Chapter 4- Life Insurance Policies; Provisions, Options and Riders (Exam 1)
Which statement concerning an adjustable life insurance policy is FALSE?
Evidence of insurability is required when there is a change in premium
A life policy that has premiums that are lower than normal during the early years is called
Modified life
Which of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance (Adjustable life insurance allows the policyowner to adjust the policy's face amount, premium, and type of protection without having to complete a new application or exchange policies. Example: converting a term policy to whole life or vice versa)
Which of the following is a TRUE statement regarding universal life insurance?
Policy indicates how much of each premium is used toward company expenses.
Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?
Provide supplemental income in 35 years.
What would be considered an advantage of purchasing term life insurance?
The initial premium is lower compared to the same amount of whole life coverage
Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?
The person insured
An advantage of owning a flexible premium life insurance policy would be
The policy owner can make policy changes without difficulty
Which is an accurate description of the premium in a graded premium life insurance policy?
Annual increases in premium for a stated number of years then levels off for the remainder of the contract
Which of the following is generally a form of group credit life insurance?
Decreasing term insurance
How long does one premium payment cover in a single premium whole life policy?
Entire life of the policy
Straight whole life insurance can be accurately described in all of these statements EXCEPT
Policy protection expires at age 65
Which of the following would NOT be a reason for purchasing life insurance on a child's life?
Provide benefits for the child if the parent dies
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policyowner on receipt of the cash value?
$16,000 was received tax-free and $4,000 as ordinary income
Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?
Fluctuate with changes in cash account
These are all accurate statements regarding universal life insurance EXCEPT Mortality charge is ded
Policy loans are not permitted
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
the Policy is surrendred for less than what was paid into it
What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?
Less than the policy's face amount
Which statement regarding an adjustable life insurance policy is NOT true?
Policy loans are not permitted
How are level term policies able to provide level premiums?
Premiums are averaged over the term of the policy.
