RMI Ch 11
A contingent beneficiary in a life insurance policy has the right to A) receive the policy proceeds if the primary beneficiary dies before the insured. B) share the policy proceeds with the primary beneficiary. C) change the beneficiary designation under specified circumstances. D) exercise policy rights if the insured is incapacitated.
A
All of the following statements about current assumption whole life insurance are true EXCEPT A) It is a form of participating whole life insurance that pays annual dividends. B) An accumulation account is credited with an interest rate based on present market conditions and company experience. C) Under the low-premium version, the premium is subject to change after an initial guaranteed period. D) Under the high-premium version, the premium may be discontinued after a period of time.
A
All of the following statements about employer-provided group life insurance are true EXCEPT A) Individual evidence of insurability, through a medical exam, is usually required. B) Group life insurance is a common employee benefit. C) A single contact between the employer and the insurer is issued. D) Employees are given certificates of insurance as evidence of the coverage.
A
All of the following statements about the interest settlement option are true EXCEPT A) The minimum guaranteed interest rate is usually equal to the prime rate. B) The interest can be paid monthly, quarterly, semiannually, or annually. C) The beneficiary may be allowed to withdraw part or all of the proceeds. D) The beneficiary may be allowed to change to another settlement option.
A
All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT A) Policy loans are permitted on an interest-free basis. B) The frequency of premium payments can be varied. C) The death benefit can be increased with evidence of insurability. D) Premium payments can be any amount provided there is sufficient cash value to keep the policy in force.
A
Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning. One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again. This period is called the A) blackout period. B) dependency period. C) emergency period. D) readjustment period.
A
Bruce lied about his health history when he purchased a life insurance policy. He died 3 years after the policy was issued. Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the application? A) incontestable clause B) entire contract clause C) ownership clause D) change-of-plan provision
A
Dave purchased a life insurance policy. The policy is nonparticipating and the cash values are based on the insurer's present mortality, investment, and expense experience. After 2 years, the insurer will recalculate the premium based on the mortality, investment, and expense experience at that time. Dave purchased A) current assumption whole life. B) variable life insurance. C) universal life insurance. D) variable universal life insurance.
A
The transfer of all ownership rights in a life insurance policy can be accomplished through a(n) A) absolute assignment. B) irrevocable beneficiary designation. C) incontestable clause. D) participating-policy provision.
A
What happens to the premiums for yearly renewable term insurance as an insured gets older? A) They increase at an increasing rate. B) They increase at a decreasing rate. C) They decrease at a constant rate. D) They remain level.
A
Which of the following is a cost/expense that an estate clearance fund is designed to pay? A) burial expenses B) retiring the mortgage C) education costs D) income for the widow(er) during the readjustment period
A
Which of the following statements about endowment insurance policies is (are) true? -The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive. -The use of endowment insurance has increased in recent years because of its favorable tax treatment. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about life insurance cash values is (are) true? -Cash values are a result of the level premium method of purchasing life insurance. -The cash value of a policy must always exceed the policy's legal reserve. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about the assignment of a life insurance policy is (are) true? Under a collateral assignment, the policyowner assigns a life insurance policy to secure a loan. Under an absolute assignment, only limited ownership rights in a policy are transferred. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about the assignment of a life insurance policy is true? A) The insurer must be notified of any assignment or the death proceeds will be paid to the named beneficiary. B) Under an absolute assignment, the only right transferred to a new owner is the right to change the beneficiary designation. C) As long as a collateral assignment exists, a creditor will receive the entire death benefit even if the loan has been repaid. D) Assignment may be made only with the permission of the insurer and the beneficiary.
A
Which of the following statements about the change of plan provision in a life insurance contract is (are) true? A change to a lower premium policy results in a refund of the difference in the cash values of the two policies. A change to a higher premium policy requires evidence of insurability. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about the grace period in a whole life insurance contract is (are) true? The purpose of the grace period is to prevent the policy from lapsing by giving the policyowner additional time to pay an overdue premium. If the insured dies during the grace period, the death benefit is reduced by 50 percent. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? -It involves an analysis of various family needs that must be met if a family breadwinner dies. -Its use is appropriate only if a person currently has no life insurance protection. A) I only B) II only C) both I and II D) neither I nor II
A
Which of the following statements is true regarding an automatic premium loan provision? A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium. B) Interest does not have to be paid on an automatic premium loan. C) If the provision is used, the insured must show evidence of insurability to resume regular premium payments. D) An automatic premium loan, unlike a regular policy loan, is forgiven if the insured dies before the loan is repaid.
