Health and Life Insurance

Insurer Definition

The entity that assumes the insured's risk. Insurance company and insurer are synonymous terms.

Jon's life insurance policy contains a disability income benefit that will pay him a periodic income in the event he becomes disabled. What factor determines the amount of the benefit?

The face amount of the policy

James is past due on his life insurance premium by 5 days. His policy has a 30 day grace period. If James dies on day 15 of his grace period, what would the beneficiary receive?

The full face amount, minus any past due premium

Which of the following best describes the automatic premium loan provision of a life insurance policy?

The insurer will automatically use the policy cash value to pay an overdue premium.

In which fund are premiums for a variable whole life insurance policy invested?

The insurers separate account

What makes the interest rate variable on a variable life insurance policy?

The interest rate is variable because it is linked to the insurer's separate account, which fluctuates according to its investment performance

When a juvenile covered by a payor rider reaches the specified age, what happens to the ownership of the policy?

The juvenile can assume ownership of the policy.

All of the following are true regarding the fixed-amount installment life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. Payments are made until the principal and interest reach zero. c. The length of time installments are paid depends on the amount of the policy proceeds. d. The larger the payment amount, the longer time period payments will be received

The larger the payment amount, the longer time period payments will be received

Insured Definition

The person that is covered under the policy

What is true regarding Variable life policies and the minimum death benefit? (policy face amount)

The policy cash value is not guaranteed since it is tied to the separate account. Therefore, the death benefit will increase or decrease over time according to the investment performance. The death benefit will never drop below the guaranteed minimum face amount. Cash value is figured daily and varies based on the investment in the separate account. Cash value may be borrowed or withdrawn at any time. Policy loans are subject to interest. If policy loans are not repaid, the death benefits are reduced by the amount of the loan plus interest. Policy loans are typically limited to 75% - 80% of the policy's cash value.

Mr. Barnes purchased a universal life policy with a death benefit of $200,000 several years ago. With a current cash value of $50,000, he selected benefit option B. What is his current death benefit?

$250,000

Variable universal life (VUL) is a mixture of:

- whole life insurance - universal life insurance - variable life insurance

What is the 12% rule?

12% Rule = No Rate Greater Than 12% Can Be Used In Selling Policies

How long is the loan period on STOLI arrangements?

2 years

In most states, the period of contestability for material misrepresentations made on a life insurance application is:

2 years

The appropriate rider allows premium payments to be waived in the event of disability. What is the normal waiting period for premiums to be waived?

3 or 6 months

Marci's universal life policy is currently crediting its cash value with 5% interest. The interest rate on policy loans is currently 6%. Based on these figures, at what interest rate is Marci's cash value accumulating?

5% on the entire cash value Based on the figures presented, 5% of the entire cash value is correct. Policy loans are a lien against the policy and do not have a direct impact on the cash value.

Which of the following best describes how the cash value in a universal life policy grows?

At a guaranteed minimum rate, but may earn a higher current rate

Which license is needed to sell variable products?

A Securities License

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

Adjustable Life Adjustable life insurance policies allow policyowner's to raise or lower the premium and face amount, and change the coverage period and premium-paying 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

Adjustable Life The adjustable life policy offers flexibility on a variety of characteristics of the policy.

Gail has no children and has decided to make a gift of her life insurance to her alma mater. This type of assignment is voluntary and also usually absolute and complete. Specifics of this type of assignment include: Select one: a. All the rights of the policy are assigned. b. The assignee has the right to use the cash value of the policy. c. The policyowner cannot recover surrendered rights. d. All of the above

All of the above

Applicants for variable products must receive a prospectus at the time of policy application, which:

Describes the investments, Any charges imposed on the contract owner, and Policy features to help the applicant make an appropriate purchase.

Who are the named individuals or entities the policyowner designates to receive life insurance policy proceeds upon the insured's death?

Beneficiaries

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

Cash value The cash value is invested in the insurer's separate account, and is, therefore, not guaranteed.

