Exam Ch 5-19 questions
A furniture company is owned by five partners. What business continuation plan would you suggest to the company? Select one:
(a.) Entity plan b. Cross-purchase plan c. Stock redemption plan d. Key person
Which of the following best describes option 1 under a universal life policy? Select one:
(a.) The death benefit is the policy face amount or policy cash value, but not both. b. The death benefit is the policy face amount and the cash value. c. The death benefit is only the face amount. d. The death benefit is only the cash value.
Which of the following life insurance policies is not an example of third party ownership? Select one:
a. Split-dollar plan b. Key employee life insurance c. Group life (d.) Economatic
Net single premium is: Select one:
(a.) Mortality - Interest b. Loading + Gross Premium c. Interest - Gross Premium d. Mortality + Loading
This life insurance policy provides death protection for the insured's entire life, but premiums are not paid for the insured's entire life. Select one:
(a.) 20-pay life b. Economatic life c. Modified whole life d. Indeterminate premium
What policy provides flexible premiums, cash values, face amounts, premium-paying period and length of coverage? Select one:
(a.) Adjustable life b. Whole life c. Equity indexed universal life d. Term life
What is the primary purpose of the Securities Act of 1933? Select one:
(a.) Defines a securities product b. Regulates sales representatives' duties c. Requires insurer to maintain a separate account for variable investments d. Sets a cap for sales fees
The ___________ approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual. Select one:
(a.) Human life value b. Needs c. Salary d. Social Security blackout
The nonguaranteed elements of an insurance policy are: Select one:
(a.) Illustrations b. Policy summary c. Policy face d. Policy terms and conditions
An adjustable life policy allows the policyowner to make all of the following changes, EXCEPT: Select one:
(a.) Invest premiums in a separate account b. Change the length of the coverage period c. Increase or decrease the premium d. Change the length of the premium-paying period
Some universal policies permit a cash withdrawal. All of the following are true statements about universal life, EXCEPT: Select one:
(a.) It is treated as a loan. b. It will reduce the cash value. c. It is not subject to interest. d. Repayment is treated like a premium payment.
Which of the following policies has a level face amount with level premiums? Select one:
(a.) Level premium term b. Convertible term c. Decreasing term d. Annual renewable term
Which of the following laws defined a security product? Select one:
(a.) Securities Act of 1933 b. Securities Act of 1934 c. Investment Company Act of 1940 d. None of the above
What business continuation agreement would you recommend to a corporation with 3 shareholders so that when a shareholder dies, all other shareholders agree to purchase a portion of the deceased shareholder's stock at an agreed price? Select one:
(a.) Stock purchase plan b. Section 303 stock redemption c. Entity plan d. Stock redemption plan
Which type of life insurance provides living benefits? Select one:
(a.) Whole b. Term c. Conventional d. No life insurance policy provides living benefits.
Level premium life insurance policies usually have ______ premiums in order to account for the greater risk of death with advancing age. Select one:
(a.) higher b. lower c. increasing d. decreasing
Betty and Jack have a partnership. If their partnership is worth $800,000 how much life insurance is issued on each partner if a cross-purchase plan is used? Select one:
a. $200,000 (b.) $400,000 c. $800,000 d. $1 million
Judy wants to purchase whole life insurance, but cannot afford straight life insurance premiums. Her agent recommends she purchase economatic whole life. If Judy wants $500,000 of whole life coverage, which of the following is a possible arrangement? Select one:
a. $500,000 term; $0 whole b. $350,000 term (c.) $400,000 whole; $100,000 term d. $500,000 whole; $0 term
What is business life insurance used for? Select one:
a. An employee benefit b. A funding tool c. Business interruption insurance (d.) All of the above
All of the following are true regarding purchase of personal life insurance for charity, EXCEPT: Select one:
a. Coverage is taken out on the life of the person buying the policy. b. The charity is named as the beneficiary. c. The person buying the policy pays the premiums, which are usually tax-deductible. (d.) The person purchasing life insurance for charity must have insurable interest in the lives of the charity's members.