A
Which statement is true concerning the economic problem of premature death in the United States? -The economic impact of premature death of the breadwinner varies for different types of families. -Increased life expectancy has increased the economic problem of premature death over time. A) I only B) II only C) both I and II D) neither I nor II
A
A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 years) and are higher thereafter is an example of a A) level-term policy. B) modified life policy. C) limited-payment whole life policy. D) variable life policy.
B
Al was named the beneficiary in his mother's life insurance policy. His mother died during the contestable period. The insurer denied payment, citing a material misrepresentation on the application. Al believes the insurer should pay the claim because the misrepresentation occurred on the application, and the application is not part of the formal agreement between the insurer and the policyholder. Which provision protects the insurer by making the application part of the formal agreement between the parties to the contract? A) incontestable clause B) entire contract clause C) ownership clause D) reinstatement clause
B
All of the following are nonforfeiture options found in cash value life insurance policies EXCEPT A) cash value. B) reduction of premiums. C) reduced paid-up insurance. D) extended term insurance.
B
All of the following statements about ordinary life insurance are true EXCEPT A) Premiums are level throughout the policy period. B) The face amount of the policy is paid if the insured lives to age 65. C) There is a build-up of cash value that can be borrowed by the policyholder. D) It offers the policyholder the flexibility to meet a wide variety of financial objectives.
B
Amy purchased a life insurance policy with the intent of committing suicide to pay all the debts that were burdening her family. If she commits suicide 9 months after the policy is purchased, and the insurer is able to prove that her death was a suicide, how much will be paid by the insurance company? A) nothing, because the policy is void B) the premiums paid for the policy C) the policy's cash value D) the face value of the policy
B
Bert purchased a life insurance policy 4 years ago. He inadvertently stated that he was 1 year younger than his actual age. If Bert dies today, how much will the insurance company pay? A) nothing B) less than the policy face value C) the policy face value D) more than the policy face value
B
Cal purchased a whole life policy 6 years ago. The policy requires annual premium payments. Cal forgot to pay the premium that was due 2 weeks ago. He wonders if his life insurance is still in force. Which life insurance policy provision is designed to keep the policy in force for a short time even if the premium payment is late? A) waiting period B) grace period C) guaranteed purchase option D) reinstatement clause
B
Gwen purchased an interesting life insurance policy. A minimum interest rate is guaranteed on the cash value, but additional interest may be credited based on the investment performance of a group of common stocks. There is also a cap on the additional interest credited to the policy. Based on this information, what type of life insurance did Gwen purchase? A) variable life insurance B) indexed universal life insurance C) current assumption whole life insurance D) variable universal life insurance
B
Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian's human life value? A) $184,600 B) $249,200 C) $360,800 D) $400,000
B
Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balance gradually declines. This type of life insurance is called A) modified life insurance. B) decreasing term insurance. C) re-entry term insurance. D) current assumption whole life.
B
Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group life insurance policy through her employer. Based on this information, how much additional life insurance should Sarah purchase? A) $80,000 B) $130,000 C) $150,000 D) $160,000
B
The difference between the legal reserve of a whole life policy and the face amount of insurance is the A) cash value. B) net amount at risk. C) premium. D) dividend accumulations.
B
The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a A) collateral assignment. B) viatical settlement. C) catastrophic illness conversion. D) grace period transaction.
B
The purchase of term insurance is justified by which of the following circumstances? The insured wants to save money through the policy for a specific need. The insured has a temporary need for life insurance protection. A) I only B) II only C) both I and II D) neither I nor II
B
To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement.
