Life Mid Term Test Q&A
5. Which of the following disabling acts would NOT normally be excluded from the waiver of premium rider?
Injury sustained while a paying passenger on a scheduled airline flight *Waiver of premium coverage is generally not available for self-inflicted injuries or for injuries received while committing a crime or while in military service in time of war.
93. All of the following apply to a term policy, except:
It pays at the end... *the benefit is paid only if the insured person dies BEFORE the end of the specified term. A term policy does not build any cash, loan, or surrender values.
61. Which of the following is NOT a characteristic of life insurance as property?
> a. It requires reasonable managerial ability. b. It creates an immediate estate. c. It may be paid for in installments. d. It requires no physical maintenance. *Unlike real estate or stock, a life insurance policy does not require attention to taxation, market conditions or other property management concerns.
2. The typical waiting period for benefits under the disability income rider is:
Three to six months
78. If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax?
a. $3,000 *Any proceeds from a surrendered or mature life insurance policy that exceed policy costs are subject to federal income tax.
9. The cash value accumulation in a life insurance policy:
a. Can be accessed for policy loans or retirement income.
102. Social Security disability benefits become available to eligible workers after a waiting period of:
a. One month. b. two months. > c. Five months. d. six months. * After a disabled worker satisfies the two eligibility tests for Social Security disability, there is a five-month waiting period before the benefits can begin
66. The primary advantage of convertible term policies is that:
a. These policies do not require the insured to show proof of insurability to convert to a permanent policy. *Convertible term policies allow the insured to convert to a permanent insurance policy for up to the same face amount without proving insurability.
40. The main purpose of the spendthrift clause contained in a settlement option is to prevent the beneficiary from doing all of the following EXCEPT:
a. Transferring the proceeds of the policy. b. Commuting the proceeds of the policy. c. Encumbering the proceeds of the policy. > d. Spending any of the money for a designated period of time. *A spendthrift clause is designed to protect life policy proceeds from the beneficiary's creditors and spending habits as well as to prevent the beneficiary from transferring, commuting or encumbering the proceeds.
108. As you learned in your course lessons, there are various types of permanent life insurance. Which type of life policy would the policy owner bear all of the investment risk?
a. Universal Life b. Adjustable Life c. Interest Sensitive Whole Life -> d. Variable Universal Life * The policy owner bears all of the investment risk in a Variable Universal Life policy.
28. The head of the state department of insurance has been granted all of the following authority EXCEPT:
a. Writing and approving state insurance laws. *All state insurance laws are written and approved by the state legislature. The head of the state insurance department is charged with the duty to uphold and enforce these laws and regulations.
69. A Variable Whole Life policy offers:
a. a guaranteed minimum death benefit. *A Variable Whole Life policy offers a guaranteed minimum death benefit.
63. A beneficiary that can be changed is called:
a. a revocable beneficiary. *When a revocable beneficiary is named, the policy owner can change the beneficiary as often as desired.
82. In an outright gift of life insurance to a charity:
a. all the incidents of ownership in the policy belong to the donee. *When insurance is given to a charity, the charity must also hold all rights of ownership, because if the donor retains any control over the policy, tax advantages of the gift are lost.
70. Income payments from a non-qualified annuity are:
a. always fully taxed. *Federal law requires that a specified amount of each annuity income payment is considered a return of principal. This portion of the payment is not subject to taxation. This is referred to as the 'Exclusion Ratio'. Only the portion that represents gain in the contract is taxable.
74. Insurers may limit the period of time that an insured can exercise the conversion privilege on a convertible term policy. This conversion period:
a. varies among the different insurance companies. *Many insurers limit the amount of time in which the insured can convert to a permanent policy. This time period varies with each insurer. Some companies may express this time limit in terms of the insureds age, such as age 70 or age 75.