All of the following statements are correct regarding adjustable life policies, EXCEPT: a. The policyowner may take out policy loans. b. Policies have nonforfeiture and settlement options. c. Cash value always accrues in the policy. d. Adjustable life policies are suitable for people with varying incomes.

Cash value always accrues in the policy. Cash value in an adjustable life policy only accrues when the amount of the premium paid is greater than the cost of coverage.

All of the following statements are false regarding who may make modifications to a life insurance policy, EXCEPT: Select one: a. Modifications can be made by any employee of the insurer. b. Insurance producers can make any policy change. c. Only the insurer has the right to request changes to a policy. d. Changes to the policy can only be implemented by an executive officer of the insurer.

Changes to the policy can only be implemented by an executive officer of the insurer.

Which of the following is a beneficiary designation based on a group of people with shared characteristics?

Class Designation

Julie applies for a life insurance policy. Her consideration consists of:

Completed application and initial premium

Which clause states that the policy owner must pay something of value for the insurer's promise to pay benefits?

Consideration Clause

If Jaime has an adjustable life policy, he can:

Convert term to lessen the amount of the whole life Convert whole life to lessen or increase the term Convert term to equal whole life ****All of the above The conversions can all be accomplished with an adjustable life policy. Converting term to equal the whole life would probably result in a premium increase.

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

Cost of death protection deducted and current interest rate credited Each month, the cost of the death protection is deducted from the cash value, and the current interest rate is credited.

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

Defines a securities product

What would an insurance company do if an insured commits suicide within the contracts contestable period?

Deny the claim due to the suicide clause

All of the following are ways that an adjustable life insurance policy can be altered when an extra premium payment is made

Increase the coverage period Decrease the premium-paying period Decrease the premium

The Guaranteed Insurability Rider, or GIR, allows the insured to buy:

More insurance coverage at specified points in the future, without proof of insurability

All of the following policy elements are not guaranteed in a variable whole life policy, EXCEPT: Select one: a. Value in separate account b. Accumulation units c. Death benefit d. Cash value

Death Benefit

Which provision prevents the insurer from making changes to a contract by citing documents not included in the policy itself?

Entire Contract Provision

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

Equity Indexed Universal Life Equity indexed universal life works the same way as universal life insurance except the interest rate is tied to the stock market index which has the potential to offer greater cash value growth than universal life insurance.

Agents selling variable products must have which of the following? Select one: a. FINRA representative license. b. Life Insurance license. c. FINRA representative license and Life license. d. Agents are required to be licensed to sell variable products.

FINRA representative license and Life license.

Features of Variable Universal Life

Flexible premiums Cash value based on investment in separate account Policyowners choose sub-account investments Access to cash values (policy loans and withdrawals) Death protection deducted from cash value Death benefit option 1 or option 2

What do flexible premium payments allow?

Flexible premiums allow the policyowner to vary the amount of the premium payment.

The stipulated period of time, allotted by the insurance company, to allow a policyholder to make an overdue payment while the policy remains in force and coverage is provided is called the _____________.

Grace Period

Randy drives racecars and scuba dives in his spare time. Will he be able to purchase life insurance with these types of hobbies?

He will be able to purchase life insurance but his premiums will be higher.

In addition to being a commercial pilot, Michael also flies his own private small plane. What will most likely happen when he applies for life insurance?

He will be charged a higher premium to compensate for the added risk.

Compared to ordinary whole life policies, universal life interest rates are:

Higher Universal life policies tend to have higher interest yield compared to whole life. Interest rates range from 8 to 12%, whereas ordinary whole life is 3 to 6%. Universal life policies have a guaranteed minimum rate, usually 5%. This represents the guaranteed minimum growth rate. However, universal policies have a current interest rate that is comprised of the minimum rate and the excess interest experience by the insurer.

Chuck is in the military. How does this affect payment of the death benefit on his life policy?

His policy excludes death while on active military service.

Withdrawals or partial surrenders can be made on the cash value of a universal life policy. Which of the following is specified in the policy?

