A.D. Banker Ch.3 Study Sets

Jason has a Whole Life insurance policy with a face amount of $100,000, an annual premium of $1,000, and a cash value of $10,000. If he wants to borrow money from the insurer, what is the maximum he can obtain?

$10,000

An insured purchases a 20-Pay Life Policy with a face amount of $25,000 and an annual premium of $1,000. The insured dies 15 years later when the cash value is $5,000. What amount will the beneficiary receive?

$25,000

If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, upon his death the amount of the benefit payable to the beneficiary would be _________ if the policy had $25,000 in cash values.

$275,000

C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. What is the maximum loan C can obtain from the insurer using the policy as collateral for the loan?

$30,000

Z suffers a total and permanent disability. The policy he has requires a premium payment of $100 per month. He is on claim for 100 months. Initially, how much did Z have to pay before the waiver of premium benefit on his policy started?

$600

If a universal life policy with the increasing death benefit option has an initial face amount of $75,000 and cash value of $10,000, the actual death benefit would be:

$85,000.00

A convertible term life insurance policy may be converted _____ time(s) for a permanent life policy based on the original or attained age.

1

Which of the following term life insurance policies would have the lowest 1st-year annual premium, all other factors being equal?

1-year

A permanent life policy issued 30 years ago would endow at what age?

100

At what age does the cash value equal the face amount of a traditional whole life policy issued 25 years ago?

100

Which of the following term life insurance policies would have the highest 1st-year annual premium, all other factors being equal?

15-year

Which of the following Whole Life insurance policies has the highest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal?

20-Pay Ordinary Whole Life

For an insured to be deemed terminally ill under the accelerated death benefit rider, he or she must be expected to live no more than _____ months.

24

In determining whether disability is permanent, most companies call for a:

3 to 6 month waiting period

The normal waiting period for benefits under the disability income rider is:

3 to 6 months

Which of the following traditional whole life policies has the lowest first-year annual premium?

40-pay life

Which of the following life insurance policies does not develop a cash value?

5 year term

In a viatical settlement, a third party purchases a policy from a terminally ill insured for approximately _____ to _____% of the policy's face amount.

60/80

The waiver of premium rider normally expires at age:

65

A payor benefit rider is used to keep what type of policy in force?

A jumping juvenile policy

What type of policy has an endowment date, a face amount, and cash value?

A permanent life insurance policy

Which of the following best describes an Annual Renewable Term Policy?

A policy with a level death benefit, but with increased premium at each renewal

Term Life insurance is designed to provide coverage for ___________.

A specified period of time

All of the following are typical exclusions for coverage under an accelerated death benefit rider, except:

AIDS

When the death of an insured occurs within a specified period, causing the policy to pay double or triple benefits, this policy must have which of the following riders?

Accidental Death Rider

The cash value of a permanent life insurance policy can be used for all of the following, except:

Accidental death benefits

A and B are married. They have two minor age children. A and B feel that all family members should have coverage on their lives, not just A. What would be the least expensive way to accomplish this?

Add a term life insurance rider to this policy to provide additional coverage on the spouse and children

A policyowner would like more coverage than the $100,000 Whole Life policy being proposed, but does not have enough discretionary income to pay a lot more money to do so. What can a producer recommend that will allow the policyowner to have the Whole Life policy, but with more total death benefit at an affordable price?

Add a term rider

What is a way to provide additional life insurance protection for a temporary period of time without having to acquire an additional life insurance policy?

Add a term rider to a new or existing policy

An indeterminate premium whole life policy has _______ premiums.

Adjustable

Which of the following situations will require proof of insurability?

Adjusting the face amount up on a Universal Life insurance policy with Option A death benefit selected

All of the following are true about riders, except:

All riders are available free of charge and can be added at anytime without proof of insurability

Which of the following best describes the return of premium rider?

An increasing term benefit that matches the cumulative premiums paid

How often can adjustments be made to Adjustable Life?

Annually

All of the following are true of a Universal Life policy, except:

Any borrowing or partial withdrawal from the cash value account terminates the policy

Premium payments made into a variable universal life policy:

Are invested in one or more investment portfolios at the policyowners option

Premiums for a variable universal life policy:

Can vary in amount as well as payment schedule

What rider is designed to help the insured offset the effects of future inflation on the policy's face amount?

Cost of Living

With a Variable Life Policy, which of the following is guaranteed?

Death benefit

Which of the following term life insurance policies cannot be renewed?

Decreasing

Mortgage or credit life refers to what type of life insurance coverage?

Decreasing term

Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son, Donald. Suppose that when Donald reaches age 21 his father presents him with the policy as a gift. Which of the following statements is NOT correct?

Donald must change the beneficiaries immediately

When the life insurance policy's cash value equals the face amount of the policy and the proceeds are paid to the policyowner, this is known as the policy's _________.

Endowment

The nonforfeiture option that provides the most amount of coverage is:

Extended Term

The ________ is the amount payable to the beneficiary upon death of the insured named in a life insurance policy.

Face amount

A client wants coverage for himself as well as coverage for his wife and children all under one policy at an affordable price. Which of the following would best meet the need?