101. The extended term nonforfeiture option provides:
> a. Paid-up term coverage equal to that of the original policy. b. Reduced term coverage based on the accumulated cash value of the original policy. c. Term coverage based on the amount of premium the insured is able to pay. d. term coverage equal to that of the original policy with premiums based on the insured's attained age. * With the extended term nonforfeiture option the policy owner uses cash value accumulation to buy a single premium term policy with a face amount equal to that of the original policy.
94. Which of the following disabling acts would NOT normally be excluded from the waiver of premium rider?
Injury sustained while a paying passenger on a scheduled airline flight *Waiver of premium coverage is generally not available for self-inflicted injuries or for injuries received while committing a crime or while in military service in time of war.
4. All of the following apply to a term policy, except:
It pays at the end...*the benefit is paid only if the insured person dies BEFORE the end of the specified term. A term policy does not build any cash, loan, or surrender values.
1. Which of the following defines pure risk most accurately?
The chance of loss
103. All of the following offer tax-deferred growth on cash accumulations EXCEPT:
a. A single-premium deferred annuity. > b. a bank certificate of deposit. c. a 401-K plan. d. a variable universal life policy. *Bank CD's do not offer tax-deferment unless used to fund a tax-qualified retirement plan such as an IRA.
107. Which policy may usually be converted into a different type?
a. Endowment b. Whole life -> c. Term d. Industrial * Many term policies are also convertible, which means they may be exchanged for another type of policy such as whole life
105. If an insured commits suicide within the time specified by the suicide clause, the insurance company may do all of the following EXCEPT:
a. Refuse to pay any death benefit. b. Void the policy. c. Refund to the beneficiary only the amount of premium paid to date. -> d. Pay the beneficiary only the amount of interest earned by the premium paid to date. *If the insured commits suicide within the period specified in the policy, the insurer refunds the premiums paid, but does not refund the interest earned on the premiums.
104. The policy conditions represent the obligations of:
a. The insurance company only. b. The insured only. c. The beneficiary only. -> d. Both the insured and the insurer. *The policy conditions describe the rights and responsibilities of the insurer, the insured and the policyowner.
52. Under the Uniform Simultaneous Death Act, who is considered to have died first if the insured and the primary beneficiary die at the same time?
a. The primary beneficiary *Under the Uniform Simultaneous Death Act, if no evidence exists in when an insured and beneficiary die within a short time of each other in a common disaster, and it cannot be determined who died first, the presumption is that the insured survived the beneficiary and the life insurance proceeds will either be paid to a contingent beneficiary (if named in a policy) or, if not named, then to the insured's estate.
31. "Third-party ownership" refers to which of the following?
a. When the policy owner is different than the insured. *Third-party ownership means that the policy is owned by a different person or entity than the insured. As an example, a business may own insurance on the life of a key employee. In this situation, the corporation is the applicant and the policy owner, while the key employee is the insured.
81. A Keogh plan in which a specified amount is invested each year is known as:
a. a defined contribution plan. *In a Keogh plan that produces a defined benefit, contributions are calculated to produce the benefits specified in the plan document.
106. Premium payments made into a variable universal life policy:
are invested according to company policy. are invested in a conservative account of long-term bonds and mortgages. Your Choice -> must be divided equally into separate investment accounts. Correct -> are invested in one or more investment portfolios at the policy owner's option. Explanation Premiums for a variable universal life policy can be placed in a number of separate account portfolios that will change in value in response to investment experience.
73. An expense loading is added to the net premium in order to do all of the following EXCEPT:
> a. Cover all expenses and contingencies. b. Have funds for expenses when needed. c. Concentrate costs among certain small groups of insured. d. Spread cost equitably among insureds. *An expense loading is added to the net premium in order to cover all expenses and contingencies, have funds for expenses when needed, and spread cost equitably among insureds.
95. Premiums for a variable universal life policy:
Can vary in amount as well as payment schedule. *Variable universal life premiums can be paid in any amount and at any frequency within certain limitations.
6. Premiums for a variable universal life policy:
Can vary in amount as well as payment schedule. *Variable universal life premiums can be paid in any amount and at any frequency within certain limitations.
