Chapter 3

A Long-Term Care Rider provides up to what percentage of the policy's death benefits if the insured qualifies for long-term care benefits based on being chronically ill as defined in the rider? A 100 B 80 C 50 D 75

1 hunnit

Joe has a whole life policy with a guaranteed insurability rider. He was 21 at the time the policy was issued. If he exercises all of the options at the ages specified under the typical rider, how many policies will he end up with? A 2 B 7 C 6 D 3

7

The Double Indemnity Rider requires that the insured die within _____ days of the accident. A 180 B 365 C 120 D 90

90

Jacob owns a policy that pays a death benefit only if he dies within the 20-year policy period. If Jacob dies anytime that the policy is in force, his beneficiary will receive $100,000. The premium that Jacob pays for this policy will be the same throughout the 20-year policy period. Jacob owns: A A Decreasing Term policy B A Level Term policy C A Re-Entry Term policy D An Increasing Term policy

A Level Term Policy

The face amount of an Ordinary Whole Life Policy _________ over the life of the policy. A Remains the same B Decreases C Increases D Varies

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? A Renewable and Convertible B Convertible C Renewable D Non-Renewable and Non-Convertible

Renewable and Covertible

Who has a right to rescind a life settlement contract? A The insurer B The owner of the life insurance policy C The life settlement provider D The life settlement broker

The owner of the life insurance policy

The method of premium can vary depending on the: A Age of the insured B Type of policy issued C Insurer that issued the policy D Health of the insured

Type of Policy

Typical exclusions or restrictions found in an accelerated death benefit include all of the following, except: A Engaging in illegal occupations or activities B Accidental injury while at work C Suicide D Intentional self-inflicted injury

Accidental injury while at work

The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________. A Endowment Value B Cash Value C Rider Value D Annuity Value

Cash Value

The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy. A Varies B Remains the same C Decreases D Increases

Decreaes As the cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon the death of the insured. It is a way to keep the premiums affordable as the insured ages and the risk of death increases.

Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured? A Renewable Term B Split Level Term C Ordinary Term D Decreasing Term

Decreasing Term

Frieda wants coverage until she has paid back her business loan in 10 years. The ideal life insurance policy with the least expense would be: A Variable Universal Life B Decreasing Term Life C Universal Life D Participating Permanent Life

Decreasing Term Life

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 _________. A Endowment B Reinstatement C Renewal D Conversion

Endowment

If the premium can fluctuate at the policyowner's discretion, meaning it can be increased, decreased, or even skipped at any premium due date, what premium paying method was used? A Adjustable B Special C Modified D Flexible

Flexible

What type of term life insurance policy has its policy premium guaranteed to remain level throughout the term of the policy? A Guaranteed level B Non-guaranteed level C Indeterminate D Adjustable

Guaranteed level

All of the following are characteristics of Ordinary Whole Life Insurance, except: A Premiums are designed to be paid throughout the life of the insured B If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner C Premiums remain uniform D The policy pays the face value if the insured dies before age 100

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

A Return of Premium Term policy provides for a full refund of premiums under what situations and circumstances? A If the insurer does not deviate from the current illustrated rates at the time the policy was issued B If the insured's health has not changed and the beneficiaries sign-off on the appropriate document C If the insured is not completely satisfied at any time D If the insured is still living at the end of the term

If the insured is still living at the end of the term

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. A $250,000 B Zero C $225,000 D $275,000

$275k

If Jon dies with an outstanding policy loan of $10,000 on his $100,000 policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim? A $100,000 B $90,000 C $105,000 D $115,000

$90,000 Upon death, the insurance company recovers any outstanding loan prior to paying out a claim to the beneficiary.

The applicant/insured wants a term life insurance policy that will last for 20 years and is willing to risk that the insurer is managing its financial affairs properly and is not concerned about the premium of the policy down the road so long as there is a cap on how much it can ultimately become, so the producer should show him/her a(n): A 20 year adjustable premium term life insurance policy B 20 year guaranteed level premium term life insurance policy C 20 year indeterminate premium term life insurance policy D 20 year non-guaranteed level premium term life insurance policy

20 year indeterminate premium term life insurance policy

A Living Needs Accelerated Benefit Rider allows the early payment of a portion of the face amount of a life insurance policy before death, should the insured become terminally ill with less than how many months to live? A 36 B 24 C 60 D 48

24

Credit life insurance is a special form of what type of term life insurance? A Decreasing B Increasing C Level D Annually renewable 30 year

Decreasing

Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured? A Decreasing Term B Ordinary Term C Split Level Term D Renewable Term

Decreasing Term

All of the following are characteristics of Ordinary Whole Life Insurance, except: A Premiums remain uniform B Premiums are designed to be paid throughout the life of the insured C If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner D The policy pays the face value if the insured dies before age 100

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

If the insured qualifies for long-term care benefits based on being chronically ill as defined in the Long-Term Care rider, how will this impact the ultimate death benefit payable to the beneficiary? A It will be reduced B It will be increased C It will have no impact so long as the policyowner pays the required fee and any interest charges D It will have no impact

