance company will compute this information and determine the amount of premium required to achieve the desired results

Why is a Juvenile Life policy also called Jumping Juvenile policy?

When issued, the face amount (death benefit) is level until a specified age such as age twenty-five (25). When the child reaches the specified age indicated in the contract, the face amount jumps to a multiple (usually five times) of the original face amount; however, the premium normally does not increase.

What is the death benefit of an Option B Universal Life (UL) written for $100,000 that has $25,000 in cash value build-up? a. $125,000 b. $100,000 c. $125,000 minus charged expenses d. $100,000 minus charged expenses

a. $125,000 The Option B Universal Life (UL) is a combination of the amount at risk ($100,000) and the current cash build-up of $25,000

All of the following statements regarding Universal Life (UL) insurance are correct EXCEPT: a. As his or her needs change, the policyowner has the right to increase or decrease the interest rate credited to his or her cash account. b. The cost of the insurance is deducted from the policy's cash value account each month. c. As long as the policy's cash values are sufficient to support the cost of the insurance and expenses, the policy remains in force whether or not premiums are paid. d. As his or her needs change, the policyowner has the right to increase or decrease the amount of the policy's death benefit.

a. As his or her needs change, the policyowner has the right to increase or decrease the interest rate credited to his or her cash account. The Universal Life (UL) does not allow the policyowner to determine the interest rate paid. The interest rate is determined by the insurance company

M has a mortgage that she would like to have paid off if she were to die before the end of the mortgage. As her life insurance producer (agent) which of the following life policies would be the least costly life insurance product to solve her concerns? a. Decreasing Term b. Increasing term c. Level Term d. Universal Life

a. Decreasing Term

Which of the following statements about life insurance policy riders is NOT correct? a. Life insurance policy riders do not require underwriting. b. Life insurance policy riders are typically less expensive than a stand-alone policy. c. Life insurance policy riders are typically for a specified amount of coverage. d. Life insurance policy riders are for a stated period of time.

a. Life insurance policy riders do not require underwriting. Underwriting, as required by the insurance company, is a feature of adding a rider to a life insurance policy.

A policy feature that is NOT included in a Universal Life (UL) policy is: a. Once the contract is written, it is typically not changeable. b. The amount of the death benefit within the contract is changeable. c. Premium deposits may be changed during the lifetime of the contract. d. There is a guaranteed interest rate applied to the cash account and an "excess" interest applied to the cash account.

a. Once the contract is written, it is typically not changeable. An important feature of the Universal Life (UL) is the flexibility of the contract. Premiums, cash growth and death benefits can be changed. This is not a feature of Whole Life

Whole Life insurance policies have all of the following characteristics EXCEPT: a. Premiums increase as the insured gets older. b. It is considered permanent insurance. c. It provides a "savings" element. d. It matures for an amount equal to the death benefit amount.

a. Premiums increase as the insured gets older. Level premiums are a fundamental part of Whole Life insurance policies

What is the death benefit of an Option A Universal Life (UL) written for $100,000 that has $25,000 in cash value build-up? a. $125,000 b. $100,000 c. $125,000 minus charged expenses d. $100,000 minus charged expenses

b. $100,000 The Option A Universal Life (UL) is a combination of the decreasing amount at risk ($75,000) and the cash build-up of $75,000

Which of the following will NOT have any potential income tax implications? a. Life Paid-Up at Age 65 b. 20-year Level Term c. Endowment at Age 65 d. Whole Life

b. 20-year Level Term Term insurance is pure death benefit. Death benefits are not income taxable. All of the other contracts listed have the potential for a taxable gain from interest paid.

The Family Policy generally defines an insurable child under the policy as all of the following EXCEPT: a. Step-children b. Foster Children c. Natural Born Children d. Adopted Children

b. Foster Children

What increases in a Whole Life policy each time a premium is paid? a. The death benefit b. The cash value c. The death benefit and the cash value d. Nothing increases

b. The cash value The cash value will increase when a premium is paid because part of the premium is dedicated the cash account.

If an insured wanted a Whole Life policy on the breadwinner and smaller Term insurance amounts on all the other members of the family, what type of life policy could the insured choose? a. Multiple Protection Policy b. Family Income Policy c. Family Policy d. Joint Life Policy

c. Family Policy The Family Policy is specifically designed to provide coverage on all members of the family. The term "breadwinner" could apply to either parent

The Joint Life policy is often referred to as a _________ policy. a. Last to Die b. Second to Die c. First to Die d. Survivorship

c. First to Die The Joint Life policy pays when the first person listed on the policy dies

The term used to indicate that the UL policy separates the mortality costs from the expense cost of the policy is referred to as __________. a. Unfettered b. Unlocked c. Unbundled d. Bundled

c. Unbundled The Universal Life (UL) policy provides an annual report to the policyowner about the state of the policy. The unbundled policy provides the actual mortality costs, interest earned and the expenses charged by the company.

Term Life insurance: a. Provides death protection indefinitely. b. Is referred to as "standard" insurance. c. Usually has the lowest premium cost for life insurance coverage at issue. d. Is not the best insurance for paying off a mortgage or other debt.

c. Usually has the lowest premium cost for life insurance coverage at issue. Term insurance is the most economical method of purchasing life insurance when it is issued. The policyowner must be aware that the premiums will increase if the contract is renewed.

Which of the following insurance policies provides death protection for a "specified" period of time while the policyowner is primarily accumulating cash for future use? a. 20 year Term Life b. 10 Pay Whole Life c. Joint Life policy d. 20-pay Endowment

d. 20-pay Endowment Endowment policies are purchased with the purpose of providing cash benefits to the insured after a period of time. The contracts were often sold to provide retirement funds

The cash value build-up in a Variable Universal Life (VUL) insurance policy: a. Is not available until age 59 b. Is taxable annually c. Is guaranteed d. Is determined by the results of investments

d. Is determined by the results of investments The cash value will be determined by the investments chosen by the policyowner from a portfolio of investment vehicles provided by the insurance company.

All of the following are purposes of juvenile life insurance policies EXCEPT: a. Provide funds for a child's final expenses. b. Help to fund a college education. c. Provide a life insurance program for a child at a low premium rate. d. Provide coverage for the medical expenses of a child under age 19

d. Provide coverage for the medical expenses of a child under age 19 The juvenile policy will provide life insurance, but it does not provide health insurance

Premiums paying for a Variable Universal Life (VUL) insurance policy are placed by the insurance company into a _________ that is subject to the fortunes of the investment portfolio. a. General Account b. Fixed Account c. Base Account d. Separate Account

d. Separate Account Premiums paid for variable products are placed in the insurer's separate account, not in the insurer's general account

Which type of life insurance product hedges against inflation?

increasing term life

What is a 10-pay or 20-pay endowment?

is a contract in which the premiums are payable for the stated number of years. At the end of that time, the contract matures and the benefit is paid.

What is a retirement endowment?

is a contract sold to provide a retirement income and typically matures at age sixty-five (65) or some planned date.

What is a juvenile endowment?

is a contract that matures at a specific age such as age eighteen (18).

which conversion method allows the Term Life insurance policy to be converted to a new life insurance policy (typically Whole Life) at the insured's current (attained) age?

the attained age method

All of the following are features of Term Life insurance EXCEPT: a. Term Life insurance may be renewable at the end of the term. b. Term Life insurance allows the conversion of the policy to another form of life insurance. c. The premiums in a Term Life insurance policy are level for the period of the term. d. The Term Life insurance policy develops steady cash growth throughout the term period.

d. The Term Life insurance policy develops steady cash growth throughout the term period. Because Term insurance is "pure" insurance charging the lowest possible premiums, there is no cash value associated with the contract.