92. The party who makes the contract with the insurance company is the:
Owner
85. Which of the following elements of a valid contract consists of the "offer" and "acceptance"?
a. Agreement *An agreement is effected when an offer made by one party has been accepted by the other, with mutual understanding by both, an agreement exists.
50. R dies without having paid the $500 premium on his $50,000 policy that was due a week before her death. With no outstanding policy loans, R's beneficiary can expect to receive:
a. All $50,000 of the policy proceeds since R died during the grace period and the last premium is therefore waived. b. None of the policy proceeds since R died without having paid her last premium. > c. $49,500 which is the face amount minus the premium owed. d. All $50,000 of the policy proceeds, but only if the $500 premium is paid by the beneficiary. *The policy is still in force due to the grace period; therefore, the beneficiary will receive the face value minus the amount of the outstanding premium.
15. Times are tough and Joe has decided to cash in his 20 year old whole life policy. His cash surrender value is $14,354 and he has paid $19,876 in premiums since he started the policy. How much of the cash surrender value would be subjected to tax?
a. $0 *If a policy owner decides to cash-in (surrender or cancel) a permanent policy, the cash value is not forfeited. The policy owner owns the cash value and can receive it as cash surrender value. If the cash surrender value exceeds the premiums paid, the excess is considered to be taxable income. If the cash surrender value is less than the total premiums paid, there is no taxable event.
53. Jack has a variable annuity in a separate account that has a portfolio valued at $5 million. There are 500,000 outstanding accumulation units for the account. What's the value of one unit?
a. 5 > b. 10 c. 20 d. 50 *The number of accumulation units can be found by dividing the value of the separate account by the number of accumulation units that are outstanding.
57. The waiver of premium rider normally expires at age:
a. 60 *The waiver of premium rider generally expires when the insured reaches age 60.
79. Which policy can be changed from a non-accumulating cash value policy to a policy that does accumulate cash value?
a. A convertible term policy *Policies that have the conversion feature allow the policyowner to convert from a term policy to a permanent cash value policy without proof of insurability
16. A participating policy is likely to have which of the following?
a. A higher premium than a nonparticipating policy. *The premium calculations for participating policies are very conservative and include an allowance for future dividends. Premiums for these policies are slightly higher than they would be otherwise.
65. Which of the following would NOT be permitted as a Section 1035 policy exchange?
a. A life contract exchanged for another life contract. > b. An annuity contract exchanged for a life contract. c. An annuity contract exchanged for another annuity contract. d. An endowment contract exchanged for an annuity contract. *An annuity contract can be exchanged only for another annuity contract under a Section 1035 exchange.
22. Select the correct statement.
a. A producer is never permitted to make a change in policy wording.
55. The Social Security program is funded by:
a. A special payroll tax on employers, employees and the self-employed. *Social Security benefits are funded by a payroll tax on employers, employees and the self-employed.
7. Premium payments made into a variable universal life policy:
a. Are invested in one or more investment portfolios at the policy owner's option.
96. As a general rule, most insurance companies will allow the insured to change to another type of insurance policy without a medical examination if the:
a. new premium is lower than the original. > b. new premium is higher than the original. c. original policy has been in effect less than two years. d. original policy required an examination. *The privilege of change clause will generally allow the insured to change to a policy with a higher premium without proof of insurability.
87. Under the provisions of the fixed period settlement option, the:
a. principal amount gradually decreases to zero. *Under the fixed period option, the beneficiary gets a regular income from both interest and principal for a period of time, so the principal eventually is reduced to zero.
54. If an insured's policy includes the waiver of premium rider, what happens when the age is reached where the rider no longer applies?
a. The premium for the policy is reduced. *When the insured's age causes a waiver of premium rider to expire, the insurer lowers the premium charged to reflect the loss of the rider's protection.
27. Voluntary assignment of a life policy is often used for which of the following purposes?
a. To make a gift of the policy *Voluntary assignment of a life policy occurs when a policy owner sells or makes a gift of a policy by turning all rights, including the right to the cash value, over to an assignee.
