Chp. 3 Life Insurance Policies- Provisions, Options and Riders Exam 1 Life Policies

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20-pay Life -The shorter the pay period, the faster the cash value growth.

Under a Renewable Term policy,

the renewal premium is calculated on the basis of the insured's attained age

Which of these life products is NOT considered interest-sensitive? A.) Modified Whole Life B.) Variable Universal Life C.) Interest Sensitive Whole Life D.) Variable Life

Correct Answer: A.) Modified Whole Life

L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances? A.) L's spouse dies at age 62 B.) L's spouse dies at age 66 C.) Their natural child dies at age 18 D.) Their adopted child dies at age 18

Correct Answer: B.) L's spouse dies at age 66

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?

Equity index insurance

Which of these statements describe a Modified Endowment Contract (MEC)?

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract -Policies that do not meet the 7-pay test are considered MEC's and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period.

Term insurance has which of the following characteristics?

Expires at the end of the policy period

What type of life policy covers 2 lives and pays the face amount after the first one dies?

Joint Life Policy

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

Ten-Year Endowment

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term Life

What kind of life insurance product covers children under their parent's policy?

Term Rider

Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?

There is a flexible premium payment

A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities

Variable

Which of the following policies combines investment choices with a form of Term coverage?

Variable Universal Life

A life insurance policy that provides a policyowner with cash value along with a level face amount is called:

Whole life

What kind of special need would a policyowner require with an Adjustable Life insurance policy?

flexible premiums

What kind of premium does a Whole Life policy have?

level

If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase:

A Whole Life Policy with an Other Insured Rider

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it? A.) Modified Whole Life B.) 20-Pay Life C.) Decreasing Term D.) Endowment

Correct Answer: C.) Decreasing Term

Whole Life insurance policies are contractually guaranteed to provide each of the following, EXCEPT: A.) cash value that will ultimately replace the death benefit B.) nonforfeiture benefit options C.) premiums that remain fixed for the life of the policy D.) partial withdrawal features beyond a surrender charge period

Correct Answer: D.) partial withdrawal features beyond surrender charge period