Which of the following life insurance contracts is referred to as an unbundled policy? a. Interest Sensitive Whole Life b. Variable Life c. Modified Endowment Contract d. Universal Life

d. Universal Life

The Multiple Protection policy known as the Triple Multiple Protection Policy features what two (2) types of life insurance? a. Whole Life and Decreasing Term Life rider b. Whole Life and Increasing Term Life rider c. Increasing Term Life and Whole Life rider d. Whole Life and Level Term Life rider

d. Whole Life and Level Term Life rider Triple Multiple Protection polices use level term insurance to provide the higher death benefit with an economical premium. This policy is excellent for young families that need a significant amount of life insurance protection at an affordable cost

What is an 'endowment at age 65'?

is a contract that matures for full-face amount at age sixty-five (65). Premiums are due until age sixty-five (65).

what is a 20-pay endowment at age 65?

is a contract where the premium is paid for an initial twenty (20) year period and the policy will pay either a death benefit at any time during the policy or pay the face amount to the insured at age sixty-five (65).

What type of policy is the Interest Sensitive Whole Life Insurance (ISWL)?

is a version of the traditional Whole Life policy The basic features of Whole Life remain the same, but there is the potential to increase the cash value through this policy.

What does a 10-pay life insurance contract entail?

limited-pay whole life policy the insured only pays premiums for 10 years the policy matures either at death or 100 (typically)

What does a life paid-up at 65 policy entail?

limited-pay whole life policy the insured only pays premiums until they turn 65 years old the policy matures either at death or 100 (typically)

The Interest Sensitive Whole Life insurance (ISWL) is designed to _____________

provide for an increasing cash value and an increasing death benefit through the application of excess interest that is not present in the traditional Whole Life policy

What is the main disadvantage of a limited-pay whole life insurance policy?

the initial costs are extremely high in comparison to other options If a person wants a Limited-Pay policy but cannot afford the premium, the choice would be to take a smaller death benefit. However, this may not meet the needs of the proposed insured.

Term Life insurance only provides the death benefit amount shown on the Declarations Page if _______

the insured dies within the indicated term

Single Premium Whole Life has all the features of any other Whole Life policy. What sets the policy form apart from the other Whole Life policies is _____

the one (single) large premium that is paid when the policy is applied for

The Universal Life insurance policy is referred to as a ___________ policy because the UL separates the monthly mortality (cost of insurance), investment (interest) earnings, and expenses charged to the policy

unbundled

What is the typical maximum of a Limited Death Benefit (Guaranteed Issue) policy?

$10,000

What are the three main categories of whole life policies?

(a) Ordinary Whole Life (b) Limited-Pay Whole Life (c) Single Premium Whole Life

Two special and important features of Term Life insurance are:

(a) the right to renew the policy for another period of time or term (b) the right to convert to another form of life insurance

What are the three basic types of term life insurance?

(a.) Level Term Life (b.) Decreasing Term Life (c.) Increasing Term Life.

What are the four main disadvantages of a variable life policy?

1. Variable Life insurance is extremely expensive. 2. Market declines can cause a loss in cash value. 3. The policyowner, not the insurance company, assumes the investment risk. 4. If the investment does not perform as expected, the premium costs will have to be paid out-of-pocket to maintain the policy.

In regards to a Universal Life policy, the interest rate that is guaranteed for the policy duration may be 2.5%, but the insurer is paying a current rate of 4%. This is an excess interest rate of:

1.5%

What is the typical age range for a Limited Death Benefit (Guaranteed Issue) policy?

40-75

What is a Juvenile Life policy?

A Juvenile Life insurance policy is a specialized child's life insurance policy When issued, the face amount (death benefit) is level until a specified age such as age twenty-five (25). When the child reaches the specified age indicated in the contract, the face amount jumps to a multiple (usually five times) of the original face amount; however, the premium normally does not increase

What is an example of a plan with an adjustable premium payment method?

A type of life insurance called Universal Life features this premium arrangement.

How does an adjustable premium payment plan work?

Adjustable premium life insurance policies allow the insurance company or policyowner to adjust premiums to higher or lower than the initial scheduled premium amount Increases or decreases are caused by higher or lower mortality costs and expenses not initially anticipated by the insurance company

Who would be interested in a double/triple multiple protection policy?

An individual may be interested in this type of policy if he or she only needs an additional death benefit for a specific period of time. For example, the individual may want the additional life insurance coverage until his or her children are grown.

E decides that she would like to convert her 20-year Level Term Life insurance policy by exchanging the policy for a Whole Life contract. E asks her life insurance producer about the lowest premium without giving up any of the death benefit. What method of conversion would her producer suggest? a. Attained Age b. Specified Age c. Original Age d. Pro-rated Age

By converting at Original Age, the new policy will have a premium based on the younger age when E purchased the Term policy. This would make the premium less expensive since her mortality rate would be lower

What are the two main benefits of endowment policies?

Cash accumulation death benefit

What are the main disadvantages of the family policy?

Conversion must be made by a specified age or the coverage ceases on the Term insurance riders. The conversion must be made at attained age so the premiums will be higher than the premium for the Term rider while part of the policy. This could be significant for the spouse making conversion.

___________ is a policyowner's right to exchange his or her Term Life insurance policy for another type of life insurance policy from the same insurer

Convertibility Typically, the new policy is a form of permanent life insurance such as Whole Life or Universal Life

What is another name for Interest Sensitive Whole Life Insurance (ISWL)?

Current Assumption Whole Life insurance

What 5 things are included in the annual report in the Universal Life policy?

Current death benefit Current cash value Total premium paid since last report Total of expenses deducted since last report Outstanding loans

___________ insurance is designed to provide a death benefit that decreases in some manner such as monthly or annually. The individual that purchases this type of term policy likely has a financial obligation that is reducing over a time period such as a home mortgage.

Decreasing Term Life

What type of policy is described below: For example, if the policy is issued for a maturity date of twenty (20) years with a benefit of $25,000, then the policyowner will receive a check in the amount of $25,000 at the end of the twenty (20) year endowment period.

Endowment

True or False: Overtime, as the cash value of a the policy goes up in a whole life policy, the insurance company's risk goes up as well

False As the years go by, the amount at risk is being gradually offset by the increasing cash value in the policy. Eventually the cash value will equal the death benefit and the insurance company will not have any more risk

True or False: Both Universal Life policy Option A and Option B feature increasing death benefits

False Both feature level death benefits

True or False: Endowment premiums increase over time as the insurer's risk increases

False Endowment policies feature: level premiums, level insurance-based death benefit, tax-deferred interest on cash accumulation, no investment risk, and maturity at a specified age or date.

True or False: With proof of insurability, a child from a family policy can convert their policy to an individual life insurance policy with an increased death benefit

False Even without proof of insurability the death benefit can be increased

True or False: A life insurance licenses allows for the selling of whole life, variable life and term life policies

False Individuals who wish to sell variable insurance products must be securities licensed having passed at least the Series 6 and Series 63 license exams as well as hold a Life Insurance Producer's license and a Variable Life and Variable Annuity Products license from the NCDOI.

True or False: Conversion of the Term Life insurance is usually based on the age of the non-primary spouse at the time of conversion

False It is based on the attained age Conversion typically is allowed prior to the maximum allowable age to convert as well

True or False: In a Decreasing Term Life policy, as the death benefit decreases so does the premium

False It provides level premiums for the duration of the term. Only the death benefit decreases

True or False: In an increasing Term Life policy, as the death benefit increases so does the premium

False It provides level premiums for the duration of the term. Only the death benefit increases

True or False: A policy that becomes a Modified Endowment Contract due to interest gains can switch back once the interest rate returns to the previous rate

False Once a life insurance policy is classified as a Modified Endowment Contract (MEC), it is always a Modified Endowment Contract (MEC).

True or False: Due to the way the policy is constructed, ordinary whole life tends to be the most expensive type of whole life policy short-term

False Ordinary Whole Life generally has a lower premium than other Whole Life contracts such as Limited-Pay Whole Life The reason the premiums are lower is due to the premium period being longer than any other type of Whole Life policy. Generally an Ordinary Whole Life policy premium is paid up to age 100.