How much can be withdrawn

Under what conditions will the waiver of premium rider pay benefits?

If the insured is totally and permanently disabled

Insurance producers selling variable products must be ________________ and pass which test?

Insurance producers selling variable products must be registered with FINRA by passing the series 6 or 7 examinations.

Variable insurance Definition

Insurance that is comprised of variable life and variable annuities. Variable insurance products invest premium dollars in securities, which carry more risk due to price fluctuations. A requirement of selling variable products is a securities license and a life insurance producer license.

Whole Life Insurance Definition

Insurance that provides life insurance protection for the insured's entire life, or until age 100. Whole life insurance provides living benefits. Synonymous with permanent life insurance.

This provision identifies the named insured, type, and amount of coverage provided by the policy:

Insuring Clause

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.

Interest earned is not credited to the death benefit. Interest earned is credited to the cash value

Of the following life insurance settlement options, which pays only the interest earned on the principal in periodic payments?

Interest-only

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

Invest premiums into a separate account Only variable life policies allow policyowner's to invest premiums in the insurer's separate account.

Joanna has selected a variable universal life policy because it meets her needs. Which of the following is not a characteristic of a variable universal policy? Select one: a. It is backed by equity investments. b. It allows the policyholder to adjust the premium. c. It has no cash value. d. It allows the policyholder to adjust the death benefit.

It has no cash value

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.

It is NOT treated as a loan A cash withdrawal from a universal life policy is NOT treated as a loan.

Which of the following explanations best describes the purpose of the waiver of premium provision of a life insurance policy?

It waives the insured's premiums if the insured is totally disabled before a specified age.

Of the following settlement options for life insurance, which can result in the insurer paying more in benefits than the principal plus interest?

Life income

George bought a $300,000 whole life policy when he was employed as a bank teller. Four years later, he changes jobs and begins working in a coal mine. If he is killed while working in the mine, what will the insurer do?

Pay the Claim

Marcella purchases a modified life insurance policy at the age of 31. Thinking she could get a slightly better rate on her policy, she lists her age as 21. If the insurance company discovers the error upon Marcella's death, what action will the insurance company take?

Pay the death benefit based on Marcella's actual age

Mary and Philip are married. Philip named Mary as the primary beneficiary of his life insurance policy. His children from a prior marriage are contingent beneficiaries. Under the Uniform Simultaneous Death Act, who will receive the death benefit if Mary and Philip are in a car accident and there is no evidence of who died first?

Philips children from his prior marriage

Variable Life Insurance Definition

Policies that earn a fluctuating rate of interest and do not guarantee a certain cash value. Policies have fixed level premiums and a guaranteed minimum death benefit.

Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs?

Rick could use the dividends to purchase paid-up additions.

If an irrevocable beneficiary is named on a life insurance policy, all of the following statements are true, EXCEPT: Select one: a. The policy owner pays the premium. b. Irrevocable beneficiaries must consent to the policy owner canceling the policy. c. Policy owners need consent to assign the policy. d. Policy owners can borrow from cash value without consent.

Policy owners can borrow from cash value without consent.

The insured and the primary beneficiary are killed in a car accident. Which of the following is true according to the Uniform Simultaneous Death Act?

Policy proceeds are paid as if the primary beneficiary died first.

Since the insurance company does not insure the separate account, the investment risk is borne upon the ___________________________

Policyowner

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

Prevent the cash value from growing too quickly Life insurance policies must comply with the seven-pay test in order to keep their tax-exempt status. If the cash value is growing too quickly, the insurer will increase the policy's death benefit so the policy does not become a MEC.

What is the primary purpose of the entire contract provision in a life insurance policy?

Provide assurance that the policyholder has all necessary policy documents in their possession

If a policy loan is unpaid, the automatic premium loan provision has the effect of deducting the amount of the loan with interest from the death benefit. What should the policyowner do to avoid this reduction in the death benefit?

Repay the loan with interest

What is the primary purpose of the Investment Company Act of 1940?