36. What is the purpose of the variable annuity?
a. To provide a hedge against inflation. *A variable annuity, like variable life insurance, is designed to provide a hedge against inflation through investments in a separate account of the insurer consisting primarily of common stock.
23. An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company:
a. Will automatically institute the extended term option. *Generally the extended term option is used automatically when a cash value policy is lapsed and the policy owner makes no choice of non-forfeiture option and no effort to reinstate the policy.
3. The party who makes the contract with the insurance company is the:
Owner
35. Life insurance buy-sell agreements can be structured in all of the following ways, excep
a. A stock redemption. b. A cross-purchase. c. A split dollar. d. A repurchase plan. *Split dollar is a method to fund a life insurance policy rather than a type of buy-sell agreement.
60. When a group insurance plan is noncontributory:
a. All members become covered immediately after completing the probationary period. *With a noncontributory plan, all members of the group become immediately covered after the probationary period. With a contributory plan, the employees must first complete the probationary period, and then enroll during the eligibility period to avoid medical underwriting.
20. Amanda's life insurance policy names her sister Joyce as irrevocable beneficiary of the policy proceeds. This means:
a. Amanda can borrow against the policy's cash value but only with Joyce's permission. *An irrevocable beneficiary must agree to a loan of the policy's cash value to the policy owner.
34. Turning over all rights in a life policy to an assignee is referred to as:
a. An absolute assignment. *When all rights in a life policy are given to an assignee in an absolute assignment, the original policy owner usually has no way to recover the surrendered rights.
45. The applicant, if other than the proposed insured, must have:
a. An insurable interest in the insured. *To establish insurable interest, the applicant must have an interest in the insured remaining alive.
62. Clete names his wife, Anna, as the primary beneficiary of a $100,000 whole life policy with a common disaster provision. Their son, Jimmy, is the contingent beneficiary. Clete and Anna are involved in a serious private airplane accident. Clete is killed immediately but Anna lives for another two months before she, too, dies. Which of the following is likely to occur?
a. Anna receives the proceeds of the policy, which in turn are paid to her estate upon her death. *Under a common disaster provision, the primary beneficiary must outlive the insured by a stated period of usually 10, 15 or 30 days, then the proceeds are paid to the primary beneficiary.
18. Which of the following life insurance provisions allows for a transfer of all or a portion of the policy owner's rights under an insurance contract?
a. Assignment *The policy owner may assign some or all of the rights under the policy to another person. These include the right to choose or change the beneficiary, to change the method of premium payments, and to select settlement options for the payment of proceeds.
75. Which of the following life insurance provisions allows for a transfer of all or a portion of the policyowner's rights under an insurance contract?
a. Assignment *The policy owner may assign some or all of the rights under the policy to another person. These include the right to choose or change the beneficiary, to change the method of premium payments, and to select settlement options for the payment of proceeds.
56. In many states it is necessary for permanent policies to have some cash value:
a. By the end of the policy's third year. *Many states require that permanent policies have some amount of cash value by the end of the third policy year.
88. An Adjustable Life policy allows all of the following changes except:
a. Change the period of protection > b. Variable investment options c. Increase or decrease the face amount d. Raise or lower the premium amount *Adjustable life insurance policies allow the policyowner to change the period of protection, increase or decrease the face amount, raise or lower the premium amount, and change the length of the premium payment period.
29. All of the following describe consideration in an insurance contract except:
a. Consideration is something of value b. The premium paid is the applicant's consideration c. The promise to pay benefits according to the policy terms is the insurance company's consideration d. None of the above *The question is asking which answer does NOT describe consideration in an insurance contract. All answers given DO describe consideration. Therefore, the correct answer is none of the above
24. With a Variable life policy:
a. Death benefits will vary according to the performance of the separate account; however, death benefits will not fall below a guaranteed minimum amount.
19. If a new mode of premium payments calls for less frequent payments, the total annual dollar outlay by the policy owner will:
a. Decrease. *When premiums are paid more frequently than annually, the policy owner makes a higher annual outlay to make up the interest earnings on the money not available for investment for the entire year.
