Chapter 4 Mod 3 Quiz

Who is the beneficiary of a credit life policy?

Credit life insurance is issued on the life of the person who has the debt (debtor) and the creditor owns and is the beneficiary of the policy. The correct answer is: Creditor

Charlotte takes out a $14,000 loan. How much credit life insurance can the creditor take out on Charlotte?

The amount of credit life insurance can at no time exceed the balance of the debt. The correct answer is: $14,000 plus interest

A policy known as interest-sensitive whole life is:

Current assumption whole life is also known as interest-sensitive whole life. The correct answer is: Current assumption whole life

A policy with flexible premiums based on a changing current interest rate is:

Current assumption whole life provides flexible (varying) premiums based on a changing current interest rate. The correct answer is: Current assumption whole life

An endowment life insurance policy is characterized by all of the following, EXCEPT:

Endowment contracts mature on a particular date or when the insured reaches a certain age, such as 20 years from the date of purchase or until the insured reaches the age of 65. For this reason, the cash value in an endowment policy must accrue very quickly, demanding a significantly higher premium. The correct answer is: Endowment contracts endow only upon the insured's death.

Upon the death of the last person insured, the _________ policy pays a death benefit.

With a survivorship life policy, the policy proceeds are only paid upon the death of the last person insured. The correct answer is: Survivorship life policy

The beneficiary of a credit life insurance policy is the:

Credit life insurance is issued on the life of the person who has the debt (debtor) and the creditor owns and is the beneficiary of the policy. The correct answer is: Creditor

Which policy will pay benefits on the death of the second insured?

A survivorship life policy, or second-to-die policy, pays life insurance proceeds on the death of the second insured. The correct answer is: Survivorship life policy

All of the following are true regarding credit life insurance, EXCEPT:

As the debt is paid off, the face amount decreases to match the amount of the debt. At any time, the face amount of the policy cannot be greater than the amount of the debt. Credit life policies may be issued individually or through a group policy. Credit life policies usually are issued for a period of 10 years or less. Other forms of life insurance, aside from credit life, may be used to cover a debt. The correct answer is: Credit life insurance is only sold through a group policy.

What policy is usually used for credit life insurance?

Credit life insurance is usually issued as decreasing term life. As the debt is paid off, the face amount decreases to match the amount of the debt. The correct answer is: Decreasing term

Which of the following is not a way that an endowment policy can mature?

There are two scenarios for endowment policy maturation: 1.) upon the insured's death, or 2.) at the end of the policy period, even if the insured is alive. At the end of the policy period, the cash value equals the face amount. The correct answer is: Surrender of cash value