Chapter 1 Exam -- Life Policies

Variable Life Insurance and Universal Life Insurance are very similar. Which of these features are held exclusively by Variable Universal Life Insurance?

Policyowner has the right to select the investment which will provide the greatest return.

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test?

Pre-death distributions are typically taxable

Under a Modified Endowment Contract, what are the likely tax consequences?

Pre-death distributions will become taxable

What two policy features can be changed with "Adjustable Life"?

Premium and Face Amount

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

What are the premium payments for a Universal Life Policy NOT used for?

Separate account investments

The type of multiple protection coverage that pays on the death of the last person is called a(n):

Survivorship Life Policy

What is NOT a valid option for an Adjustable Life Policy?

A nonforfeiture option can be used to increase the death benefit

A single premium cash value policy can be described as:

A policy that is paid up after only one payment.

A policyowner may change two policy features on what type of life insurance?

Adjustable Life

Which policies does NOT build cash value?

Term Life Insurance

What is a corridor in relation to a Universal Life insurance policy?

The gap between the total death benefit and the policy's cash value.

Someone purchases a 10-year level term life insurance policy that has a death benefit of $200,000. What happens to the face amount and premium during the 10 years?

The remain constant.

The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is

The shorter the payment period, the higher the premium

A life insurance policy that is subject to a contract interest rate is referred to as:

Universal Life

A partial surrender is allowed in which of the following life policies?

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?

Universal Life Insurance

Universal Life Insurance policies do NOT have a:

fixed surrender value

A life insurance policy that has premiums fully paid up within a stated time period is called:

limited payment insurance

Term insurance is appropriate for someone who:

seeks temporary protection and lower premiums

What types of life insurance are normally used for key employee indemnification?

term, whole, and universal life insurance

Pre-death distributions from a modified endowment contract (MEC) receive different tax treatment that other life insurance policies becuase...

the MEC tends to be an investment vehicle

A securities license is required for a life insurance producer to sell:

Variable Life Insurance

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable Universal Life Policy

"When a whole life policy is surrendered, income takes may be owed" applies to what policy?

Whole Life Policy

Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds:

Will no longer provide insurance protection

A Modified Endowment Contract (MEC) is best described as:

a life insurance contract which accumulates cash values higher than the IRS will allow

A Renewable Term Life insurance policy can be renewed...

at a predetermined date or age, regardless of the insured's health

This is NOT a characteristic of a Universal Life Insurance Policy:

Builds cash value

This person is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?

Can be converted to permanent coverage without evidence of insurability.

Someone is a whole life insurance policyowner and would like to add coverage for his two children. Which product would allow him to accomplish this?

Child Term Rider

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

Coverage is eliminated

Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)?

Death Benefit

This person has a $100,000 30-year mortgage on their new home. What type of life insurance could she purchase that would be designed to pay off the loan balance if she dies within the 30-year period?

Decreasing Term Insurance

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Endowment Policy

Level Premium Permanent insurance accumulates a reserve that will eventually:

Equal the face amount of the policy

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?

Equity Index Whole Life

What does the word "level" in Level Term describe?

Face Amount

Which of these riders will pay a death benefit if the insured's spouse dies?

Family Term Insurance Rider

What policy feature makes a universal life policy different from a whole life policy?

Flexible Premium Schedule

A business will typically use which type of life insurance to cover their employees?

Group Policy

A life insurance policy written on one contract for two people in which it is payable upon the first death is called:

Joint Life Insurance

Which type of life insurance is normally associated with a Payor Benefit rider?

Juvenile Insurance

What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death?

Last Survivor Life Insurance

A limited payment whole life policy provides:

Lifetime Protection

A Whole Life Policy with premiums paid up after 20 years would best exemplify what insurance policy?

Limited Pay Life Insurance

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n):

Limited Pay Policy