True or False: In ordinary whole life policies, the premiums increase at a scale equal to the death benefit

False Ordinary Whole Life insurance has level premiums as well as a level death benefit for the duration of the contract

True or False Premiums paid for Variable Life insurance policies are placed in the insurer's general account and the interest from the various policies are put in the insurer's separate account

False Premiums paid for Variable Life insurance policies are placed in the insurer's separate account; not in the insurer's general account.

True or False: Term Life insurance is often referred to as non-traditional insurance because it builds a Cash Value

False Term Life insurance is often referred to as PURE life insurance coverage because it does NOT build a Cash Value

True or False: Term life insurance builds a cash value

False Term Life insurance is often referred to as pure life insurance coverage because it does not build a Cash Value

True or False: In an endowment policy, the death benefit is a pro-rated percentage of the cash accumulation due at maturity

False The death benefit is the full amount due at maturity

True or False Once a variable life policy is applied for, the insurer is fully responsible for the investments without input from the insured

False The insurance company offering the Variable products presents a portfolio of securities products such as Mutual Funds and stocks to the applicant to pick and choose his or her preferred investments

True or False: If a married couple has a Joint Life policy and both die simultaneously in a car accident, the benefit is forfeited since a "first to die" could not be established

False The policy will pay death benefits for both insured persons in the case of simultaneous death. For example, S and J purchase a Joint Life Policy in the amount of $100,000. Unfortunately S and J die unexpectedly in a car crash. The Joint Life policy covers both persons and will pay a death benefit of $200,000 ─ $100,000 on each life.

True or False: Like life insurance policies, endowments are generally tax-free

False There is a capital gains tax on the difference between the premiums and the paid amount

True or False: Like Term life policies, Whole life policies do not develop a cash value

False This insurance can provide needed death benefit protection while developing a savings component. The policy is typically sold on the basis of a death benefit with a cash value accessible by the policyowner.

True or False: Whole Life policies are more flexible than Universal Life policies

False Universal Life (UL) offers a flexibility not seen in traditional life insurance contracts. When an individual purchases a Universal Life insurance policy, he or she may choose the amount of death benefit, the premium paying period, and the amount of cash value accumulation desired

True or False: If a withdrawal is made from a Modified Endowment Contract before age 64½, it is subject to an additional 10% penalty.

False the limit is 59½ not 64½

True or False: A 10-pay policy is a limited-pay whole life policy in which after 10 years of paying premiums, the policy reaches its full cash value

False the policy doesn't reach full cash value or maturity until the end of the policy, not when the premiums are done being paid

True or False: Whole Life policy premium increases marginally as the insured gets older to account for increased mortality

False the premium does not change

True or False: A paid-up at 65 policy is a limited-pay whole life policy in which the policy matures at 65

False the premiums are no longer paid after 65 but there is still 35 more years until the policy matures

True or False: Whole life insurance premiums may increase over the course of a lifetime

False this makes them attractive to switch during a term life renewal

True or False In a variable life policy, the premiums fluctuate based on investment success but the death benefit stays the same

False, the opposite of this Variable Life offers fixed premiums and a minimum death benefit. The better the total return is on the investment portfolio, the higher the death benefit or cash surrender value of the policy.

True or False: Riders can only be added to a policy at the time of application?

False: It should be noted that the Term insurance rider can be placed onto the existing contract at the policy issue date or after the policy is issued. No matter when the Term rider is added to the policy, normal medical underwriting is required

What is FINRA?

Financial Industry Regulatory Authority

What is another name for a Universal Life policy?

Flexible Premium Adjustable Life

How does an indeterminate (non-guaranteed) premium payment plan work?

In this life insurance policy, the premiums are guaranteed in the early years of the policy (typically for the first 2 ─ 3 years) and are generally less than what would be charged for a traditional life policy Future premiums may be increased but not beyond a guaranteed maximum amount. Premium adjustments are taken into consideration with the insurer's mortality, expense and investments projections

What does ISWL stand for?

Interest Sensitive Whole Life

What policy is known as the vanishing premium policy?

Interest Sensitive Whole Life

_____________ is used to provide significant sums of death benefit at very low premiums. This policy is very attractive to young individuals because of the cost.

Level Term Life insurance

________________ provides a level death benefit amount that will not increase or decrease over the policy term. It features level premiums by averaging the mortality costs over the duration of the policy term

Level Term Life insurance

The children on the Family Policy will be covered by a ______________ (may be referred to as a child's rider) until a specified age as shown on the policy Declarations page

Level Term life insurance rider

How does a modified premium payment plan work?

Life insurance policies using this type of premium allow the policyowner to pay a lower premium in the early years of the policy, typically the same as a Term Life insurance rate. This premium rate is in effect typically for the first 3 ─ 5 years of the policy. The premium then automatically increases at a specified date in the contract to a higher fixed premium comparable to Whole Life premiums for the duration of the contract.

What is a Survivorship policy?

Like a Joint Life Policy, it covers the lives of two (2) or more individuals (typically a married couple); however it pays only upon the death of the last living insured named in the policy. Generally, this policy is designed to be useful in estate planning because the death benefit is paid to the survivors of the last person to die.

If an Option A UL policy's cash value exceeds the required percentage of the risk due to higher interest earnings than set at policy issue, the UL could be considered an investment contract called a _______________

Modified Endowment Contract (MEC)

The Single Premium Whole Life policy could be reclassified as a ____________________ and lose significant tax-advantages granted to life insurance policies

Modified Endowment Contract (MEC)

________- is the frequency of death at any given age

Mortality

Which policy type is more beneficial to the Universal Life policyowner, front-end load or rear-end load?

Rear-end load A front-end load policy deducts policy expense charges as the premiums are paid. Front-end load policies are generally disadvantageous to the policyowner since less money is applied to the cash account earning less interest Rear-end load policies apply the expense charges upon surrender of the policy. This is referred to as surrender charges. Surrender charges will decrease over the life of the policy until the surrender charges disappear

What is a surrender charge as it pertains to Universal Life policies?

Rear-end load policies apply the expense charges upon surrender of the policy. This is referred to as surrender charges. Surrender charges will decrease over the life of the policy until the surrender charges disappear For example, the initial surrender charge may start at 10% and decrease each year to 0% by the end of the tenth year

What are the advantages of a Survivorship policy?

Survivorship life insurance is usually less expensive per thousand dollars of death benefits than traditional single-insured life insurance. In the case of survivorship policies, the premium is based upon the joint life expectancy of the insureds. Since the insurance company owes nothing until both insureds die, the premium will be significantly cheaper than buying separate policies for both people.

When can taxation occur on partial surrenders of Universal Life policies?

Taxation could occur if the amount received when making a partial surrender is greater than the amount paid into the policy in premiums.

____________ can leave the insured without life insurance coverage once the policy expires

Term Life insurance

____________ provides a death benefit for a specified period of time or until the insured reaches a certain age indicated in the policy

Term Life insurance

_____________ usually has the lowest premiums when issued (compared with other types of life insurance)

Term Life insurance

What is the Corridor of Insurance in regards to a Universal Life policy?

The Corridor of Insurance is the required difference between a Universal Life policy's risk component (death benefit) and the increasing cash value. The difference is always a specified decreasing percentage throughout the contract.

Variable insurance products are securities products and must be registered with _________________

The Financial Industry Regulatory Authority (FINRA)

What is a Joint Life (First to Die) policy?

The Joint Life Policy provides coverage on two or more persons and is generally written on the lives of spouses or business partners. The policy may be issued as a term or permanent life insurance policy. The policy is referred to as a First to Die contract. First to Die means the policy pays the death benefit upon the first death of those insured by the policy

What is a Limited Death Benefit?

The Limited Death Benefit policy is designed to provide life insurance coverage for persons who are normally uninsurable due to health concerns. This is a policy of life insurance that is sometimes advertised as a guarantee issue. The common statement about the policy is that you cannot be turned down.

Why is it best to avoid having a life insurance policy be deemed a Modified Endowment Contract (MEC)?

The Modified Endowment Contract (MEC) created tax penalties on withdrawals within specified IRS guidelines

When discussing Universal Life Option A, what is the insured's amount at risk?