Requires insurer to maintain a separate account for variable investments

The Common Disaster Clause:

Requires the primary beneficiary to outlive the insured by a certain number of days in order to receive the death benefit in a common disaster between the insured and the primary beneficiary

An insured commits suicide while the suicide clause is in effect. What will the insurer do?

Return all premiums to the beneficiary

Mr. Brown committed suicide during the suicide clause of his insurance policy. The insurance company will:

Return all premiums to the beneficiary

Which beneficiary designation is most appropriate for a person who wants to name his spouse as a beneficiary of his life insurance policy, and simultaneously retain full policy ownership rights?

Revocable beneficiary

All of the following are ownership rights, EXCEPT: Select one: a. Right to name a beneficiary b. Right to take out a policy loan c. Right to make changes to the policy d. Right of assignment

Right to make changes to a policy

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

Securities Act of 1933 The Securities Act of 1933 ruled that applicants for a variable product must receive a prospectus. It also laid out a clear definition of a security product.

Variable life insurance is regulated by three pieces of legislation:

Securities Act of 1933: applicants must receive a prospectus, and defines a security product Securities Act of 1934: requirement for sales representatives to have a Series 6 license and regulates the duties of sales representatives Investment Company Act of 1940: requirement for insurers to maintain a separate account for variable investments and establishes a cap for sales fees

Which of the following laws requires sales representatives selling variable products to have a Series 6 license?

Securities Act of 1934

All of the following are true regarding the period certain life insurance settlement option, EXCEPT: Select one: a. Payments consist of principal and interest. b. The principal reduces to zero by the end of the period. c. The amount of each installment is based on the length of the period, the amount of the policy proceeds and the interest rate. d. Shorter payment periods result in lower payments.

Shorter payment periods result in lower payments

Gerry forgets to pay his life insurance premium, and the policy lapses. If he is within the reinstatement period and decides to reinstate his policy, he will be required to take all of the following actions, EXCEPT: Select one: a. Pay all past-due premiums b. Pay any back-due interest on an outstanding policy loan c. Provide proof of evidence of insurability d. Surrender or cancel the policy within 10 years of the reinstatement date

Surrender or cancel the policy within 10 years of the reinstatement date

What are the two premiums in a universal life insurance policy?

Target premium minimum premium

Insurance Company Definition

The entity that assumes the insured's risk. Insurance company and insurer are synonymous terms.

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

The 12% Rule The 12% rule prevents producers from using illustrations with projected interest rates greater than 12% to induce people to purchase policies. They are not bound by NAIC, and they are regulated as both insurance and securities.

What happens if an insured commits suicide 3 years after the policy inception?

The Death Benefit is Paid

What happens when the cash value in a universal life insurance policy reaches zero and the grace period has lapsed?

The Policy Expires ***The cash value in the policy must continually cover the cost of death protection (cannot reach zero); otherwise, the policy will expire after its grace period lapses.

The insuring clause of a policy includes all of the following, EXCEPT: Select one: a. The names of covered individuals b. The amount of the policy premium c. The effective date of the policy d. The period of coverage of the policy

The amount of the policy premium

All of the following statements are true about the accidental death benefit (ADB), EXCEPT: Select one: a. The amount paid is one half of the face amount of the life insurance policy. b. The policy pays an additional sum if the insured dies due to an accident. c. The insured must die within a certain time period after the accident (usually 90 days). d. The accidental death benefit does not build cash value.

The amount paid is one half of the face amount of the life insurance policy.

All of the following options are available if the only logical beneficiary is a minor, EXCEPT: Select one: a. A guardian can be appointed. b. The benefits can go directly to the estate of the insured. c. A trust can be established. d. The insurance company can hold the proceeds until the minor comes of age.

The benefits can go directly to the estate of the insured.

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 a designated amount specified by the policy owner. c. The death benefit is only the face amount. d. The death benefit is only the cash value.

The death benefit is a designated amount specified by the policy owner. With option 1, the policy pays a designated amount specified by the policy owner.

