xcel Life Policies Exam

Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)? A. Policy dividend B. Loan against the cash value C. Death benefit D. Policy withdrawal

C. Death benefit The death benefit would NOT be subject to income tax under a Modified Endowment Contract (MEC)

A limited payment whole life policy provides A. Protection for 20 years B. Discounted premiums C. Protection for more than one person D. Lifetime protection

D. Lifetime protection

Which policy feature makes a universal life policy different from a whole life policy? A. A fixed cash value B. A flexible premium schedule C. A fixed death benefit D. The ability to take out a policy loan

D. The ability to take out a policy loan

Which of these riders will pay a death benefit if the insured's spouse dies? A. Family term in surance rider B. Payor benefit rider C. Guaranteed Insurability rider D. Family Whole Insurance rider

A. Family term insurance rider A family term insurance rider provides a death benefit if the spouse of the insured dies

A limited payment whole life policy provides A. Lifetime protection B. Discounted Premiums C. Protection for more than one person D. Protection for 20 years

A. Lifetime protection Premiums on limited payment whole life insurance are paid for a limited number of years, but the benefits last a lifetime.

A permanent life insurance policy where the policy owner pays premiums for a specified number of years is called a(n) A. Adjustable policy B. Variable Universal Policy C. Limited Pay Policy D. Level Term Policy

C. Limited Pay Policy A permanent life insurance policy where the policy owner pays premiums for a specified number of years is called a limited pay policy.

Which of these riders will pay a death benefit if the insured's spouse dies? A. Family Term Insurance Rider B. Payor Benefit Rider C. Family Whole Insurance Rider D. Guaranteed insurability rider

A. Family Term Insurance Rider

Which type of life insurance is normally associated with a Payor Benefit rider? A. Juvenile insurance B. Family income insurance C. Spouse insurance D. Term rider

A. Juvenile insurance A Payor Benefit rider waives the premium ONLY in connection with juvenile insurance.

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? A. Pre-death distributions are typically taxable B. The premium payments will be tax deductible C. Withdrawls will be prohibited D. Policy Loans are disallowed

A. Pre-death distributions are typically taxable Failing to meet the seven-pay test results in pre-death distributions likely to become taxable

What is the automatic continuance of insurance coverage referred to as? A. Reinstatement B. Resumption C. Renovation D. Renewal

D. Renewal The automatic continuance off insurance coverage is called renewal

Which type of multiple protection policy pays on the death of the last person? A. Joint Life Policy B. Dual Life Policy C. Multiple Life Policy D. Survivorship Life Policy

D. Survivorship Life Policy

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true? A. The policy automatically converts to whole life after the 10-year period B. The face amount will remain constant and the premium will increase over the 10-year period C. The premium will remain constant and the face amount will increase over the 10-year period D. The face amount and premium will remain constant over the 10-year period

D. The face amount and premium will remain constant over the 10-year period

As life insurance policy that is subject to a contract interest rate is referred to as _______. A. Term life B. Adjustable life C. Group life D. Universal life

D. Universal life Universal life is subject to a contract interest rate or a current annual interest rate.

Which type of life offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested? A. Variable universal policy B. Adjustable life policy C. Modified whole life policy D. Universal policy

A. Variable universal policy

Level premium permanent insurance accumulates a reserve that will eventually A. equal the face amount of the policy B. pay a dividend to the policyowner C. require the policyowner to make periodic withdrawals D. become larger than the face amount

A. equal the face amount of the policy Level premium permanent insurance accumulates a reserve that will eventually equal the face amount of the policy.

All of these are characteristics of an Adjustable Life policy EXCEPT A. Builds cash value B. Flexible death benefit C. Fixed surrender value D. Flexible premiums

C. Fixed surrender value A fixed surrender value is NOT a characteristic of a universal life insurance policy

A partial surrender is allowed in which of the following life policies? A. Limited whole life B. Adjustable whole life C. Universal life D. Decreasing term life

C. Universal life

Under a Modified Endowment Contract, what are the likely tax consequences? A. Pre-death distributions will become taxable B. Premium payments are tax deductible C. Interest on policy loans is tax deductible C. Cash value cannot be surrendered early

A. Pre-death distributions will become taxable The tax consequence of a modified endowment contract is pre-death distributions are likely to become taxable.