The amount at risk to the insurance company is the difference between the death benefit on the policy and the amount the insurer has collected in premiums and earned in interest from its investments.

What is a General account when dealing with variable life policies?

The insurer's general account consists of primarily safe, conservative investments such as high-grade bonds, real estate and certificates of deposit (CDs). The premium from traditional life insurance contracts is placed in the company's general account and the entire contract is fully guaranteed by the insurer.

What is the major difference between a Universal Life policy and a Variable Universal Life policy?

The major difference is that interest credited to the cash value account depends on the investment in the separate accounts (the same as it does in Variable Life). The insurer does not guarantee the cash accounts in the VUL.

What two types of policies make up the Face Amount Plus Return of Premium policy?

The policy is issued as a Whole Life policy with an Increasing Term rider

What is the main advantage of the family policy?

The policy provides life insurance on all members of the immediate family for an economical premium. The premium will be less than buying individual life insurance policies on each person.

What are the disadvantages of the Face Amount Plus Cash Value policy?

The policyowner is paying for the additional death benefit through the Increasing Term insurance portion of the policy. Most likely the same amount of premium paying for the Increasing Term would have purchased much more immediate Level Term insurance.

What is the purpose of modified and graded premium payment methods?

The purpose is to make the Whole Life policy attractive and affordable by having a lower premium in the early years of the contract The Modified and Graded premiums are designed to be used as a variation of a Straight (Ordinary) Whole Life policy

What is the purpose of an endowment policy?

The purpose of the Endowment policy is to provide a living cash benefit to the owner of the policy who is typically the named insured. The Endowment policy combines the cash savings account with a mortality based death benefit

What is the purpose of a Survivorship/Last to Survive policy?

The reason to purchase this policy is to fund the needs of the survivors. Survivors, such as children, are the people most likely to pay the financial obligations of the deceased's estate in order to inherit the estate. For example, J and L purchase a Last Survivor Policy with a $250,000 death benefit. J dies on June 1st. No death benefit payment is made. When L dies several months later on September 12th, the death benefit payment is made to L's beneficiary or estate.

How does a single premium payment plan work?

The single premium life insurance method of payment requires only one payment. No further payments are required This type of payment arrangement could ultimately be the least expensive way to pay for the life insurance policy when viewed from the perspective of the policy remaining in benefit for a long period of years

What are the disadvantages of a Joint Life policy?

The survivor may need to purchase an individual life insurance policy when the Joint Life policy pays a death benefit on the first to die. This purchase, under the conversion right, is normally at attained age which will very likely be a higher premium for the person making the conversion. A second issue would be if there are age or health differences between the insured parties. The younger, healthier insured may end up paying more for coverage than he or she would under an individual policy.

What is a double or triple multiple protection policy?

This policy features a combination of Whole Life and a Level Term rider in one policy with one premium. At death, this policy pays the full death benefit amount of the Whole Life part of the policy plus another sum (provided by the Level Term) that is equal to one or two times the death benefit amount of the Whole Life policy This policy will feature an ending date for the Term rider coverage. The insured must die within a specified period of time such as age sixty-five (65). After the specified period, the policy provides only the Whole Life death benefit.

What is a face amount plus cash value policy?

This policy is a combination of Whole Life and Increasing Term insurance. The policy offers a death benefit equal to the Whole Life death benefit plus the accumulated cash value. This is accomplished by attaching an Increasing Term rider to the contract The Increasing Term insurance rider part of the policy increases in value at the same rate that cash values develop in the policy non-forfeitures. For example, if B has a policy with a $25,000 Whole Life death benefit for the past ten (10) years with a cash value accumulation of $5,000, the death benefit would be $30,000.

How does a Universal Life policy with Option A avoid becoming a Modified Endowment Contract in times of greater interest earned than expected?

To avoid the risk of the policy becoming a Modified Endowment Contract (MEC), the death benefit in the Option A Universal Life (UL) policy is increased automatically in the Corridor if the cash growth in the policy exceeds the policy guidelines set by IRS regulations. K has a $100,000 UL Option A that has accumulated $25,000 in cash. But what if the IRS guidelines indicate that the policy can only have $20,000? The death benefit will be automatically increased in the Corridor to an amount that will bring the policy in line with guidelines

True or False Variable Life insurance policies are considered securities contracts and are regulated under the Federal securities laws

True

True or False: Conversion of the Term Life insurance rider does not require evidence of insurability (good health) by the non-primary spouse

True

True or False: If the primary insured of a family policy dies, the spouse's coverage must be converted to a permanent life insurance policy

True

True or False: In regards to the family policy, once a child has reached a specified age, such as twenty-four (24), the now adult child may convert his or her coverage to an individual life insurance policy.

True

True or False: Ordinary Whole Life insurance has level premiums as well as a level death benefit for the duration of the contract

True

True or False: Term life insurance premiums may increase over the course of a lifetime

True

True or False: The non-primary spouse's death benefit coverage must be converted to a permanent life insurance policy at a specified age, such as sixty-five

True

True or False: The rapid cash growth in the Limited-Pay contract begins to slow down once the premiums are paid in full. Conversely, the Ordinary Whole Life insurance policy cash value is accelerating because premiums are still being paid.

True

True or False: Whole Life policy premium is the same from the first date the policy is purchased to age 100

True

True or False: Without exception, the only way that a Term Life policy will pay a death benefit is if the insured dies during the term

True

True or False: Single Premium Whole Life accumulates cash value at an accelerated rate in the early years of the policy; however, the death benefit remains level throughout the contract.

True

True or False: Both spouses are required to sign the application for the policy.

True Also, evidence of insurability (good health) is required for both spouses at policy issue. If one spouse is uninsurable, the family policy cannot be issued.

True or False: While there is a death benefit component, the main purpose of a endowment policy is the cash accumulation

True Endowment policies are designed principally for accumulating a sum of money including tax-deferred interest paid by the insurance company for future delivery to the living policyowner once the policy has matured (endowed) at some specified age or after a specified number of years

True or False: Whole Life typically has a higher premium than Term Life with an equal death benefit

True However, the premiums in a Term Life policy may eventually exceed the Whole Life premium as the insured ages

True or False: Endowment policies are typically considerably more expensive than Whole Life or Term Life insurance policies for the same death benefit because more of the premiums are allocated to the savings account part of the policy

True If a person is seeking a death benefit as opposed to a savings benefit, the Endowment policy would not be the policy to purchase.

True or False: Whole Life policies are described as "front-loaded" because the majority of the premiums early on go towards expenses as opposed to cash value

True In the early years of the Whole Life policy (typically the first 15 ─ 20 years), most of the premiums paid into the policy are allocated to paying the mortality and expenses associated with the policy. However, an ever increasing portion of the premium funds a cash account (known as the Cash Value) that grows over time. As the years go by, the amount of the premiums allocated to the cash account (Cash Value) increases

True or False: In a Joint Life policy, the surviving partner can convert the plan into a individual life insurance option

True It is done without the need to proof insurability again as well

True or False: Life insurance policies have tax advantages that include the ability to withdraw funds from the accumulated cash values. Life insurance policy withdrawals are referred to as first-in, first-out (FIFO) meaning that the withdrawals are considered to be the investments making the withdrawal tax free

True Life Insurance policies are considered FIFO and are not taxed

True or False: the main benefit of a limited-pay whole life policy is reducing the premium paying period

True Limited-Pay Whole Life (short for limited payment) contracts provide a death benefit with a reduced length of time that premiums need to be paid

True or False: Limited-Pay Whole Life insurance policies have a cash value that grows faster in the early years of the policy than the cash value found in the Ordinary Whole Life insurance policies.

True Limited-Pay Whole Life insurance policies compact the required premiums into fewer years than a traditional Whole Life insurance policy.

True or False: Cash withdrawals from a Modified Endowment Contract (MEC) are considered last-in, first-out (LIFO) meaning that the withdrawal is the interest earned amount making the withdrawal fully taxable as ordinary income.