It will be reduced

A Life Settlement Contract is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for how much? A 3 times the cash value B 80% of the face value of the policy if the insured is between the ages of 65 and 70 C 2 times the premium paid into the policy D More than the cash surrender value and less than the face value

More than the cash surrender value and less than the face value

The face amount of an Ordinary Whole Life Policy _________ over the life of the policy. A Decreases B Increases C Remains the same D Varies

Remains the Same

Individual Term policies are generally stand-alone policies, but may be written with other types of policies as a(n): A Dividend B Bonus C Endorsement D Rider

Rider

If an insured has a Life Paid-Up at 75 Policy (a limited-pay life paid-up at age 75), what would the beneficiary receive if the insured died at age 68? A The face amount plus the cash value B The face amount C The cash value D The face amount minus the cash value

The Face amount

A life insurance premium is paid each month. The insurer then subtracts a mortality and expense charge from the policy's cash value. This best describes which of the following life insurance policies? A Universal Life B Whole Life C Variable Whole Life D Adjustable Whole Life

Universal Life

A Guaranteed Universal Life policy is also referred to as a(n): A Universal Life with a No-Lapse Guarantee B Permanent term life insurance C Flexible premium adjustable life insurance D Traditional whole life

Universal Life with a No-Lapse Guarantee

Which of the following is NOT a type of Term Life Insurance Policy? A Increasing B Level C Decreasing D Variable

Variable

Which of the following policies requires a producer to have both a life and securities license to sell? A Indeterminate Premium B Equity-Indexed C Universal D Variable Universal

Variable Both Variable Life and Variable Universal Life require a securities and life license to sell. A securities license is not required for Adjustable Life, Universal Life, or Equity-Indexed Life.

A Life Settlement Contract is

a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for more than the cash surrender value and less than the face value.

Variable Universal Life's cash values

grow based on the performance of the separate accounts chosen by the policyowner, while the other three policies have interest credited to the cash values by the insurer.

Joint Survivorship Life

pays upon the death of the last to die, and for this reason it is a popular policy with couples who want to defer estate taxes until both are deceased. It is also more economical to buy this one policy than to buy two separate policies.

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? A $15,000 B $30,000 C $25,000 D $20,000

25k

What happens if a Return of Premium Term policy is not held to the end of term? A There will be no return of any premium paid B All premiums paid can be used to offset the first year cost of a traditional whole-life insurance policy C There will be a nominal return of premiums paid, the amount will depend upon how long the policy was in-force D All premiums paid can be 'rolled-over' into an annuity using the IRS Code 1035 exchange rules

C There will be a nominal return of premiums paid, the amount will depend upon how long the policy was in-force

What type of term life insurance policy has a policy premium that can fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns? A Indeterminate B Flexible C Increasing D Adjustable

Indeterminate

Universal Life

All premiums paid to a Universal Life Policy are placed in the policy's cash value account. The mortality charge (cost of protection) and expenses are then deducted from the cash value account.

Which of the following best describes the return of premium rider? A A level term rider in the amount of 20 annual premiums B An increasing term benefit that matches the cumulative premiums paid C An increasing term benefit that matches the cash value accumulation D A benefit similar to waiver of premium, but is free of charge

An increasing term benefit that matches the cumulative premiums paid

A married couple wants to have funds available so that the heirs to their estate have the funds necessary to pay the estate taxes. Which of the following would be the most economical and effective way to accomplish this? A Buy a Joint Survivorship Life policy B Buy a Joint Life policy C Buy a Whole Life policy on each spouse D Have one spouse buy a whole life policy and the other one a Universal Life policy

Buy A Joint survivorship life policy

The Return of Premium Rider, the Return of Cash Value Rider, and the Cost of Living Rider all use which type of term insurance to accomplish their objective? A Level Term B Re-Entry Term C Increasing Term D Decreasing Term

Increasing Term The purpose behind each of the 3 riders in the question is to increase the death benefit to fulfill the objective of the rider.

A _________ policy is one that is written on the life of a minor. A Equity-Indexed Whole Life B Joint Survivorship Life C Joint Life D Juvenile

Juvenile

Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions? A Living Needs Transaction B Buy/Sell Agreement C Life Settlement D Viatical Trust Settlement Agreement

Life Settlement

When credit life insurance is used to protect against the unpaid balance of a mortgage, it is commonly referred to as: A Mortgage redemption insurance B Creditor protection insurance C Decreasing term life insurance D Debtor estate protection insurance

Mortgage redemption insurance

What is the maximum amount of credit life insurance that can be written on an insured? A $100,000 B $250,000 C $50,000 D No more than the outstanding debt

No More than the Outstanding Debt

While a Guaranteed No-lapse Rider relieves the policyowner of the responsibility of monitoring the policy's cash value what is required of him/her to make sure that the policy's no-lapse rider remains in effect? A Remain in good health B Keep his/her address up-to-date with the insurer C Do not change to a more hazardous occupation D Pay the premium in full and on time

Pay the Premium in full and on time

All of the following life insurance policies have a cash value that increases based on interest being credited to the cash value, except: A Current Assumption Whole Life B Equity-Indexed Whole Life C Variable Universal Life D Universal Life

Variable Universal Life