B
Under the needs approach, when is the dependency period of a surviving spouse assumed to end? A) 1 or 2 years after the breadwinner's death B) when the youngest child reaches age 18 C) when the surviving spouse reaches age 65 D) when the surviving spouse dies
B
What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own? A) 3 to 6 months B) 1 to 2 years C) until the youngest child reaches age 18 D) until the surviving spouse reaches age 65
B
When using the needs approach, several "special needs" should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n) A) estate clearance fund. B) emergency fund. C) readjustment period fund. D) mortgage redemption fund.
B
Which of the following is a noneconomic cost associated with premature death? A) reduction in the standard of living B) loss of a parental role model C) additional expenses, such as uninsured medical bills D) loss of the deceased breadwinner's future earnings
B
Which of the following statements about a decreasing term insurance policy is true? A) The face amount of the policy decreases during the policy period, and the premium increases. B) The face amount of the policy decreases during the policy period, but the premium remains level. C) The premium decreases during the policy period, but the face amount remains constant. D) Both the premium and the face amount of the policy decrease gradually over the policy period.
B
Which of the following statements about a variable universal life insurance policy is (are) true? -There is a minimum guaranteed interest rate for the cash value. -The policyowner has a variety of investment options for the savings component of the policy. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about dividend options is (are) true? The interest on dividends left to accumulate with the insurer is not considered to be taxable income. Paid-up additions are additional units of whole life insurance. A) I only B) II only C) both I and II D) neither I nor
B
Which of the following statements about home service life insurance, which evolved over time from a type of life insurance called industrial life insurance, is true? A) Most policies have a face value exceeding $100,000. B) Premiums are usually not collected at the insured's home and are remitted directly to the agent or the insurer. C) Industrial life insurance is group term insurance coverage marketed to employees at the work site. D) This popular product accounts for over 40 percent of the life insurance sold today.
B
Which of the following statements about indexed universal life insurance is true? A) It is another name for variable life insurance. B) Although a minimum interest rate is guaranteed, the rate credited can be higher if a specified stock index performs well. C) The cash value is usually credited with 100 percent of the return on the equity index, including dividends paid on the stocks in the index. D) The formula used to determine the additional interest credited to the policy places no limit on the additional interest that can be credited.
B
Which of the following statements about premature death is (are) true? -From an economic standpoint, premature means death before a specified age, such as 65. -The economic problem of premature death in the U.S. has declined substantially over time. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about second-to-die life insurance is (are) true? -The insurance is a form of endowment coverage. -The premium is lower than the combined cost of purchasing a life insurance policy on each insured. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about term insurance is true? A) The coverage is appropriate if the goal is permanent lifetime protection. B) Most policies can be renewed for additional periods without evidence of insurability. C) Premiums increase at a constant rate each time the policy is renewed. D) Most policies have a cash value that is refunded when coverage ceases.
B
Which of the following statements about the ownership of a life insurance policy is (are) true? Under the ownership clause, the policyholder and beneficiary equally share all contractual rights in the policy while the insured is living. The policyholder can designate a new owner by filing an appropriate form with the insurance company. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about universal life insurance is (are) true? -The current interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy. -A monthly deduction is made from the policy's cash value for the cost of insurance protection. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements about variable universal life insurance is (are) true? -Variable universal life insurance has fixed premium payments. -Variable universal life insurance allows the policyowner to decide where the premiums are invested. A) I only B) II only C) both I and II D) neither I nor II
B
Which of the following statements is (are) true regarding the results of the 2014 study by the Life Insurance Market Research Association (LIMRA) on the adequacy of life insurance owned by households in the United States? The average household is adequately insured against the risk of premature death. The average household is significantly underinsured against the risk of premature death. A) I only B) II only C) both I and II D) neither I nor II
B
A common use of second-to-die life insurance is A) insuring children. B) insuring "double income with kids" families. C) estate planning. D) insuring key employees of a business.
C
Advantages of selecting the paid-up additions dividend option in a life insurance policy include which of the following? Evidence of insurability is not required to purchase additional insurance. The additions are purchased at net rates without a loading for expenses. A) I only B) II only C) both I and II D) neither I nor II
C
All of the following statements about universal life insurance are true EXCEPT A) Interest is credited to the policy's cash value each month. B) Any withdrawal of a policy's cash value reduces the amount of the death benefit. C) Interest credited to a policy's cash value is taxable for the policyowner in the year credited. D) The policyowner can add to a policy's cash value at any time subject to policy guidelines.