All of the following are guaranteed features in a variable life insurance policy, EXCEPT: Select one:
a. Death benefit (b.) Cash value c. Premium rate d. Period of death protection
This policy insures the primary breadwinner with whole life and level term: Select one:
a. Family income policy (b.) Family maintenance policy c. Protection plan d. Juvenile policy
Which policy has a face amount that increases by five times the original policy face when the insured child reaches the age of 21? Select one:
a. Family protection plan (b.) Estate builder c. Ordinary whole life d. Universal life
All of the following are features of variable universal life insurance, EXCEPT: Select one:
a. Flexible premiums b. Cash value (c.) Death protection is not deducted from cash value d. Death benefit option A or B
___________ policies have premiums that fluctuate between the current rate and maximum rate, as stated in the policy. Select one:
a. Increasing b. Interim (c.) Indeterminate premium d. Decreasing
Which of the following is not used to calculate the premium for life insurance contracts? Select one:
a. Loading b. Interest (c.) Morbidity d. Mortality
After looking at his options, Randy decided on a single premium whole life policy. What is the main advantage of this type of policy? Select one:
a. Only one payment is due. b. The policyholder is covered immediately. c. There is no medical exam. (d.) The total premium is lower.
All of the following statements are correct regarding variable universal life contract charges and fees, EXCEPT: Select one:
a. Sales and loading charges are deducted from the policy's cash value. b. The full cost of death protection is deducted from the policy's cash value. c. Insurers must provide policyowner's with an annual statement of charges and interest earned. (d.) Interest earned is credited to the death benefit.
Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy? Select one:
a. Split-dollar b. Executive bonus plan (c.) Key person insurance d. Section 303 plan
All of the following are buy-sell agreements, EXCEPT: Select one:
a. Stock redemption plan b. Cross-purchase plan c. Entity plan (d.) Split-dollar plan
All of the following are personal uses of life insurance, EXCEPT: Select one:
a. Survivor protection b. Estate creation c. Cash accumulation (d.) Business financial relationship
When must insurable interest be shown for a life insurance policy? Select one:
a. When death benefits are paid b. When submitting the claim c. When the policy is delivered (d.) Upon policy application
Because variable contracts are equity products, they are subject to various regulations. Which of the following applies to variable contracts? Select one:
a. NAIC regulations (b.) The 12% rule c. Flexible premium amounts d. Insurance regulations only
Gerald wants a life insurance policy in which he can choose the investment vehicle. Which policy would you recommend to him? Select one:
a. Ordinary whole (b.) Variable life c. Universal life d. Adjustable life
All of the following policies could be offered as variable policies, EXCEPT: Select one:
a. Ordinary whole life (b.) Decreasing term c. Joint life d. Universal
Which policy is a combination of whole life and convertible term, and has lower premiums in early policy years and higher premiums in later years? Select one:
a. Ordinary whole life (b.) Modified whole c. Joint life d. Economatic
Employer-paid premiums used to fund group life insurance for the benefit of employees are: Select one:
a. Paid with after-tax dollars (b.) Tax-deductible as a business expense c. Not tax-deductible d. Refunded to employers each year
What part of a mortgage reduction policy decreases over time? Select one:
a. Policy premiums b. Cash value (c.) Face amount d. Policy term
What happens when the cash value of a life insurance policy equals the face value? Select one:
a. Taxes must be paid on the interest accumulation. b. Premiums must be increased so the policy does not become a MEC. (c.) The policy endows. d. The policy is void.
Term insurance is categorized by all of the following, EXCEPT: Select one:
a. Temporary protection b. Premiums increase each time the policy is renewed (c.) Policy cash value grows tax-deferred d. Provides the largest amount of protection for the least amount of premium
All of the following characterize term life insurance, EXCEPT: Select one:
a. Term life insurance provides the largest amount of coverage for the lowest amount of premium. b. Term life insurance provides pure death protection. (c.) Term life insurance provides living benefits (cash accrual). d. Term life insurance usually cannot be renewed beyond a certain age, usually 75.