25. For the insurance company to pay the accidental death benefit, most companies require that the insured:
a. Die within 90 days of the accident. *To qualify as accidental death, the insured must have died in an accident or as the result of an accident within a specified length of time, usually 90 days.
10. All of the following statements regarding Keogh Plans are true except:
a. Distributions prior to age 59 1/2 are tax deductible. *Withdrawals prior to age 59 1/2 are subject to a 10% premature distribution penalty in addition to ordinary income tax.
99. Macky chooses a life annuity with period certain. This will pay him:
a. During the certain period after which all installments stop. b. An amount equal to the purchase price in a specified number of payments. > c. For a specified minimum number of years, or the rest of his life, whichever is longer. d. Until his death, at which time the beneficiary begins receiving payments for the rest of his or her life. *A life annuity with a period certain guarantees payments for a minimum stated period. If the annuitant dies before all the guaranteed payments have been paid, the remainder of the guaranteed payments are made to a beneficiary.
68. Keogh Plans are NOT available to:
a. Employed persons with a qualified retirement plan who are not also self-employed. *Only self-employed persons may set up Keogh plans.
42. An application for group coverage is signed by the:
a. Employer, who then receives individual policies to distribute to each individual insured. b. Individual insureds, who then receive individual policies. c. individual insureds, but a master policy is issued to the employer > d. Employer, who then receives and retains a master policy. * The employer or an authorized representative provides necessary policy information and signs the application for a group life policy.
46. Of the following, which is the type of insurance that provides group life insurance automatically for federal employees, unless they opt-out of the coverage?
a. FEGLI *FEGLI, Federal Employees' Group Life Insurance, provides group life insurance for federal employees automatically, unless they choose to not be covered under the plan.
32. The human life value approach considers all of the following, except:
a. Future needs of heirs. *The HLVA takes in to account: 1) the individual's net annual salary, 2) the individual's annual expenses, 3) the number of years the individual has left to work (the present to retirement age), and 4) the value of the individual's dollar as it depreciates over time
84. The premium that reflects mortality rates, assumed interest, and the policy's share of the company's operating expenses is called the:
a. Gross premium. *The gross premium is made up of the elements of the net premium, mortality rates and assumed interest, plus the cost of operations.
17. What is the name of plan that caps the amount of group life insurance coverage at $50,000 to provide life insurance benefits on a tax favored basis?
a. Group carve out plans *A group Carve-Out is an employee benefit plan that helps selected key employees purchase permanent Life Insurance on a favorable cost basis.
71. Why should a policyowner be especially careful when deciding to increase the amount of an outstanding policy loan?
a. If the outstanding loan balance, plus interest, equals or exceeds the cash value of the policy, the company could cancel the insurance. *Loan collateral disappears when the outstanding loan balance plus interest is greater than the policy's cash value, and the policy will be lapsed, with proper notification.
38. For an immediate annuity, payments to the annuitant begin:
a. In a period of time equal to the time between payments. *An immediate annuity will begin payments after one full payment period as specified in the contract.
26. The part of the insurance policy in which the insurer promises to pay to or on behalf of the insured is called the:
a. Insuring agreement or clause. *Generally, the insuring agreement (clause) is a broad statement on the first page of the policy stipulating conditions under which benefits are to be paid by the insurance company.
33. The settlement option under which the principal never decreases unless the beneficiary withdraws it is the:
a. Interest option. *In the fixed period, fixed amount and life income options, the principal and interest are both used to make payments to the beneficiary, so the principal decreases through the payout period.
67. Money provided under the automatic premium loan provision:
a. Is generally charged interest. *The automatic premium loan provision, used to keep the policy in force by paying premiums from cash value, charges interest on this loan from cash values.
44. A universal life policy with a back-end load:
a. Makes a service charge when the policy is surrendered. *A life policy with a back-end load allows cash value to accumulate more quickly since the money stays in the policy longer. Surrender charges are made when money is withdrawn or the policy is surrendered.