C
Ann is considering the purchase of a life insurance policy with these characteristics: flexible premium payments, the insurance and savings components are separate, the interest rate credited to the cash value is tied to a changing market interest rate but a minimum interest rate is guaranteed, and a monthly administrative fee is charged. Ann is considering buying A) whole life insurance. B) variable life insurance. C) universal life insurance. D) current assumption whole life.
C
Carl would like to purchase life insurance. He would also like to invest in a mutual fund. An agent told Carl about a form of life insurance in which Carl could select where the saving component is invested. This form of life insurance has fixed premiums and the cash value is not guaranteed. This type of life insurance is called A) universal life insurance. B) whole life insurance. C) variable life insurance. D) current assumption whole life.
C
Disadvantages of life insurance settlement options include which of the following? Higher yields can often be obtained elsewhere. Life income options have limited usefulness at younger ages. A) I only B) II only C) both I and II D) neither I nor II
C
Reasons for NOT purchasing an accidental death benefit rider include which of the following? Most people die as a result of a disease rather than from an accident. The economic value of a human life is not increased if death occurs because of an accident. A) I only B) II only C) both I and II D) neither I nor II
C
Sources of life insurance dividends include which of the following? Excess interest earned on the assets necessary to maintain legal reserves Favorable mortality experience A) I only B) II only C) both I and II D) neither I nor II
C
Tamara purchased a term insurance policy when she had high life insurance needs and limited income. Now Tamara can afford whole life insurance. What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance without having to show that she is still insurable? A) renewal provision B) tax-free exchange provision C) conversion provision D) free look provision
C
The cost-of-living rider typically bases increases in the policy face value on changes in the A) gross national product. B) interest rate for short-term U.S. government securities. C) consumer price index. D) national wage level.
C
The human life value is defined as the A) present value of a deceased breadwinner's future gross income. B) future value of a deceased breadwinner's past earnings. C) present value of the family's share of a deceased breadwinner's future earnings. D) future value of the family's share of a deceased breadwinner's future earnings.
C
The net amount at risk for an ordinary life insurance policy is the difference between the A) present value of future benefits and the present value of future premiums. B) face amount of the policy and the total premiums that have been paid. C) face amount of the policy and the legal reserve. D) annual premium and the annual policyholder dividend.
C
What major feature distinguishes a participating policy from a nonparticipating policy? A) the availability of a waiver-of-premium provision B) the existence of settlement options C) the payment of dividends D) the method by which beneficiaries can be named
C
Which of the following $100,000 whole life insurance policies, issued by the same company to a man age 32, would require the highest first-year premium? A) continuous premium (ordinary) life B) whole life paid-up at 65 C) 10-payment whole life D) 20-payment whole life
C
Which of the following is a common dividend option found in a participating life insurance policy? A) reduced paid-up insurance B) fixed period C) paid-up additions D) life income
C
Which of the following pieces of information is needed to calculate a person's human life value? A) the marital status of the person. B) the person's estimated annual Social Security benefits after retirement. C) the person's cost of self-maintenance. D) current outstanding debts, including mortgage debt.
C
Which of the following statements about a typical accidental death benefit rider is (are) true? Accidental injury must be the cause of death for the increased benefit to be paid. The accidental death must occur prior to some specified age for the increased benefit to be paid. A) I only B) II only C) both I and II D) neither I nor II
C
Which of the following statements about accelerated death benefits riders is (are) true? The benefit paid is usually less than the full face amount. Several different medical conditions may trigger the payment of benefits. A) I only B) II only C) both I and II D) neither I nor II
C
Which of the following statements about life insurance policy loans is true? A) Loans are only permitted for specific reasons listed in the policy. B) They are forgiven if the insured dies before the loans are repaid. C) The policyholder must pay interest on a life insurance policy loan. D) They must be repaid on the basis of a schedule determined at the time of the loan.