Who is responsible for the dissemination and content of insurance advertisements? Select one:
a. The advertising company b. The producer (c.) The insurer d. The state department of insurance
Angela took out a $2,000 policy loan from her whole life insurance policy. The policy face amount is $200,000. If Angela does not repay the loan, how will the death benefit be affected? Select one:
a. The death benefit will be increased by $2,000. b. The death benefit will be decreased by $2,000. c. The death benefit will remain the same. (d.) The death benefit will be decreased by $2,000 plus interest.
What happens when a universal life policyholder pays the target premium? Select one:
a. The face amount will automatically increase. b. The face amount will automatically decrease. c. The policy will resemble term life insurance. (d.) The policy will resemble whole life insurance.
A life insurance policy summary includes all of the following, EXCEPT: Select one:
a. The insurance agent's name b. Policy premium amounts c. Policy loan interest rates (d.) Policy illustrations
All of the following are true regarding claims for life insurance policies, EXCEPT: Select one:
a. The only claim in a life insurance policy is the insured's death. b. Upon the insured's death, the policy proceeds are paid to the beneficiary. (c.) In order for death benefits to be paid, the insurer must receive notice of the insured's death, but does not need the death certificate. d. Life insurance claims are typically paid within a few days of the insured's death, but the insurer may have up to 60 days to pay claims.
Joanna's cash value in her life policy was reduced to zero. Which of the following statements is TRUE about the effect on her cash value life insurance policy. Select one:
a. There was no effect. b. Her policy lapsed when the premium did not get paid. c. The APL borrowed from the face value of the policy. d. Consideration clause
Which of the following policies allows the policyowner to buy term and direct the investments made in the cash value account? Select one:
a. Variable b. Universal (c.) Variable universal life d. Equity indexed universal life
The third party that purchases a life insurance policy death benefit from a terminally ill insured is termed: Select one:
a. Viator b. Viatical settlement (c.) Viatical settlement provider d. Insurance producer
Which policy has fixed premiums, a guaranteed minimum death benefit and nonguaranteed cash values? Select one:
a. Whole life b. Universal life (c.) Variable whole life d. Variable universal life
All of the following are characteristics of whole life insurance, EXCEPT: Select one:
a. Whole life insurance is permanent protection providing death protection for the insured's entire life. b. Whole life insurance provides living benefits in addition to permanent life insurance. c. Whole life insurance policies use the insured's age at issue to establish policy premiums. (d.) The cash value in a permanent life insurance policy is not a nonforfeiture benefit.
In life insurance the risk of death increases with age, so premiums must be ______ in ______ years to account for this risk. Select one:
a. lower; earlier b. higher; earlier c. lower; later (d.) higher; later
A limited payment life insurance policy is best suited for: Select one:
(a.) Josh, a 25-year old successful entrepreneur with extra funds, who doesn't want to pay life insurance premiums when he retires. b. Kelly, a 40-year single waitress who wants the most insurance protection for the least amount of money. c. Megan and Tom, newlyweds who need a life insurance policy to cover the mortgage on their house. d. Berry, an 18-year old student with limited funds.