12. The portion of the premium that is based only on mortality rates and assumed interest is called the:
a. Net premium. *The net premium is the mortality risk discounted for interest, without any expense adjustment
47. As a general rule, most insurance companies will allow the insured to change to another type of insurance policy without a medical examination if the:
a. New premium is higher than the original. *The privilege of change clause will generally allow the insured to change to a policy with a higher premium without proof of insurability.
100. Which life insurance provision states that the company agrees not to use as a defense any error, concealment or misstatement on the part of the insured after the policy has been in effect a specified length of time?
a. Participating b. Nonforfeiture > c. Incontestability d. Insuring clause * The insurance company may only challenge the validity of a policy during the first two years that coverage is in effect. After that time, the policy may not be contested or coverage denied for any reason except nonpayment of premiums.
59. What does the term "premium mode" refer to?
a. Premium frequency *Premium mode refers to the frequency that premiums payments are made. Insurance premiums can be usually paid monthly, quarterly, semi-annually or annually. For example, if the premiums are paid monthly, this would be referred to as a monthly premium mode.
11. T, Inc. applies for life insurance on its chief accountant, R. T, Inc. pays the premium and is the beneficiary. Which following is correct?
a. R is the proposed insured; T, Inc. is the applicant. *For a key employee life policy, the employer is the applicant, owner and beneficiary, while the key employee is the insured.
13. If the insured's age has been overstated at the time the policy was purchased, and the error is discovered prior to the death of the insured, the company will:
a. Reduce future premium payments.
49. Paul dies before his annuity has paid out an amount at least equal to the purchase price of the annuity, so Paul's beneficiary continues to receive annuity payments until that amount has been reached. This type of annuity is a:
a. Refund life annuity. *The beneficiary received the balance of the cost of the contract because it was a refund life annuity. If the annuitant had lived longer, he would have received an income for life, possibly greater than the total contract cost.
43. What is the type of annuity that guarantees to pay an income totaling an amount at least equal to the purchase price of the contract?
a. Refund life annuity. * A refund life annuity makes installments to the annuitant for life. If the annuitant dies before an amount equal to the purchase price is paid, the remaining balance of the annuity is paid to the annuitant's beneficiary.
41. If an insured commits suicide within the time specified by the suicide clause, the insurance company may do all of the following EXCEPT:
a. Refuse to pay any death benefit. b. Void the policy. c. Refund to the beneficiary only the amount of premium paid to date. > d. Pay the beneficiary only the amount of interest earned by the premium paid to date. * If the insured commits suicide within the period specified in the policy, the insurer refunds the premiums paid, but does not refund the interest earned on the premiums.
83. Universal Life insurance does not allow the the policyowner to do any of the following except:
a. Select where the cash value is invested b. Take a partial surrender. > c. Increase the death benefit automatically d. Both A and B *A Universal Life policy provides the option for the policyowner to take a partial surrender.
97. Universal Life insurance does not allow the policy owner to do any of the following except:
a. Select where the cash value is invested > b. Take a partial surrender. c. Increase the death benefit automatically d. Both A and B *A Universal Life policy provides the option for the policy owner to take a partial surrender.
64. The type of life insurance that does not require a medical exam is known as:
a. Simplified issue. *With simplified issue life insurance, the applicant is not usually required to take a medical exam. The application typically only asks 4-5 health related questions. Simplified life is usually written as a Whole life policy with lower face amounts. These policies are mostly written for the final expense market.
37. The type of risk that is below an average risk of loss is referred to as:
a. Substandard. *Most insurers offer substandard rates to persons who do not qualify for standard rates because of health, habits or occupation.