When Dakota's life insurance policy was written, it stated on the policy that Dakota was male. However, Dakota is female. On average, women tend to live several years longer than men. When Dakota died this misstatement was discovered. How did this impact the policy?

The death benefit was increased

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.

The policy will resemble whole life insurance. Paying the target premium will build cash value in the policy, and the policy will resemble whole life insurance.

Of the following individuals, who has the right to change the beneficiary designations in a life insurance policy?

The policyowner

Who may choose the settlement option for a life insurance policy?

The policyowner and the beneficiary

Which of the following is true with regards to a Variable Universal life policy? Select one: a. The policyowner has no say in the investment choices, but can choose the premium payment b. The policyowner controls the investment choices and the premium amounts c. The insurer controls the investment choices in their general account d. The death benefit fluctuates, but only the insurer has a say in premium choices

The policyowner controls the investment choices and the premium amounts Variable Universal Life Polices allow the policyowner to control the investment of cash values and select the timing and amount of premium payments.

There are different kinds of beneficiaries in a life policy. When Alice dies, the death benefit will be paid to Walter. If Walter dies before Alice, the benefit would go to Alexander. Which of the following statements is true?

The primary beneficiary is Walter and Alexander is the contingent beneficiary.

A fixed period option pays policy proceeds in equal installments over a period of months or years. Which of the following is NOT considered when determining the amount of the installment?

The relationship of the beneficiary to the insured

Which of the following best describes the return of premium rider

The return of premium rider pays the total amount of premiums paid into the policy as long as the insured dies within a certain time period specified in the policy.

With universal life, sales, administrative, and loading charges are deducted from where?

They are deducted from the policy's cash value along with the cost of death protection. The interest rate is credited to the cash value. Insurers are required to provide policyowners with an annual statement itemizing the charges and interest earned.

Donna is getting ready to look at variable life insurance as an option for her insurance. Which of the following statements is TRUE about variable life insurance? Select one: a. The benefits of variable life insurance vary according to the premiums paid b. The insurance company assumes the investment risk of a variable policy c. Cash values are guaranteed d. To sell a variable life insurance policy, the proposal must be accompanied by a prospectus

To sell a variable life insurance policy, the proposal must be accompanied by a prospectus

How long is the suicide clause typically in effect?

Two years from the policy effective date

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

Universal Life The cash value in a universal life policy must continually cover the cost of death protection (cannot reach zero); otherwise, the policy will expire after its grace period lapses. In this way, universal life policies are simply annual renewable term with a cash value account.

Which permanent life insurance policies is interest-sensitive?

Universal life insurance

VUL policies are issued with a minimum scheduled premium based on the policys ______________________ What does the minimum scheduled premium allow?

VUL policies are issued with a minimum scheduled premium based on the policy's initial death benefit. This minimum amount covers the cost of death protection. As long as there is enough cash value to cover the cost of insurance protection, the policyowner can decrease or skip premium payments. The coverage will then resemble term insurance.

What do VUL policies provide?

VUL policies provide flexible premiums, control of where cash value is invested, and a flexible death benefit. VUL is universal life insurance with a separate account. VUL policies have the flexible features of universal life and the investment choices of variable life. Variable universal life policies are regulated as variable products.

Insurance agent Sam would need a securities license to sell this policy:

Variable Life

Which life insurance policy allows the policyowner to choose where they want their funds invested?

Variable Life

Which life policy offers the owner the opportunity to invest in products such as money -market funds, long -term bonds and the stock market? Select one: a. Adjustable Life b. Term Life c. Variable Life d. Universal Life

Variable Life Variable life offers the policy owner the opportunity to invest in equities, bonds and money - market products.

What do Variable Products have?

Variable Products=Have Separate Accounts

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

Variable Universal Life Variable universal life is universal life insurance with a separate account.

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

Variable Whole Life These are all characteristics of variable whole life insurance. Universal life and variable universal life insurance have flexible premiums.