Gina and Jerry are purchasing life insurance. They decided on policies that would be paid up in 20 years. What type of policies did they purchase? Select one:
(a.) Limited payment policies b. Continuous payment policies c. Economatic policies d. Single premium policies
For replacement transactions, an insurance producer's duties include all of the following, EXCEPT: Select one:
(a.) Notify existing insurers of policies to be replaced b. Provide the applicant with a policy cost comparison statement c. Make a list of all existing policies the applicant intends to replace d. Leave a notice regarding replacement with the applicant
A person with this risk classification will have a discounted premium from the rates provided in the C.S.O. tables. Select one:
(a.) Preferred b. Standard c. Substandard d. Declined
For what reason would the insurance company raise the death benefit of a universal life policy? Select one:
(a.) Prevent the cash value from growing too quickly b. Require the policyowner to pay higher premiums c. To accommodate lower cash value growth d. To allow the policy to become a MEC
Which of the following is not a way that an endowment policy can mature? Select one:
(a.) Surrender of cash value b. When the cash value equals the face amount, at the end of the policy period c. When the policy period ends, even if the insured is alive d. Upon the death of the insured
What are the two major types of life insurance? Select one:
(a.) Term and whole b. Permanent and whole c. Temporary and term d. None of the above
Why are whole life policies more expensive than some other insurance options? Select one:
(a.) They must cover cash values, net insurance and mortality costs, as well as expenses. b. They last a really long time. c. The policyholders are high risk. d. Whole life is generally not more expensive.
What policy can be described as annual renewable term with a cash value account? Select one:
(a.) Universal life b. Adjustable life c. Decreasing term d. Modified whole life
Ben applies for a life insurance policy on himself. How much insurable interest does Ben have in his own life? Select one:
(a.) Unlimited b. Up to $100,000 c. Up to $1 million d. Up to $100 million
Each member insured under a group life insurance policy receives a(n): Select one:
a. Master policy (b.) Certificate of insurance c. Insurance policy d. Whole life coverage
A policy known as interest-sensitive whole life is: Select one:
a. Modified whole life b. Economatic whole life (c.) Current assumption whole life d. Graded premium whole life
Which of the following characteristics does not describe convertible term life insurance policies? Select one:
Which of the following characteristics does not describe convertible term life insurance policies? Select one: a. No matter which age is used, premiums will be higher when the policy is converted. b. Most converted term policies use the insured's attained age to determine the new premium. (c.) The attained age is the insured's age upon purchase of the term life insurance policy. d. The terms of the conversion option are clearly stated in the policy.
Which of the following is not a characteristic of decreasing term life insurance? Select one:
Which of the following is not a characteristic of decreasing term life insurance? Select one: a. The policy face decreases to zero by the end of the policy period. (b.) The premium decreases to zero by the end of the policy period. c. The face amount equals zero on the day of policy expiration. d. Decreasing term insurance is often used to insure a mortgage.
Which policy works the same way as universal life, but has an interest rate that is tied to the stock market index? Select one: a. Equity indexed universal life b. Adjustable life c. Flexible premium adjustable life insurance d. Universal life
Which policy works the same way as universal life, but has an interest rate that is tied to the stock market index? Select one: (a.) Equity indexed universal life b. Adjustable life c. Flexible premium adjustable life insurance d. Universal life
To determine the premium rate for health insurance policies, all of the following are used, EXCEPT: Select one:
a. Mortality b. Interest earnings c. Loading (d.) Morbidity
All of the following are true regarding viatical settlements, EXCEPT: Select one:
a. A terminally or chronically ill insured can sell their life insurance policy to a third party in exchange for payment of a large portion of the death benefit. (b.) Viatical settlements are a type of life insurance contract. c. In a viatical settlement, the third party that purchases the insured's life insurance policy is termed the viatical settlement provider, and the insured is termed the viator. d. The portion of the death benefit the viator receives in a viatical settlement ranges from 50 to 80 percent of the death benefit.
Life insurance policy illustrations must contain all of the following, EXCEPT: Select one:
a. Agent's name (b.) Only the guaranteed policy elements c. Generic name of policy d. Insured's age and sex
All of the following are true regarding executive bonus plans, EXCEPT: Select one:
a. An employer gives an employee a bonus in the amount of the premium payments on a life insurance policy. (b.) The employee is the insured and the company is the owner of the policy. c. The employer pays the premiums, but receives a tax deduction in the amount of the premium because it is treated as a pay raise. d. The employee pays income tax on the amount of the pay raise, however the company may _bonus_ the amount of the income taxes.