30. Term insurance differs from permanent insurance in what way?
a. Term insurance does not build cash value, and only pays a death benefit. *Initially, term insurance has lower premiums than permanent insurance; however, term insurance provides life insurance only. There is no cash value build-up with term policies
91. Which statement best describes the term reserve?
a. That amount that, when increased by future premiums on outstanding policies, and interest on those premiums, will enable the company to meet future death claims. *Life insurers are required to keep a certain amount of money in reserve so it will be available to pay future death claims
48. Incidental limitations refer to which of the following?
a. The amount of life insurance that may be included in a qualified retirement plan. *Incidental limitations are limits imposed by the IRS to be sure life insurance death benefits in a qualified plan are incidental to the plan's other benefits.
51. The principal difference between an entity purchase and a cross-purchase buy-sell agreement is:
a. The identity of the policy owner. *In an entity plan, the business entity buys insurance on the life of each principal. In a cross-purchase plan, the individual business principals buy insurance on the lives of each other.
8. All of the following factors are considered when using the Needs Approach to determine the kind and amount of insurance needed for an individual EXCEPT:
a. The individual's net annual salary. *The needs approach helps calculate what will be required to pay for final expenses, family income, and future education needs of children. The individual's net annual salary is considered when using the Human Life Value Approach to determine the appropriate amount of coverage.
39. Each of the following is a factor in computing the premium for a life insurance policy EXCEPT:
a. The mortality rate. b. Investment experience. c. Number of anticipated policy owners. d. Operating expenses * Factors that can affect premiums for life insurance policies can include mortality rate, investment experience, and the insurer's operating expenses and contribution to surplus
21. If the cash value of a universal life policy reaches zero, the policy owner must make a premium payment or:
a. The policy will go into the grace period. *In a universal life policy, if the cash value reaches zero, the policy will lapse. However, typically under state law, there is a grace period of 30 days.
58. What is a life insurance policy dividend?
a. The policy's share of the company's excess funds or divisible surplus. *Policy owners with participating policies can share in the insurer's favorable experience through dividends.
80. If Jose names his estate as the beneficiary of his life insurance policy and dies without a will:
a. a court will distribute the proceeds strictly according to state law. *When there is no will, the assets in an estate, including life insurance proceeds, must be distributed according to state law since the wishes of the deceased are not known.
77. With regard to life insurance policies, loading refers to:
a. assignment of the appropriate share of the company's operating expenses to each policy. *Operating expenses such as salaries, rent, taxes, etc., must be "loaded" onto each policy in an appropriate share by insurers.
86. For an immediate annuity, payments to the annuitant begin:
a. in a period of time equal to the time between payments. *An immediate annuity will begin payments after one full payment period as specified in the contract.
98. The factors that determine the amount of each payment under the fixed period settlement option are:
a. length of the fixed period and face amount of the policy. b. length of the fixed period, face amount of the policy, and age of the beneficiary. > c. length of the fixed period, face amount of the policy, and interest. d. length of the fixed period, face amount of the policy, interest, and age of the beneficiary. *The amount of a fixed period settlement option payment is determined by the face amount of the policy, the interest it can earn, and the length of the fixed period the payments will be made.
76. What type of policy pays nothing when the first insured dies, but later pays a death benefit when the second insured dies?
a. limited pay life policy. b. convertible term policy. c. first-to-die policy. > d. survivorship life policy. *A survivorship life is sometimes called a second-to-die policy. These policies cover the lives of two people and pay death benefits at the second insureds death.
72. What is the type of annuity that guarantees to pay an income totaling an amount at least equal to the purchase price of the contract?
a. refund life annuity. *A refund life annuity makes installments to the annuitant for life. If the annuitant dies before an amount equal to the purchase price is paid, the remaining balance of the annuity is paid to the annuitant's beneficiary.
89. With an insurance contract being an aleatory contract, this means:
a. that equal value is not given by both parties to the contract. *An aleatory contract is one in which equal value is not given by both parties to the contract.
14. With a Universal Life policy, the current rate of interest paid on the cash value account is made up of:
a. the guaranteed interest rate plus excess interest
90. Controlled business may be defined as insurance sold:
a. to the producer, the producer's family and friends and the producer's business associates. *A common method of regulating the amount of controlled business a producer sells is to prevent companies from paying commission to producers who sell less than a specified level of non-controlled business.