Decreasing term life insurance is often used to A. Provide coverage for a home mortgage B. Provide coverage for estate taxes C. Accumulate cash value D. Provide retirement funds

A. Provide coverage for a home mortgage

Term insurance is appropriate for someone who: A. Seeks permanent protection and high premiums B. Seeks a policy that builds cash value C. Seeks temporary protection and lower premiums D. Seeks living benefits for themselves

A. Seeks permanent protection and high premiums Term insurance is appropriate for individuals seeking temporary protection and lower premiums

The premium for a Modified whole life policy is A. higher than the typical whole life policy during the first few years and then lower than typical for the remainder B. lower than the typical whole life policy during the first few years and then higher than typical for the remainder C. normally graded over a period of 20 years D. level for the first 5 years then decreases for the remainder of the policy

B. lower than the typical whole life policy during the first few years and then higher than typical for the remainder

Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this? A. Family income rider B. Payor Rider C. Family maintenance rider D. Child term rider

D. Child term rider A child term rider is level term insurance that can be added to an existing policy.

A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called A. Group Life B. Whole Life C. Credit Life D. Universal Life

D. Universal Life

Which of these would be the best example of a limited pay life insurance policy? A. Term life policy with premiums paid up after 20 years B. Term life policy that returns cash value after 20 years C. Whole life policy that pays out its cash value over a 20 year period D. Whole life policy with premiums paid up after 20 years

D. Whole life policy with premiums paid up after 20 years A whole life insurance policy where the premiums are paid up after 20 years would be considered a limited pay life insurance policy

A policyowner may change two policy features on what type of life insurance? A. Adjustable Life B. Modified Whole Life C. Decreasing Term Life D. Whole Life

A. Adjustable Life Adjustable Life allows the policyowner to change two policy features: premium and face amount.

Which type of life insurance is normally associated with a Payor Benefit rider? A. Juvenile insurance B. Spouse insurance C. Family income insurance D. Term rider

A. Juvenile insurance

Which type of multiple protection policy pays on the death of the last person? A. Multiple life policy B. Joint life policy C. Survivorship life policy D. Dual life policy

C. Survivorship life policy A survivorship life policy pays on the death of the last person

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this? A. Modified Endowment Contract B. Current assumptive whole life C. Credit life insurance D. Equity index whole life

D. Equity index whole life The type of policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder is invested contracts tied to a stipulated stock index is equity index whole life.

Which of the following policies does NOT build cash value? A. Term B. Endowment C. Straight Life D. Variable Life

A. Term Term life insurance does not build cash value

A life insurance policy that contains a guaranteed rate is called A. Universal Life B. Group Life C. Credit Life D. Whole Life

A. Universal Life

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this? A. Universal life B. Adjustable life C. Modified Life D. Credit life

A. Universal life A universal life policy pays a death claim in the amount of the death benefit plus the savings element.

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive? A. Universal life policy B. Modified life policy C. Adjustable life policy D. Endowment policy

D. Endowment policy A type of life insurance policy which provides for the payment of the face amount at the end of the specified period of the face amount at the end of the specified period if the insured is still alive is an endowment policy

A business will typically use which type of life insurance to cover their employees? A. Endowment policy B. Whole Life Policy C. Adjustable life policy D. Group Policy

D. Group Policy A type of life insurance policy most commonly used by businesses for employees is a group policy.

Under a Modified Endowment Contract, what are the likely tax consequences? A. Cash Value cannot be surrendered early B. Interest on policy loans is tax deductible C. Premium payments are tax deductible D. Pre-death distributions will become taxable

D. Pre-death distributions will become taxable

What types of insurance are normally used for key employee indemnification? A. Term, Whole, And universal life insurance B. Join, Credit, and Group life insurance C. Adjustable permanent, and limited-pay life insurance D. Increasing term insurance

A. Term, Whole, And universal life insurance

The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is A. The shorter the payment period, the lower the premium B. The longer the payment period, the higher the premium C. The shorter the payment period, the higher the premium D. The payment period has no affect on the premium payment

A. The shorter the payment period, the lower the premium

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called A. Variable Whole Life B. Increasing Term Life C. Modified Whole Life D. Adjustable Whole Life