True MECs are considered LIFO and are taxable

True or False: Due to the way the policy is constructed, ordinary whole life tends to be the most expensive type of whole life policy long-term

True Ordinary Whole Life requires premium payments for a longer period of time than other Whole Life contracts such as Limited-Pay Whole Life policies. For this reason Ordinary Whole Life could be the most expensive of the contracts over the length of the policy period.

True or False: The Universal Life (UL) policy will provide a guaranteed interest rate that will not decrease no matter what the economic situation may be

True Some insurers do offer a minimum guaranteed death benefit even if the cash account does not support the mortality and expense charges of the policy. Taxation could occur if the amount received when making a partial surrender is greater than the amount paid into the policy in premiums.

True or False a Universal Life policyowner can make a loan against the policy's cash value without repayment

True This loan will have an interest charge applied. Loans from a Universal Life policy are very similar to loans from a Whole Life insurance policy cash value account Policy loans do not have to be repaid, but any amount of a loan and any interest will be deducted from a policy surrender or death benefit if not repaid

True or False: A particular disadvantage of Term Life insurance is the plain and simple fact that the death benefit is only available if the insured dies during the term of the policy

True To solve this problem, many Term Life insurance policies contain a provision that allows the policyowner the right to renew the policy for another term.

True or False: The unbundled feature of the Universal Life policy and the annual report that goes with it are exclusive to this type of policy. They are not included in

True Traditional contracts, such as Term or Whole Life insurance, do NOT have this unbundled feature.

True or False: Universal Life (UL) has adjustable death benefits, flexible premiums and provides cash value growth at competitive interest rates

True Universal Life includes the ability of the policyowner to (1) change the death benefit amount within the contract and (2) change the premium deposits to meet current needs. These features are NOT available with Whole Life, Endowment or Term Life insurance policies

True or False: A Limited Death Benefit policy has more expensive premiums than a traditional whole life policy

True because it is guaranteed and does not require traditional medical underwriting

True or False: The Renewable Term policy will typically have a higher premium than a nonrenewable term policy of the same amount on the same risk

True because of the Right to Renew provision

True or False: Conversion does not require the insured to prove insurability (he or she is still in good health) again

True but only if the new policy contains an equal or lesser death benefit An increase in death benefit amount may require the insured to prove insurability for the additional death benefit.

True or False: Single Premium Whole Life can be considered the most economical method of purchasing Whole Life insurance coverage since only one large initial premium is required

True it is the cheapest in terms of actual cost but the initial, one-time cost is astronomical

What two types of policies does a VUL policy comvine?

Variable life and Universal Life

What does the Face Amount Plus Cash Value policy combine?

Whole Life and Increasing Term insurance The policy offers a death benefit equal to the Whole Life death benefit plus the accumulated cash value. This is accomplished by attaching an Increasing Term rider to the contract

What type of insurance is a Limited Death Benefit?

Whole life

What is another name for a Survivorship policy?

a Last Survivor policy

What is a Prospectus?

a document that details the investment nature of Variable products must be provided to prospective consumers and policyowners at the time of the application

What is a variable life insurance policy?

a form of permanent life insurance which provides a permanent death benefit for the beneficiary upon the death of the insured

At age 35 B purchased a $25,000 life insurance policy for which her beneficiary will be paid in full if B dies before age 60.. B will pay premiums until she reaches age 55, but the insurance protection continues until maturity and pay B the full benefit. Which of the following did B purchase? a. 20-pay endowment at age 60 b. 20-pay life c. 30-year endowment d. Life paid-up at age 65

a. 20-pay endowment at age 60 Endowments have a specific premium payment period and maturity date.

S and K purchased a $100,000 Joint Life Policy. S died and K received a check from the insurance company for $100,000. She also receives a letter 30 days later telling her what her options are regarding her coverage under the policy. Which of the following statements about her insurance would be correct? a. K will be allowed to convert her coverage to an individual plan without proving insurability. b. K will be able to convert her policy with evidence of insurability. c. K will be able to convert her policy with premiums calculated at her original age when the Joint Life policy was issued. d. K cannot convert her insurance.

a. K will be allowed to convert her coverage to an individual plan without proving insurability. One of the features of the Joint Life Policy is the ability to convert to an individual plan of life insurance without regards to current insurability

Which type of life insurance policy requires no underwriting and does NOT provide the full death benefit for a specified period of time? a. Limited Death Benefit b. Straight Whole Life c. 20-Pay Life d. Retirement Income

a. Limited Death Benefit This contract is designed for individuals who have health problems that would not allow them to purchase a life insurance policy. The premiums are paid and as specified periods of time go by the death benefit is increased until it reaches a specified amount

Which type of life insurance policy requires no underwriting and does NOT provide the full death benefit for a specified period of time? a. Limited Death Benefit b. Straight Whole Life c. 20-Pay Life d. Retirement Income

a. Limited Death Benefit This contract is designed for individuals who have health problems that would not allow them to purchase a life insurance policy. The premiums are paid and as specified periods of time go by the death benefit is increased until it reaches a specified amount

Which life insurance policy becomes payable upon the death of the last named insured? a. Survivorship Life b. Joint Life Policy c. Family Income Policy d. Simultaneous Death Policy

a. Survivorship Life A Survivorship Life policy is written to pay a benefit when the last person dies who is listed as an insured on the contract. Typically this is a tool used in estate planning

All of the following statements by an insurance producer are true about a Limited Death Benefit policy EXCEPT: a. The full death benefit is available to be paid after the first premium is paid b. The applicant cannot be refused a policy due to health conditions. c. There is generally a waiting period before the full death benefit will be paid. d. Policies are generally only available up to a specified age.

a. The full death benefit is available to be paid after the first premium is paid Limited Death Benefit policies do not make the full death benefit available until a specified period of time has expired such as two years.

All of the following statements by an insurance producer are true about a Limited Death Benefit policy EXCEPT: a. The full death benefit is available to be paid after the first premium is paid. b. The applicant cannot be refused a policy due to health conditions. c. There is generally a waiting period before the full death benefit will be paid. d. Policies are generally only available up to a specified age

a. The full death benefit is available to be paid after the first premium is paid. Limited Death Benefit policies do not make the full death benefit available until a specified period of time has expired such as two years.

Which of the following combination of life insurance policies would provide the greatest continuous death protection for the least premium? a. Whole Life plus Level Term b. Whole Life plus Decreasing Term c. Endowment Life plus Level Term d. Endowment Life plus Decreasing Term

a. Whole Life plus Level Term Whole Life plus Level Term is the best combination to give the greatest continuous death protection. If you answered Whole Life plus Decreasing Term you would be right about the lowest premium but not the greatest continuous death benefit.

J, age 30, purchases a $75,000 life insurance policy. The premium charged when the policy is issued is lower than normal whole life policy rates. With this policy the premium increases each year for the next five (5) years. After five (5) years the premium becomes level and will not have any further increases. What policy did J purchase? a. Modified Premium Whole Life b. Graded Premium Whole Life c. Multiple Premium Whole Life d. Limited pay to age 30 Whole Life

b. Graded Premium Whole Life The graded premium policy gradually increases the premium over specified period of time

When an insurance producer (agent) completes an application for a Family Policy, the producer (agent) must: a. Only have the proposed primary spouse insured sign the application. b. Have the application signed by both spouses. c. Have all proposed insured children age 15 or older sign the application. d. No signature is required on a family policy.

b. Have the application signed by both spouses. The Family Policy requires the signature of both spouses. Children are not required to sign.