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

Variable life Gerald would be able to choose where he wants his premiums invested with a variable life insurance policy.

Variable life have _________________premiums while Universal and VUL have____________________premiums

Variable life has fixed premiums. Universal life and VUL have flexible premiums.

How does variable whole life differ from ordinary whole life?

Variable life insurance provides permanent protection; it has fixed level premiums and a guaranteed minimum death benefit, just like ordinary whole life, but differs in that it offers higher interest rates, defending the policyowner against the effects of inflation. Premiums are paid at regular intervals. If the policyowner does not pay a premium after the policy grace period, the policy will lapse. The policy cash value is not guaranteed.

What makes variable products riskier? Who Regulates them?

Variable products are inherently riskier because the policyowner bears the risk of the choice of investment, and nonguaranteed cash value. Because of these risks, the SEC federally regulates variable products.

Jennifer is trying to add her insurance premium payments to her budget. All of the following are accepted payment mode options, EXCEPT:

When she feels like it

With a level death benefit the policyowner designates _________________

a death benefit amount that will remain constant. Growing cash values will replace a corresponding amount of pure death protection until the corridor is reached. Once policy cash values reach the corridor, the death benefit will increase to keep the policy tax-sheltered. With the variable death benefit, the policyowner chooses an amount of pure death protection that remains constant. The death benefit is comprised of the policy's cash value and the amount of pure insurance specified by the policyowner.

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use?

accumulation at interest

Which life insurance rider affecting the policy's death benefit protects against the chance of depleting income during prolonged life?

annuity rider

All of the following are life insurance settlement options, EXCEPT: Select one: a. Interest only b. Fixed-period installments c. Automatic premium loan d. Life income

automatic premium loan

VUL policies have a level death benefit until __________________________

the policy's cash values reach the corridor, at which point the variable death benefit applies, providing a variable death benefit according to investments in the separate account.

The principal sum of a AD&D rider attached to a life insurance policy pays:

the principal sum if the insured loses both arms

Which life insurance dividend option does not increase a policy's cash value?

cash payment

Which of the following nonforfeiture options does not allow the insured to reinstate the policy:

cash surrender

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value?

nonforfeiture option

All of the following is true regarding lump-sum payment of life insurance policy proceeds, EXCEPT: Select one: a. Distribution is taxed. b. Distribution is not taxed. c. The policyowner has the right to select the settlement option. d. Cash payment, or lump-sum payment, is still a common way of receiving life insurance policy proceeds.

distribution is taxed

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?

extended term

Which nonforfeiture option is the "automatic" option?

extended term option

A settlement option that would leave the proceeds of the insurance policy with the insurer and the insurer would pay interest to the beneficiary on an installment basis is called:

interest only option

Which of the following settlements of a life insurance policy is taxable?

interest-only

Agents selling variable products must have a

life insurance and a FINRA representative license.

Some riders can affect the death benefit of a life insurance policy. Which of the following riders can decrease the death benefit?

long-term care rider

This dividend option provides additional permanent coverage:

paid-up additions

Of the following life insurance policy riders, which does not alter the amount of the death benefit?

payor

What does variable insurance do?

provides a way for policyowners to earn higher investment returns on life insurance policy cash values

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?

reduced paid-up insurance

Which of the following is not a dividend option?

reduced paid-up insurance

Which life insurance rider pays an amount equal to the total premiums paid as long as the insured dies during a certain time period, as stated in the policy?

return of premium

What is the term for a policy element that adds or takes away coverage?

rider

Which of the following prevents creditors from seizing life insurance policy proceeds as long as there is at least one living named beneficiary, excluding the insured's estate?

spendthrift clause

Variable life insurance products are securities contracts and are regulated by

the Securities and Exchange Commission (SEC).

Riders covering additional insureds can be added to life policies. A popular rider is the children's term rider. All of the following can be covered by the children's term rider, EXCEPT: Select one: a. Younger siblings of the policyholder b. Step children c. Legally adopted children d. Biological children

younger siblings of the policyholder