Which term policy has level premiums and a level face amount? Select one:
a. Annual renewable term b. Decreasing term c. Increasing term (d.) Level premium term
All of the following are true regarding credit life insurance, EXCEPT: Select one:
a. At any time, the face amount of the policy cannot be greater than the amount of the debt. b. Straight life or economatic life insurance may be used to cover a debt. c. Credit life policies are typically issued for a period of 10 years or less. (d.) Credit life insurance is only sold through a group policy.
The time period during which children are young and financially dependent upon their parents is termed the: Select one:
a. Blackout period b. Preretirement period (c.) Family dependency period d. Support period
Sandra wants to have flexibility with her life insurance policy to accommodate changes in her situation. She should consider: Select one:
a. Convertible term (b.) Adjustable life c. Limited payment d. Economatic
In a universal life insurance policy, the two most common adjustments made during a month are: Select one:
a. Decrease premium and increase death benefit b. Shorten premium-paying period and decrease premium c. Lengthen premium-paying period and increase death benefit (d.) Cost of death protection deducted and current interest rate credited
Which of the following business continuation agreements is most appropriate for Teri and Annette's business partnership? Select one:
a. Entity plan (b.) Cross-purchase plan c. Stock redemption plan d. Key person
Life insurance policies with cash value provide the insured with immediate availability of funds, referred to as: Select one:
a. Estate conservation (b.) Liquidity c. Survivor protection d. Viatical settlements
Martin pays his policy premiums on a monthly basis. Which of the following terms best describes the frequency that Martin pays his premiums? Select one:
a. Exclusion ratio (b.) Premium payment mode c. Net single premium d. Premium cycle
Which of the following best describes the tool underwriters use to determine the rate at which a group of people die? Select one:
a. Exclusion ratio grid b. Morbidity rate graph (c.) Mortality table d. None of the above
All of the following are considered minimum information that must be on a life insurance illustration, EXCEPT: Select one:
a. Form number b. Dividend options, if any c. Nonguaranteed elements, if any (d.) Insured's marital status
The ____________ approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities. Select one:
a. Human life value (b.) Needs c. Salary d. Social Security blackout
Family income policies consist of whole life and: Select one:
a. Increasing term (b.) Decreasing term c. Level term d. Renewable term
Another term for insurers' expense is: Select one:
a. Interest earnings (b.) Loading c. Morbidity d. Premium
Which of the following is not true regarding the cash value in an ordinary whole life policy? Select one:
a. It grows tax-deferred. (b.) It may be used as a policy loan without affecting the death benefit. c. It is a nonforfeiture value that is fully guaranteed to the policyowner. d. It can be used to pay policy premiums.
Which policy pays a death benefit only upon the death of the last person insured? Select one:
a. Joint life b. First-to-die (c.) Survivorship life policy d. Juvenile policy
Four partners share in the ownership of a bowling alley. Which of the following business continuation plans best fits their needs? Select one:
a. Key person b. Stock redemption plan (c.) Entity plan d. None of the above
Which business continuation plan permits a deceased shareholder's heirs to maintain some ownership while the corporation redeems a portion of the deceased shareholder's shares? Select one:
a. Key person insurance b. Split-dollar plan c. Entity plan (d.) Section 303 plan
Which of the following does not constitute policy replacement? Select one:
a. Life insurance coverage that is converted to reduced paid-up coverage (b.) Life insurance coverage in which a loan is not repaid to the insurer c. Life insurance coverage that is terminated d. Life insurance coverage that is lapsed
All of the following are advantages of whole life insurance, EXCEPT: Select one:
a. Life insurance protection is provided for the insured's entire life. b. Premiums are level. c. The policy has living benefits _ grows cash value. (d.) The premium-paying period may extend beyond the income-earning years.
What are the benefits of a convertible and renewable term life insurance policy? Select one:
a. Lower premiums for higher face amounts b. Increasing face amount with a level premium c. Decreasing face amount with a level premium (d.) Proof of insurability is not required to convert or renew coverage.