C has a $100,000, 15-year level term policy. J has a $100,000, 15-year decreasing term contract. The policies were issued by the same company on June 1, 2004. Which of the following statements is CORRECT? a. C and J had the same amount of protection during the 15-year periods of their policies. b. If both insureds had died in 2008, C's beneficiary would have received more than J's beneficiary. c. C and J pay the same amount of premium. d. If both insureds had died in 2008, C's beneficiary would have received less than J's beneficiary.

b. If both insureds had died in 2008, C's beneficiary would have received more than J's beneficiary. Both policies have the same initial death benefit, however, the decreasing term policy will have a lower death benefit over the years

J purchased a 20-year Renewable Level Term policy with a death benefit of $250,000. Fifteen years after the policy was issued it is determined that J has a serious heart condition. Which of the following statements is CORRECT? a. Because of the medical condition, J will not be able to renew the policy at the end of the policy term. b. J will be able to renew the policy without regard to the medical condition. c. The policy is renewable, but only 50% of the current death benefit may be renewed. d. The policy is renewable, but J will have a higher premium at the end of the current policy year.

b. J will be able to renew the policy without regard to the medical condition. The right to renew a Term policy is not affected by the medical condition that reveals itself after the policy was issued as long as the condition was not diagnosed (known pre-existing condition) prior to the application date for the policy.

With this policy the initial premium is lower than a traditional whole life policy at the time of issue for a stated period but increases to a greater premium after the initial premium period. Which of the following policies does this describe? a. Modified Premium Term life b. Modified Premium Whole Life c. Graded Premium Whole Life d. Multiple Premium Whole Life

b. Modified Premium Whole Life Modified Premium polices provide an "introductory premium" much like term insurance rates, but "jumps" to a higher premium after a state period of time. The premiums become level after the premium increase.

The Universal Life (UL) policy is basically a form of _______________. a. Annual Renewable Term b. Monthly Renewable Term c. Variable Term Life d. Modified Endowment Contract

b. Monthly Renewable Term The Universal Life (UL) can be considered a form of monthly renewable term because the insurance company deducts the mortality charges on a monthly basis. As long as there is sufficient money in the cash account to pay the mortality charges, the policy will continue.

All of the following are characteristics found in straight whole life insurance EXCEPT: a. insurance protection up to a stated age b. Option to renew c. Cash value growth d. Level premiums during the contract

b. Option to renew The option to renew is associated with term life insurance

The payor benefit typically waves premiums on a juvenile life insurance policy if the: a. Policy is converted before the insured child reaches a certain age. b. Person that pays the premiums dies or becomes disabled before the insured child reaches a certain age. c. Insured child reaches a certain age. d. Insured child dies before reaching a specified age.

b. Person that pays the premiums dies or becomes disabled before the insured child reaches a certain age. The point of the payor benefit is to make sure that the premiums are paid in case the adult premium payor cannot due to death or disability

The payor benefit typically waves premiums on a juvenile life insurance policy if the: a. Policy is converted before the insured child reaches a certain age.You chose: b. Person that pays the premiums dies or becomes disabled before the insured child reaches a certain age. c. Insured child reaches a certain age. d. Insured child dies before reaching a specified age

b. Person that pays the premiums dies or becomes disabled before the insured child reaches a certain age. The point of the payor benefit is to make sure that the premiums are paid in case the adult premium payor cannot due to death or disability.

Which of the following life insurance types is referred to as "pure" insurance? a. Whole Life b. Term Life c. Multiple Protection Life d. Endowments

b. Term Life Term insurance has no additional features such as cash value added to the contract. The policy is strictly death benefit coverage for the period of the term

Which of the following statements about a Jumping Juvenile life insurance policy is NOT true? a. The Jumping Juvenile policy will increase in death benefit at a specified age. b. The Jumping Juvenile policy will require evidence of insurability when the policy death benefit increases at a specified age. c. The Jumping Juvenile policy will not increase in premium when the policy increases in its death benefit at a specified age. d. The Jumping Juvenile policy may be purchased and premiums paid by parents or grandparents of the proposed insured child.

b. The Jumping Juvenile policy will require evidence of insurability when the policy death benefit increases at a specified age. There is no evidence of insurability required when the policy increases at a specified age

Which of the following statements about an Option A Universal Life (UL) is correct? a. The Option A Universal Life (UL) is a combination of the death benefit plus the increasing cash account. b. The Option A Universal Life (UL) cash growth could decrease if the policy has entered into the corridor. c. The Option A Universal Life (UL) cash growth could increase if the policy has entered into the corridor. d. The Option A Universal Life (UL) is a combination of the death benefit plus the decreasing cash account.

b. The Option A Universal Life (UL) cash growth could decrease if the policy has entered into the corridor.

Which of the following statements about an Option A Universal Life (UL) is correct? a. The Option A Universal Life (UL) is a combination of the death benefit plus the increasing cash account. b. The Option A Universal Life (UL) cash growth could decrease if the policy has entered into the corridor. c. The Option A Universal Life (UL) cash growth could increase if the policy has entered into the corridor. d. The Option A Universal Life (UL) is a combination of the death benefit plus the decreasing cash account.

b. The Option A Universal Life (UL) cash growth could decrease if the policy has entered into the corridor. If an Option A Universal Life (UL) enters into the "corridor," the mortality costs will be increased due to the increase in the death benefit. Without an increase in premiums, the policy cash growth will be slower

. If the excess interest rate increases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following? a. Universal Life (UL) insurance policies are not affected by the increased interest earnings. b. The cash component could increase too much and the policy could become an investment contract. c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. d. The insurer will automatically make a partial surrender of the contract

b. The cash component could increase too much and the policy could become an investment contract. If the Universal Life (UL) cash growth is too great, the policy could be reclassified as a Modified Endowment Contract

If the excess interest rate increases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following? You chose: a. Universal Life (UL) insurance policies are not affected by the increased interest earnings. b. The cash component could increase too much and the policy could become an investment contract. c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. d. The insurer will automatically make a partial surrender of the contract.

b. The cash component could increase too much and the policy could become an investment contract. If the Universal Life (UL) cash growth is too great, the policy could be reclassified as a Modified Endowment Contract

If the excess interest rate increases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following? a. Universal Life (UL) insurance policies are not affected by the increased interest earnings. b. The cash component could increase too much and the policy could become an investment contract. c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. d. The insurer will automatically make a partial surrender of the contract

b. The cash component could increase too much and the policy could become an investment contract. If the Universal Life (UL) cash growth is too great, the policy could be reclassified as a Modified Endowment Contract

If an Option A Universal Life (UL) enters into the "corridor," the following will happen: a. The death benefit will be decreased. b. The death benefit will be increased. c. The cash value will be increased. d. The policy will be cancelled

b. The death benefit will be increased. The death benefit will be increased consequently slowing the cash growth because more of the premium is paying for the increased mortality costs

Which of the following statements about converting a Term Life insurance policy after five (5) years to a Whole Life policy is NOT true? a. The premiums for the Whole Life policy will be higher than the Term policy. b. The insured will have to prove that he or she is still in good health. c. The Whole Life policy will develop cash value. d. The death benefit in the Whole Life policy will be the same as the Term policy.

b. The insured will have to prove that he or she is still in good health. Conversion does not require proof of insurability

. If J and M have $100,000 Joint Life Policy and both are killed simultaneously in an auto accident, how much benefit would the policy pay? a. The policy would pay nothing since J and M were beneficiaries of each other and both are now dead.You chose: b. The policy would pay $200,000 to a named contingent beneficiary or the estate of the deceased. c. The policy would pay $100,000 to a named contingent beneficiary or the estate of the deceased. d. The policy would pay $150,000 which is the pro-rated death benefit for both individuals

b. The policy would pay $200,000 to a named contingent beneficiary or the estate of the deceased. The Joint Life policy upon the simultaneous death of both insureds will pay an amount equal to the listed death benefit for each of the deceased.

A major feature of Universal Life (UL) insurance is: a. The policyowner may make retroactive adjustments in the policy's provisions. b. The premiums may be increased or decreased periodically by the policyowner. c. The policyowner need not pay premiums after the policy has been in force for at least ten (10) years. d. The cash value is three (3) times greater than in traditional whole life insurance.

b. The premiums may be increased or decreased periodically by the policyowner. A unique feature of the UL is the ability to increase premiums to increase the death benefit or cash growth. The premiums can be decreased if there is enough in the cash account to pay the costs of the policy.

