Chapter 4 pt.1 - Life Insurance Policies
How does the cost for a survivorship life policy compare to the cost of combining two separate individual life insurance policies?
Survivorship life policy is lower
When a 10 year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for...
10 year term insurance for a person aged 55
A "premature" distribution form a modified endowment contract (MEC) incurs a penalty tax of...
10%
Which statement concerning an adjustable life insurance policy is FALSE?
Evidence of insurability is required when there is a change in premium
Which statement regarding a single premium life insurance policy is NOT correct?
Additional premiums may be required under certain conditions
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 the cash amount
How long does one premium payment cover in a single premium whole life policy?
Full life of the policy
When can a life insurance policy be issued WITHOUT the insured's consent?
When a parent purchases policy on the life of a minor child
When would evidence of insurability be required for a person already covered with a variable universal life policy?
When the death benefit is increased
Laura added a children's rider to her life insurance policy. What type of coverage was added?
Level term
A survivorship life insurance policy usually covers how many lives?
2
Which of these is NOT an advantage of term life insurance?
A cash benefit will be provided if the insured is alive at the end of the policy period
An individual who purchases a modified life insurance policy expects...
An improvement in future income
Which of these life insurance policies does NOT contain a cash value provision?
Decreasing term life
A policyowner has just borrowed from a life insurance policy's cash value. Which of these statements is true?
In the event of death, the loan amount is deducted from the policy proceeds
All of these are considered features of whole life insurance EXCEPT...
Initial premium is lower than for an equivalent amount of term insurance
Which statement regarding whole life insurance is accurate?
Insurance coverage can continue for life
The insurance coverage in a variable life insurance policy may vary based on the value of...
Its underlying investments
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
Which of these policies is considered a whole life policy?
Single premium life
Which statement concerning adjustable life insurance is accurate?
The face amount and premiums can be changed simultaneously by the policyowner
Which of these must be disclosed in a universal life policy?
The policy's surrender charges
What is a juvenile life insurance policy?
A life policy that covers the life of a minor
Group credit life insurance is typically a form of...
Decreasing term insurance
Which of the following is generally a form of group credit life insurance?
Decreasing term insurance
What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?
Joint life
The death proceeds of a credit life insurance policy are typically paid to the...
Lender
Which of the following is a TRUE statement regarding universal life insurance?
Policy indicates how much of each premium is used toward company expenses
These are all accurate statements regarding universal life insurance EXCEPT...
Policy loans are not permitted
All of these statements concerning group credit life insurance are false EXCEPT...
The face amount is based on the outstanding loan balance
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?
The person insured
A material change in a modified endowment contract (MEC) results in...
The seven pay test, adjusted for cash value, applies again
How does a continuous premium whole life policy differ from a limited payment whole life policy?
The time period in which premiums will be paid
Which of the following statements about universal life insurance is NOT true?
Universal life insurance normally has a minimum guaranteed cash value for duration of the policy
How long does protection normally extend to under a limited pay whole life policy?
Until age 100
Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?
Variable universal life
Which statement concerning a decreasing term life policy is accurate?
Face amount decreases over the policy period
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 of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance
John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?
100%
Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?
30-year decreasing term
Which of the following combinations best describe a universal life insurance policy?
A flexible premium deposit fund and a monthly renewable term insurance policy
Which of these is NOT considered a type of limited payment whole life insurance?
Endowment at age 70
An advantage of owning a flexible premium life insurance policy would be...
The policyowner can make policy changes without difficulty