Chapter 3 Part 1 and 2 - Life Insurance

A 15-year mortgage is best protected by what kind of life policy?

15-year decreasing term

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

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

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the Death benefit

A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT

Change the policy's interest rate

S is covered by a whole life policy. Which insurance product can cover his children?

Child term rider

When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?

Conversion provision

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing term

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

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?

Family Maintenance Policy

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?

Family Maintenance Policy

Who has the option to renew a renewable term policy?

Insured

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

Modified Endowment Contract (MEC)

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and the recipient of any financial benefits from the policy?

Owner's Rights

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Policy Loan provision

What type of life insurance are credit policies issued as?

Term

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):

Third-party with no insurable interest

S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be

Universal Life

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.

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

additional Whole Life coverage at specified times

A cost of living rider gives the insured

additional death benefits

A Term Life rider offers the insured

additional life coverage

The automatic premium loan provision is designed to:

avoid a policy lapse

Under an interest sensitive whole life policy,

cash values are determined by interest rates

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

claims are denied under the suicide clause of the policy

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:

cost.

Which statement regarding the misstatement of age provision is considered to be true?

coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

decreasing term

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)

exclusion

All of these statements concerning Settlement Options are true, except:

only the beneficiary may select

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

pay face amount minus the past due premium

Which of the following actions is NOT possible with a Universal Life policy?

premiums may be applied as a credit against income tax

The amount of coverage on a group credit life policy is limited to

the insured total loan value

The advantage of reinstating an original life policy is

the premiums are based on a younger age

When is the face amount paid under a Joint Life and Survivor policy?

upon the death of the last insured

A Life insurance policy owner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as an _____ rate loan.

variable