A major feature of Universal Life (UL) insurance is: a. The policyowner may make retroactive adjustments in the policy's provisions. b. The premiums may be increased or decreased periodically by the policyowner. c. The policyowner need not pay premiums after the policy has been in force for at least ten (10) years. d. The cash value is three (3) times greater than in traditional whole life insurance.

b. The premiums may be increased or decreased periodically by the policyowner. A unique feature of the UL is the ability to increase premiums to increase the death benefit or cash growth. The premiums can be decreased if there is enough in the cash account to pay the costs of the policy.

Which life insurance policy offers flexible premiums, flexible optional death benefits and two (2) insurer controlled interest accounts? a. Interest Sensitive Whole Life (ISWL) b. Universal Life (UL) c. Variable Universal Life (VUL) d. Variable Life (VL)

b. Universal Life (UL) ULs feature two (2) insurer controlled interest accounts: (1) Guaranteed and (2) Excess.

Which of the following types of life insurance requires that the producer be FINRA licensed before selling the policy? a. Universal Life b. Variable Universal Life c. Modified Endowments d. Interest Sensitive Whole Life

b. Variable Universal Life Variable products are securities based and require the producer selling a variable product to be securities licensed

Producer J is talking with a prospect for life insurance. The prospect indicates that she would like to have a life insurance policy that would provide a sum of money in 10 years for her grandchild's college education. Which of the following would you recommend as the best policy to meet the goal? a. 10 year Level Term b. 10 year Jumping Juvenile c. 10 year Endowment d. 10 year Whole Life

c. 10 year Endowment The Endowment policy will provide money at a specified date in the amount purchased as well as provide the money if the insured dies before the maturity date.

J has a $250,000 Option A Universal Life (UL) policy with $30,000 cash value in the cash account. If J were to die, how much would his beneficiary receive? a. $280,000 b. $220,000 c. 250,000 d. Nothing

c. 250,000

E has a $250,000 Option B Universal Life (UL) policy with $20,000 cash value in the cash account. If E were to die, how much would his beneficiary receive? a. $250,000 b. $220,000 c. $270,000 d. Nothing

c. 270,000

Which of the following statements about load charges in the Universal Life (UL) policy is correct? a. A rear load Universal Life (UL) decreases the amount charges monthly. b. A front load Universal Life (UL) increases the charges monthly over the life of the contract. c. A rear loaded Universal Life (UL) diminishes the load charges annually until there is no charge. d. A front loaded Universal Life (UL) is the best contract for the consumer.

c. A rear loaded Universal Life (UL) diminishes the load charges annually until there is no charge.

Which of the following statements is INCORRECT concerning the Universal Life (UL) policy and a Variable Universal Life (VUL)? a. Both policies are issued by insurance companies. b. Both policies provide a minimum death benefit. c. Both policies provide the policyowner with investment choices. d. Both policies' death benefits can be changed.

c. Both policies provide the policyowner with investment choices. The Variable Universal Life (VUL) allows the policyowner investment choices; the Universal Life (UL) does not.

Which of the following statements is INCORRECT concerning the Universal Life (UL) policy and a Variable Universal Life (VUL)? a. Both policies are issued by insurance companies. b. Both policies provide a minimum death benefit. c. Both policies provide the policyowner with investment choices. d. Both policies' death benefits can be changed

c. Both policies provide the policyowner with investment choices. The Variable Universal Life (VUL) allows the policyowner investment choices; the Universal Life (UL) does not.

The Universal Life (UL) policy allows the policyowner the right to all of the following EXCEPT: a. Policy Loans b. Right to change amount of premiums paid c. Decide the type of investments made in the policy d. Partial Surrenders

c. Decide the type of investments made in the policy All investments that determine the cash growth in a Universal Life (UL) policy is determined by the insurance company

Coverage under this policy has a lower initial premium is less than normal for the first few years, then premiums increase over several years until the premiums become level for the balance of the policy. What policy is descried? a. Modified Premium Term life b. Modified Premium Whole Life c. Graded Premium Whole Life d. Multiple Premium Whole Life

c. Graded Premium Whole Life

What type of insurance is added to the Whole Life portion of the Face Amount plus Cash Value Policy to provide the additional sum if the insured prematurely dies? a. Level Term b. Decreasing Term c. Increasing Term d. Endowment

c. Increasing Term The increasing term insurance will keep pace with the growing cash value in the policy and pay that additional sum if the insured dies

What type of life insurance is added to the Whole Life portion of the Face Amount plus Return of Premium Policy to provide the additional sum if the insured prematurely dies? a. Level Term b. Decreasing Term c. Increasing Term d. Endowment

c. Increasing Term The increasing term insurance will keep pace with the premiums paid into the policy and pay that additional sum if the insured dies

The Current Assumption Life policy is also known as: a. Dual Interest Assumption Life b. Current Investment Life c. Interest Sensitive Whole Life d. Excess Interest Life

c. Interest Sensitive Whole Life

The Current Assumption Life policy is also known as: a. Dual Interest Assumption Life b. Current Investment Life c. Interest Sensitive Whole Life d. Excess Interest Life

c. Interest Sensitive Whole Life

Which of the following would define a limited-pay life insurance policy? a. The cash value develops slowly in the cash account. b. It is a Whole Life policy in which premiums are paid for a limited period and then matures. c. It is a Whole Life policy that provides a death benefit until the maturity date with premiums ending prior to the maturity date. d. The maturity date and the premium paying period is the same.

c. It is a Whole Life policy that provides a death benefit until the maturity date with premiums ending prior to the maturity date. A limited-pay Whole Life policy is designed to pay the premiums is a shorter payment period than the payment period in a traditional whole life policy

A family in which both parents work and, therefore, are in need of the same amount of coverage, would be a candidate for which of the following life insurance plans? a. Dual Protection Policy b. Family plan c. Joint life d. Family Income

c. Joint life The Joint Life policy will provide the same benefit on all the lives covered by the policy. The other listed policies do not

All of the following statements regarding basic forms of whole life insurance are correct EXCEPT a. Generally, straight whole life premiums are payable for the duration of the insured's life up to a maximum age such as 100. b. The owner of a 20-pay life policy will owe no more premiums after the twentieth year the policy is in force. c. Limited payment life provides protection only for the years during which premiums are paid. d. A single-premium life policy is purchased with a large one-time only premium.

c. Limited payment life provides protection only for the years during which premiums are paid. Limited pay policies only require premiums for a stated period while providing coverage for the balance of the insured's life.

A major disadvantage of a multiple protection policy is which of the following: a. Discounted premium b. Doubled or tripled death benefit c. No ability to extend the increased death benefit d. Level premium

c. No ability to extend the increased death benefit

A major disadvantage of a multiple protection policy is which of the following: a. Discounted premium b. Doubled or tripled death benefit c. No ability to extend the increased death benefit d. Level premium

c. No ability to extend the increased death benefit

Which of the following statements is NOT CORRECT about the child's coverage on a Family Policy? a. The child is covered up to a specified limiting age. b. The child will have the right to convert his or her insurance coverage under the Family Policy at a specified age. c. Premiums for the converted coverage will be based on the age of the child when he or she was added to the Family Policy. d. The child may increase the insurance coverage at conversion without medical underwriting.

c. Premiums for the converted coverage will be based on the age of the child when he or she was added to the Family Policy. The child (now an adult) will be able to convert the coverage, but will pay premiums based on his or her current age

Which of the following statements is correct about Universal Life insurance? a. The policy involves a cash account and increasing term insurance coverage. b. The policyowner controls the amount of interest earned. c. Premiums generally may be increased or decreased at the policyowner's option. d. It is similar to endowment insurance.

c. Premiums generally may be increased or decreased at the policyowner's option. The Universal Life policy is referred to as "flexible." One area of flexibility is the ability to change premiums as needed

Term Life insurance is a good tool for providing for all of the following EXCEPT: a. Paying off a mortgage if the insured breadwinner dies prematurely b. Providing educational funds for children in case of the insured's premature death c. Providing retirement benefits for the insured d. Providing a final expense fund to pay for funeral and burial expense

c. Providing retirement benefits for the insured Term insurance is only a death benefit and cannot provide funds for the retirement living of the insured.