C
Which of the following statements about life insurance settlement options is true? A) Under the fixed period option, the beneficiary normally has the right to make partial withdrawals in case of emergency. B) Under the fixed period option, any remaining proceeds revert to the insurer if the beneficiary dies before the end of the fixed period. C) Under the fixed amount option, the beneficiary can be given the right to increase or decrease the fixed amount. D) Under the fixed amount option, any interest credited in excess of the guaranteed rate increases the amount of each periodic payment.
C
Which of the following statements about nonforfeiture options found in life insurance policies is true? A) Under the reduced paid-up option, the paid-up policy is term insurance. B) Under the extended term option, the amount of term insurance is less than the face value of the surrendered cash value policy. C) Under the reduced paid-up option, no additional premiums must be paid. D) Unless the policyowner has selected another nonforfeiture option, the cash value option goes into effect automatically.
C
Which of the following statements about policies sold to preferred risks is (are) true? -Preferred risks are people whose mortality experience (deaths per thousand at a given age) is expected to be more favorable than average. -Insurers require preferred risks to purchase at least a minimum amount of life insurance, such as $250,000. A) I only B) II only C) both I and II D) neither I nor II
C
Which of the following statements about re-entry term insurance is true? A) It permits the coverage to be renewed an unlimited number of times as long as insurability is demonstrated. B) It permits a refund of premiums paid if the term insurance is renewed a specified number of times. C) It permits a lower renewal premium if the insured demonstrates insurability. D) It permits a lapsed whole life policy to be reinstated as term insurance.
C
Which of the following statements about the entire contract clause is true? A) It allows the insurer to change the policy terms without the insured's consent. B) It specifies that all statements in the application are considered warranties. C) It specifies that the life insurance policy and the attached application constitute the complete agreement between the parties. D) It prevents the insurance company from contesting a policy after it has been in force for two years during the lifetime of the insured.
C
Which of the following statements about the guaranteed purchase option is true? A) It is usually available with term insurance policies. B) The premium when an option is exercised is based on the insured's age at the time the original policy was issued. C) The option permits the insured to purchase specified amounts of life insurance in the future even if the insured has become uninsurable. D) If a guaranteed purchase option expires without being used, it can be exercised at a later date.
C
Which of the following statements about variable life insurance is true? A) Premium payments are flexible. B) The death benefit cannot be higher or lower than a guaranteed, specified, value. C) The policyowner has the option of investing the cash value in several investment accounts. D) The cash surrender value of the policy is guaranteed
C
Which of the following types of families is likely to have the least need for a large amount of life insurance? A) a blended family B) a traditional family C) a single person family D) a sandwiched family
C
Which of the following would be a valid reason for an insurer to contest a policy after the contestable period has ended? A) The policyholder made a material misrepresentation in the application process. B) The insurer's loss ratio is running higher than the insurer anticipated. C) The applicant had someone else take the medical examination required for policy approval for her. D) The policyholder concealed a material fact at the time of application.
C
A legal reserve in life insurance is a result of A) premium taxes payable by life insurance companies being postponed during the early policy years. B) dividends being paid to policyholders. C) inadequate premiums in the early policy years being subsidized by investment earnings. D) excess premiums in the early policy years being invested at compound interest.
D
Alex, age 26, purchased a 20-payment whole life insurance policy. After Alex has made 20 premium payments, his life insurance policy is considered A) matured. B) reduced. C) expired. D) paid-up.
D
All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT A) The effects of inflation are ignored. B) Other sources of income for survivors are ignored. C) Earnings are assumed to remain constant. D) Earnings during the individual's productive lifetime are ignored.
D
All of the following are requirements that must be satisfied before premiums are waived under a waiver-of-premium provision EXCEPT A) The insured must furnish proof of disability to the insurer. B) The insured must be disabled before some specified age, such as age 60 or 65. C) The insured must satisfy the definition of disability. D) The insured must satisfy a 2-year waiting period.
D
All of the following statements about the conversion of a term policy are true EXCEPT A) Under an attained age conversion, the premium is based on the insured's attained age at the time of conversion. B) Under an original age conversion, the policyowner must pay a financial adjustment in addition to the premium for the new policy. C) Most insurers require original age conversion to take place within a specified period (5 years, for example) of the issue of the term policy. D) Evidence of insurability is required before a conversion is permitted.
