Type of Insurance Policies
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
"There is a flexible premium payment". An Interest-Sensitive Whole Life policy is characterized by premiums that vary to reflect the insurer's changing assumptions regarding its death, investment, and expense factors.
The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the
Cost of insurance
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is
The cost of insurance is most important when an insured owner is trying to decide whether to convert term insurance at the insured's original age or the insured's attained age.
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value. . A Face Amount Plus Cash Value Policy is a contract that promises to pay at the insured's death the face amount of the policy plus a sum equal to the policy's cash value.
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy A policy that promises to pay the face amount on the death of first of 2 lives covered by the policy is called a Joint Life Policy.
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
L's spouse dies at age 66.
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable Term policies guarantee the insured the right to continue term coverage after expiration of the initial policy period. 10
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship A survivorship life policy insures two individuals and is designed to pay a benefit upon the second death.
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment a Ten-Year Endowment should be purchased to ensure the funds will be available when needed.
What type of life insurance are credit policies issued as?
Term The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
Credit Life insurance is
issued in an amount not to exceed the amount of the loan Credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid.
What kind of premium does a Whole Life policy have?
level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance.
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
policyowner The policyowner (investor) benefits upon the death of the insured.
A Limited-Pay Life policy has
premium payments limited to a specified number of years
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited Pay Life
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
A variable insurance policy
does not guarantee a return on its investment accounts. In contrast, variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums As financial needs and objectives change, the policyowner can make adjustments to the premium and/or face amount.
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
The investment gains from a Universal Life Policy usually go toward
the cash value. In a Universal Life Policy, income is usually directed toward the cash value.
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for- Variable Life Modified Whole Life Universal Variable life Variable Annuity
Modified Whole Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life is designed to provide flexible premiums and an adjustable death benefit.
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life A life insurance policy that has a level premium but allows the policyowner to choose from a selection of investment options is known as Variable Life.
Variable Life products require a producer to
Variable Life products require a producer to hold a Life Insurance license and a Securities license.
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
A term life insurance policy matures
upon the insured's death during the term of the policy Term life policies can only mature (pay out the face amount) if death occurs during the term of the policy.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life is comprised of monthly mortality charges and self directed investment choices.
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
A life insurance policy that provides a policyowner with cash value along with a level face amount is called
Whole life provides the insured with a cash value as well as a level face amount.
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
Modified Premium Life Modified whole life policies are distinguished by premiums that are lower than typical whole life premiums during the first few years (usually five) and then higher than typical thereafter.
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
Universal Life. Universal life insurance is characterized by flexible premiums and an adjustable death benefit.
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT
partial withdrawal features beyond a surrender charge period
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?.
. A level term policy pays the same benefit amount if death occurs at any point during the term. Level term policies may be renewable.
Which statement about a whole life policy is correct?
Cash value may be borrowed against
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term insurance would provide the greatest amount of protection for a limited period of time.
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
"Universal Life". A Universal Life policy has a cash value that may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years. the family would receive an income from the policy for 10 years. Family Income policies pay an income beginning at the insured's death and continues for a period specified from the date of policy issue.
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider The means of providing life insurance on the children of a person who is covered by a life insurance policy is by a child term rider.
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract A policy that is overfunded to where it does not meet the 7-pay test is considered a Modified Endowment Contract.
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
When applied to Whole Life insurance, the word "straight" denotes
The duration of premium payments
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
decreasing term policy has a death benefit that adjusts periodically and is written for a specific period of time.
The amount of coverage on a group credit life policy is limited to
the insured's total loan value. With a group credit life policy, the amount of insurance on the life of a debtor is limited to the total amount of the insured's loan.
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
A Renewable Term Policy is renewable at the option of the
A Renewable Term Policy is renewable at the option of the insured.
A Whole Life Insurance Policy endows when the
Cash value equals the death benefit
Which of these is an element of a Variable Life policy?
Variable Whole Life policies have a fixed, level premium.
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided.
Term insurance has which of the following characteristics?
Expires at the end of the policy period
Variable Whole Life Insurance can be described as
ariable Whole Life Insurance is both an insurance and securities product.
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit If the insured dies before the endowment's maturity, the policy's face value — also known as the "death benefit" — is paid in a lump sum to any beneficiaries.
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay Life The shorter the pay period, the faster the cash value growth.
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay Life Limited pay whole life policies have level premiums that are limited to a certain period.
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
A payor provision provides that in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract.
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
Conversion The conversion provision allows the policysowner to change the policy to a permanent life policy without providing evidence of insurability.
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at Age 65 An endowment policy is characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date (before age 100).
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance. Equity index insurance yields greater gains than bonds but will still protect the principal with a minimum of risk
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life. The cash value and death benefits of a Variable Life policy can fluctuate according to the performance of its underlying investment portfolio.
Which of the following policies combines investment choices with a form of Term coverage?
Variable Universal Life combines investment choices with a form of Term coverage.
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
A Family Maintenance Policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period.
When is the face amount paid under a Joint Life and Survivor policy?
A Joint Life and Survivor policy pays benefits after the death of the last insured.
How does a typical Variable Life Policy investment account grow?
A Variable Life Policy has investment values based instruments such as mutual funds, stocks, and bonds.
A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
A Variable Life policy offers the owner investment in products such as money-market funds, long-term bonds, or equities.
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege The conversion privilege allows an individual to leave the group term plan and continue his or her insurance without providing evidence of insurability.
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term The Automatic Premium Loan provision can be incorporated into all of these policies EXCEPT decreasing term.
A Family Income Policy is a combination of Whole Life and
Decreasing Term insurance". A Family Income Policy is a combination of Whole Life and Decreasing Term insurance.
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. Policies that do not meet the 7-pay test are considered MEC's and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.
How long does the coverage normally remain on a limited-pay life policy?
age 100 Even though the premium payments are limited to a certain period, the insurance protection extends until the insured's death, or to age 100.
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A Whole Life Policy with an Other Insured Rider
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
A joint life policy covers two or more people. Using some type of permanent insurance (as opposed to term), it pays the death benefit at the first insured's death.
What kind of life insurance product covers children under their parent's policy?
Term rider Family plan policies usually cover the family head with permanent insurance and the coverage on the spouse and children is term insurance in the form of a rider.
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy a Family Maintenance policy should be purchased. A Family Maintenance policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period.
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment With Variable Universal Life, the policyowner controls the investment of cash values and selects the timing and amount of premium payments.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
When a life insurance policy exceeds certain IRS table values, the result would create a Modified Endowment Contract (MEC).
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force t. Straight whole life provides permanent level protection with level premiums from the time the policy is issued until the insured's death (or age 100).
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing Term
Which of the following statements is CORRECT about the period in which a Term Policy can be converted?
It varies according to the contracts The conversion period varies according to the contracts.