Family Rider

In order for a death benefit to be paid to a beneficiary, with of a 15-pay Whole Life Policy, the insured must pay premiums:

For 15 years, or until the insured's death, whichever occurs first

All of the following riders will waive the premiums in the event of a disability, except:

Guaranteed Insurability

All of the following are characteristics of Ordinary Whole Life Insurance, except:

If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner

All of the following about Universal Life are true, except:

Increases in face amount do not require proof of insurability if under $100,000

Which type of term protection has an increasing face value as the insured gets older?

Increasing Term

Albert purchased an Adjustable Life Policy that has all of the following characteristics, except:

It allows for adjusting the mortality table used during the policy's lifetime

Which of the following is TRUE of a term rider when attached to a permanent life policy?

It can provide additional temporary coverage on the insured or on other members of the family

What happens to the overall annual premium cost once a term rider expires?

It decreases

All of the following are life insurance disability riders, except:

Jumping Juvenile

A life insurance applicant wants a combination of savings and insurance protection with guarantees. If the applicant is willing to pay premiums only until the age of 65, at which time the policy is fully paid-up, which of the following should he/she purchase?

Limited Pay Whole Life-Age to age 65

A universal life policy with a back-end load:

Makes a service charge when the policy is surrendered

Which of the following uses convertible term to help lower premiums initially and then allows you the right to purchase permanent insurance?

Modified whole life

If X has a life insurance policy that is no longer wanted or needed and is considering selling their policy, how much might X receive if the premiums are $10,000 annually, the cash value is $200,000, and the face amount is $1,000,000?

More than $200,000 but less than $1,000,000

Producers selling variable life insurance:

Must have a valid life license and must also be registered with FINRA

With regard to the waiver of premium rider, after the disability a policyowner normally:

Need not repay the premiums paid by the company during disability

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance:

On his own life at certain specified ages without proof of insurability

Variable Whole Life has all of the following features, except:

Partial surrender are allowed

In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined age?

Payor Benefit (Waiver of Payor Premium)

A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal?

Purchase a Joint life policy

The nonforfeiture option that provides the least amount of coverage is:

Reduced Paid-Up

Which of the following IS true regarding a Living Need (Accelerated Benefit) Rider?

Reduces the death benefit by the amount withdrawn

The face amount of an Ordinary Whole Life Policy _________ over the life of the policy.

Remains the same

Which of the following term life insurance policies would be the most expensive, everything else being equal at the time of issuance?

Renewable and Convertible

A whole life policy:

Requires the insured to pay premiums for life and endows at age 100

An insured dies within the time limit of an Increasing Term Rider and the beneficiary receives the face amount plus the value of all paid premiums. Which rider is attached to the policy?

Return of Premium

Mary decides to convert her Term Policy to permanent protection. Which of the following statements is true regarding the conversion?

She may convert without evidence of insurability

Life insurance that does not require a medical exam is known as:

Simplified issue

Bert is the owner and insured of a permanent life insurance policy he purchased 20 years ago. He has never missed a premium payment. He would like to buy a new car but his bank account is running low. How can he obtain the necessary funds while still maintaining coverage?

Take a policy loan from the insurer

Term life insurance is primarily a _______ form of life insurance protection.

Temporary

Who pays all future premiums after the Viatical Settlement?

The Viatical Company

In a whole life insurance policy:

The cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy

Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except:

The death benefit is not guaranteed

What is the net amount at risk in a Whole Life Insurance policy?

The face amount less the cash values

One of the greatest advantages of convertible and renewable term policies is that:

The insured is not required to show proof of insurability in order to renew or convert

Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider:

The insured remains eligible for all provisions

Which of the following statements about Equity Indexed Life insurance is TRUE?

The interest credited to the policy is based off of the performance of a stock market index like the S&P 500

All of the following are true regarding re-entry term, except:

The new policy's premium will be based on the insured's original age

All of the following provisions of an adjustable life policy may be changed to meet the policyholder's needs, except:

The person named as the insured on the policy

How is Variable Whole Life different from Variable Universal Life?

The policy has a guaranteed minimum face amount

All of the following are characteristics of Universal Life Insurance, except:

The policyowner can choose which investment(s) to place the cash values into from those available

All of the following are correct pertaining to Decreasing Term, except:

The premium declines throughout the term of the policy

If an insured's policy includes the waiver of premium rider, what happens when the age is reached where the rider no longer applies?

The premium for the policy is reduced

What happens to a spouse or child rider just prior to it expiring?

The spouse or child has a conversion option

If a policyowner of a convertible term life insurance policy exercises his/her right to convert, which of the following will happen?

The term policy will be replaced by a permanent life insurance policy

Flexible premium adjustable life is another name for:

Universal Life

A Variable Universal Life (VUL) is a combination of:

Universal and Variable Life

How would a term policy normally be used to pay off a mortgage upon death?

Using the death proceeds after the insured has died

Which of the following is NOT a type of Term Life Insurance Policy?

Variable

What is the 'waiver of premium' called on a Universal Life insurance policy?

Waiver of Cost of Insurance

If an insured is concerned about being unable to pay the premiums on his or her whole life policy in the event of a total disability, which of the following riders should be added to the policy?

Waiver of Premium

If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force.

Waiver of premium rider

Which of the following riders require the insured being totally and permanently disabled before it becomes effective?

Waiver of premium rider

Increases in insurance protection to keep a Current Assumption policy from endowing is provided:

Without evidence of insurability

The net amount at risk to the insurance company at the endowment date is:

Zero