D
All of the following statements about the requirements to reinstate a lapsed life insurance policy are true EXCEPT A) Evidence of insurability is required. B) The lapse must have resulted from other than the surrender of the policy for its cash value. C) All overdue premiums must be paid along with interest from the premium due dates. D) There is no time limit on when the policy may be reinstated.
D
Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was interested in purchasing life insurance. Jessica explained the various uses of life insurance, including income for Brad's wife during the 1- or 2-year period following Brad's death. This period is known as the A) dependency period. B) estate clearance period. C) blackout period. D) readjustment period.
D
Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs. What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the A) estimated cost of life insurance. B) net cost of life insurance. C) real (inflation-adjusted) cost of life insurance. D) opportunity cost of buying life insurance.
D
The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the A) emergency period. B) readjustment period. C) dependency period. D) blackout period.
D
Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a A) blended family. B) single-parent family. C) two-income earner family. D) sandwiched family.
D
Which life insurance policy provision specifies that it is the policyholder, and not the insured or beneficiary, who possesses all contractual rights while the policy is in force? A) nonforfeiture options B) entire contract clause C) incontestable clause D) ownership clause
D
Which of the following dividend options, sometimes called the "fifth dividend option," is not offered by all insurers that sell participating life insurance coverage? A) paid-up additions B) reduction of premiums C) accumulation of dividends at interest D) term insurance
D
Which of the following statements about beneficiary designations is (are) true? The primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured. If a revocable beneficiary designation is used, the insured must obtain the beneficiary's permission of exercise most policy rights. A) I only B) II only C) both I and II D) neither I nor II
D
Which of the following statements about life income settlement options is (are) true? Under a joint-and-survivor life income option, payments cease at the death of the first annuitant. Under a life income with guaranteed period, a contingent beneficiary is guaranteed a minimum number of payments regardless of when the primary beneficiary dies. A) I only B) II only C) both I and II D) neither I nor II
D
Which of the following statements about limited-payment life insurance is true? A) It is a form of term insurance. B) It matures at the end of the premium-payment period. C) The premium decreases each year during the premium-payment period. D) Its use may be appropriate if a person wants paid-up life insurance during retirement.
D
Which of the following statements about savings bank life insurance is true? A) The maximum amount that a depositor can purchase is $50,000. B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit in his or her savings account with the savings bank. C) The objective of savings bank life insurance is to provide protection to the bank in case a borrower dies before a loan is repaid. D) The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses
D
Which of the following statements about the guaranteed purchase option is true? A) An insured usually has 24 months to exercise an option. B) The option cannot be exercised until the insured reaches age 40. C) The amount of life insurance that can be purchased at each option is limited to 10 percent of the face amount of the basic policy. D) The additional coverage can be purchased without demonstrating insurability.
D
Which of the following statements about the waiver-of-premium provision in life insurance is true? A) Because the probability of becoming disabled exceeds the probability of premature death, the cost to include this provision is usually prohibitive at younger ages. B) Premiums are usually waived if the insured becomes partially disabled. C) Life insurance protection continues in force during a period of disability, but dividends cease and cash values are reduced. D) The disability must occur before a stated age, such as 65, for premiums to be waived.
D
Which of the following statements about yearly renewable term insurance is (are) true? -It requires evidence of insurability for renewal. -It is most appropriate when an insured needs lifetime protection. A) I only B) II only C) both I and II D) neither I nor II
D
Which of the following statements is true regarding return of premium term insurance? A) The insurance is free because premiums are refunded at the end of the coverage period. B) Life insurers charge less for this coverage than for regular term insurance that does not include a refund provision. C) The return of premium is only offered on one-year term insurance policies. D) The coverage is expensive and is not free when time value of money is considered.
D
Which of the following statements regarding convertible term insurance is true? A) Evidence of insurability must be provided to convert the policy. B) More term policies are converted using the original-age method than using the attained-age method. C) The converted coverage has a lower face amount than the term coverage. D) The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.
D