A. Variable Whole Life A variable whole life policy has cash values that vary according to the investment performance of common stocks

Which policy feature makes a universal life policy different from a whole life policy? A. A fixed death benefit B. A flexible premium schedule C. A fixed cash value D. The ability to take out a policy loan

B. A flexible premium schedule The policy feature that makes universal life different from whole life insurance policies is its flexible premium schedule

All of these are valid options for an Adjustable Life Policy EXCEPT A. The policy's protection period can be modified B. A nonforfeiture option can be used to increase the death benefit C. The policy's premium can be increased or decreased D. The policy's death benefit can be increased or decreased

B. A nonforfeiture option can be used to increase the death benefit Increasing the death benefit by using one of the nonforfeiture options is not an option in an Adjustable Life Policy

A single premium cash value policy can be described as A. A policy that is guaranteed issue B. A policy that is paid up after only one payment C. A policy that covers two or more lives D. A policy that only requires an annual payment

B. A policy that is paid up after only one payment A single premium cash value policy is best described as a policy that is paid up after only one payment

A Renewable Term Life insurance policy can be renewed A. Only if the insured provides evidence of insurability B. At a predetermined date or age, regardless of the insured's health C. Anytime at the policyowner's request D. Typically with no change in premium

B. At a predetermined date or age, regardless of the insured's health

Decreasing term life insurance is often used to A. Provide coverage for estate taxes B. Provide coverage for a home mortgage C. Accumulate cash value D. Provide retirement funds

B. Provide coverage for a home mortgage A common use for decreasing term life insurance is to cover a home mortgage.

The type of policy which pays on death of the last person is called A. Joint Life B. Survivorship Life C. Shared life D. Dual Life

B. Survivorship Life

The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is A. The payment period has no affect on the premium payment B. The shorter the payment period, the higher the premium C. The longer the payment period, the higher the premium D. The shorter the payment period, the lower the premium

B. The shorter the payment period, the higher the premium With a whole life policy, the shorter the payment period, the higher the annual premium.

A renewable Term Life insurance policy allows the policyowner the right to renew the policy _____. A. Paying the same premium as before the renewal B. Without producing proof of insurability C. As many times as the policy owner chooses D. At anytime the policy owner chooses

B. Without producing proof of insurability If term life insurance is renewable the policyowner is purchasing the right to renew the policy without showing proof of insurability.

Level premium permanent insurance accumulates a reserve that will eventually A. Require the policyowner to make periodic withdrawls B. Become larger than the face amount C. Equal the face amount of the policy D. Pay a dividend to the policyowner

C. Equal the face amount of the policy Level premium permanent insurance accumulates a reserve that will eventually equal the face amount of the policy

A limited payment whole life policy provides A. Protection for more than one person B. Protection for 20 years C. Lifetime protection D. Discounted premiums

C. Lifetime protection Premiums on limited payment whole life insurance are paid for a limited number of years, but the benefits last a lifetime.

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive? A. $500,000 B. $100,000 C. Nothing D. $250,000

C. Nothing Her beneficiary will receive nothing because the policy is valid for only 10 years

Variable insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance? A. Policyowner may increase or decrease the premium payments B. Policyowner may increase or decrease the face amount C. Policyowner has the right to select the investment which will provide the greatest return D. Policyowner can contribute large sums of money

C. Policyowner has the right to select the investment which will provide the greatest return The right to select the investment which will provide the greatest return pertains only to variable universal life insurance.

What happens to the coverage under a children's term rider when that child reaches a certain specified age? A. Coverage remains as long as proof of insurability is provided B. Coverage increases automatically C. Coverage decreases automatically D. Coverage is eliminated

D. Coverage is eliminated

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider? A. Can be converted to permanent coverage without evidence of insurability B. Coverage can be different for each child C. Premiums on this rider are not required until the limiting age is reached D. Increases the policy's overall cash value

C. Premiums on this rider are not required until the limiting age is reached

Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy's cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this? A. Modified Whole Life Policy B. Increasing Term Life Policy C. Universal Life Policy D. Nonparticipating policy

C. Universal Life Policy

Decreasing term life insurance is often used to A. Provide retirement funds B. Accumulate cash value C. Provide coverage for estate taxes D. Provide coverage for a home mortgage

D. Provide coverage for a home mortgage