Which of the following life insurance policies will have the fastest cash accumulation? a. 20-year Level Term b. Life Paid-up at Age 65 c. Single Premium Whole Life d. Ordinary Whole Life

c. Single Premium Whole Life The Single Premiums policy will have the fastest cash growth because all of the required premiums are deposited immediately and the interest is being paid on the total

J and E have a life insurance policy that will pay a benefit only when the second insured dies. The policy was purchased with the express intent to pay estate taxes. Which of the following life insurance policies is designed to pay the benefit in this manner? a. Joint Life Policy b. Family Protection Policy c. Survivorship Life Policy d. Family Income Policy

c. Survivorship Life Policy The Survivorship Life policy is specifically designed to pay when the last person listed on the policy dies. The policy is a good financial tool to use when needing to leave funds to pay estate obligations.

J has a Whole Life policy with a death benefit of $100,000. J is in need of adding an additional $100,000 in life insurance coverage for at least twenty (20) years. With respect to the following policies, what would be the most economical way to add the additional death benefit? a. The addition of another $100,000 Whole Life policy. b. Add an additional $100,000 through the use of a Whole Life rider. c. The addition of a $100,000 20-year Level Term rider d. The addition of a $100,000 Decreasing Term rider

c. The addition of a $100,000 20-year Level Term rider Level Term insurance is an economical method of buying death benefit. The question indicates that the death benefit is needed for at least 20 years, so Decreasing Term would not provide the needed coverage.

Which of the following statements about a Limited-Pay Whole Life policy is NOT true? a. The Limited-Pay policy will require fewer premiums. b. The Limited-Pay policy will have greater cash value growth in the early years. c. The cash value growth accelerates in the Limited-Pay policy over the years. d. The cash value growth decreases in the Limited-Pay policy over the years.

c. The cash value growth accelerates in the Limited-Pay policy over the years. The cash growth in the early years is faster than in an Ordinary Whole Life policy but slows down over the policy period. In the end, an Ordinary Whole Life policy for $25,000 and a $25,000 Limited-Pay Whole life will have equal cash value at maturity.

J has purchased a traditional Whole Life policy. Which of the following is true EXCEPT? a. It has level premiums b. The policy matures and endows at a specified age c. The cash value is increased at a constant percentage d. The death benefit is level for the duration of the contract

c. The cash value is increased at a constant percentage The percentage of the premium going into the cash value increases over the course of the contract. This is due to the risk component of the policy decreasing.

If the excess interest rate decreases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following? a. Universal Life (UL) insurance policies are not affected by the decreased interest earnings. b. The cash component could increase too much and the policy could become an investment contract. c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. d. The insurer will automatically make a partial surrender of the contract

c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. The Universal Life (UL) must always be funded adequately. A drop in the interest rate paid on the excess interest could result in smaller earnings and put the contract in jeopardy

If the excess interest rate decreases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following? a. Universal Life (UL) insurance policies are not affected by the decreased interest earnings. b. The cash component could increase too much and the policy could become an investment contract. c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. d. The insurer will automatically make a partial surrender of the contract.

c. The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges. The Universal Life (UL) must always be funded adequately. A drop in the interest rate paid on the excess interest could result in smaller earnings and put the contract in jeopardy

Which of the following life insurance policies offers flexible premiums, flexible optional death benefits and policyowner controlled investments? a. Interest Sensitive Whole Life (ISWL) b. Universal Life (UL) c. Variable Universal Life (VUL) d. Variable Life (VL)

c. Variable Universal Life (VUL)

Which of the following life insurance policies offers flexible premiums, flexible optional death benefits and policyowner controlled investments? a. Interest Sensitive Whole Life (ISWL) b. Universal Life (UL) c. Variable Universal Life (VUL) d. Variable Life (VL)

c. Variable Universal Life (VUL) VULs feature investment accounts chosen by the policyowner from a portfolio provided by the insurance company

Current Assumption Life is most closely aligned with which of the following policies? a. Renewable Term b. Endowment c. Whole Life d. Annuity

c. Whole Life Current Assumption Whole Life insurance is a version of the traditional Whole Life policy. The basic features of Whole Life remain the same, but there is the potential to increase the cash value through this policy

The Multiple Protection policy known as the Double Multiple Protection Policy features what two (2) types of life insurance? a. Whole Life and Decreasing Term Life rider b. Whole Life and Increasing Term Life rider c. Whole Life and Level Term Life rider d. Increasing Term Life and Whole Life rider

c. Whole Life and Level Term Life rider Double Multiple Protection polices use level term insurance to provide the higher death benefit with an economical premium. This policy is excellent for young families that need a significant amount of life insurance protection at an affordable cost.

. All of the following are typical features of the life insurance policy known as the Family Policy EXCEPT: a. Death or disability of the primary insured will result in premiums being waived by the insurer to a limiting age for each child's death benefit. b. Stepchildren are covered at no additional premium charge. c. A Term Life insurance has a death benefit on the other spouse and all the children within specified age limits. d. Evidence of insurability is NOT required on both spouses at policy issue.

d. Evidence of insurability is NOT required on both spouses at policy issue. Insurability of both the parents is required at application. If one parent is not insurable, the Family policy cannot be written.

J is interested in buying life insurance, but he feels that if he dies and the policy pays a death benefit, his beneficiary should also receive an amount equal to his current investment in the policy. Which of the following life insurance policies would meet his desires? a. Face Amount plus Cash Value Policy b. Family Policy c. Family Protection Policy d. Face Amount plus Return of Premium

d. Face Amount plus Return of Premium The Face Amount plus Return of Premium Policy will pay the death benefit and an additional sum equal to J's investment (premiums) in the policy

You are interviewing a husband and wife who are interested in equal amounts of life insurance for each. A major concern is the amount of premium that they will have to pay. With premium cost in mind which of the following would best serve their needs? a. Two Whole Life policies b. One Whole Life and One Level Term c. Survivorship (Last to Die) policy d. Joint Life

d. Joint Life A Joint Life (First to Die) policy provides an equal level death benefit on both persons at a lower premium than purchasing two separate policies.

E is the insured in a $50,000, 10-year level term policy issued in 2001. She died in 2012. Her beneficiary received which of the following: a. Only the cash value of the policy b. $25,000 c. $50,000 d. Nothing

d. Nothing E dies after the end of the policy period. There is no indication in the question that the policy was renewed. Term insurance does not create a cash value

The Interest Sensitive Whole Life policy features all of the following EXCEPT: a. A guaranteed death benefit that does not decrease b. A minimum guaranteed cash value c. Some additional cash growth through the use of higher interest rates d. Partial Surrenders

d. Partial Surrenders Partial surrenders are a feature of Universal Life (UL) policies

The Interest Sensitive Whole Life (ISWL) policy features all of the following EXCEPT: a. A guaranteed death benefit that does not decrease b. A minimum guaranteed cash value. c. Possible additional cash growth through the use of higher interest rates. d. Periodic premium reductions

d. Periodic premium reductions Interest Sensitive Whole Life insurance (ISWL) premium is fixed at contract issue and is not subject to increases or decreases

The Interest Sensitive Whole Life (ISWL) policy features all of the following EXCEPT: a. A guaranteed death benefit that does not decrease. b. A minimum guaranteed cash value. c. Possible additional cash growth through the use of higher interest rates. d. Periodic premium reductions

d. Periodic premium reductions Interest Sensitive Whole Life insurance (ISWL) premium is fixed at contract issue and is not subject to increases or decreases

All of the following are purposes of juvenile life insurance policies EXCEPT: a. Provide funds for a child's final expenses. b. Help to fund a college education. c. Provide a life insurance program for a child at a low premium rate. d. Provide coverage for the medical expenses of a child under age 19.

d. Provide coverage for the medical expenses of a child under age 19. The juvenile policy will provide life insurance, but it does not provide health insurance