Life Insurance Chapter 4 Life Insurance Polcies
What does "level" refer to in level term insurance? A. Premium B Cash Value C Interst Rate D Face Amount
Face Amount
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? A Interest-sensitive whole life B Life annuity with period certain C Increasing term D Limited pay whole life
Limited pay whole life - Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why? A The group has not been established for long enough. B The purpose of the group was to purchase life insurance. C Their profession poses too high of a risk for the insurer. D There are not enough people in the group to qualify for group life insurance.
The purpose of the group was to purchase life insurance - In order to qualify for small group life insurance, a group must be formed for a purpose other than attaining life insurance.
A Universal Life Insurance policy is best described as a/an A Variable Life with a cash value account. B Whole Life policy with two premiums: target and minimum. C Flexible Premium Variable Life policy. D Annually Renewable Term policy with a cash value account.
Annually Renewable Term policy with a cash value account. - A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
When an employee terminates coverage under a group insurance policy, coverage continues in force A For 60 days. B Until the employee can obtain coverage under a new group plan. C Until the employee notifies the group insurance provider that coverage conversion policy is issued. D For 31 days.
For 31 days. - An employee has 31 days under the conversion privilege to convert to an individual policy.
Which of the following entities regulates variable life policies? A The Federal Government only B Securities and Exchange Commission and the Insurance Department C Financial Industry Regulatory Authority and the State Guarantee Association D The Insurance Department only
Securities and Exchange Commission and the Insurance Department - Variable life insurance is regulated by both the state and federal governments (through the Securities and Exchange Commission and the Financial Industry Regulatory Authority) and the Insurance Department.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A Equity Indexed Universal Life B Variable Universal Life C Universal Life - Option A D Universal Life - Option B
Universal Life - Option A - Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? A Whole Life B Ordinary Life C Joint Life D Decreasing Term
Joint Life - A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
Which of the following statements is correct regarding a whole life policy? A The policy premium is based on the attained age. B The death benefit may increase or decrease during the policy period. C The policyowner is entitled to policy loans. D Cash values are not guaranteed.
The policyowner is entitled to policy loans. - Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his A Experience Rating. B Group rate. C Insurer's scheduled rate. D Attained age.
Attained age. - If an employee terminates membership in the insured group, the employee has the right to convert to an individual whole life policy without proving insurability. The insurer will determine what type(s) of policy an employee may convert to, but it must be issued at a standard rate, based on the individual's attained age.
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? A Graded Premium Life B Limited-pay Life C Variable Life D Adjustable Life
Limited-pay Life - In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? A As high B Half the amount C Lower D Higher
Lower - Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.
Which of the following are generally NOT considered when underwriting group insurance? A The nature of the group B The group's past claim experience C The size of the group D The insureds' medical history
The insureds' medical history - Group life insurance is written on a group, not individual basis. Each individual completes an application that identifies the participant and beneficiary. Then, the group is judged based on its nature and past claim experience. Generally, medical questions are not necessary.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid A Until the policyowner's age 100, when the policy matures. B For 20 years or until death, whichever occurs first. C Until the policyowner reaches age 65. DFor 20 years.
For 20 years or until death, whichever occurs first. - Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? A She can only convert her coverage without proof of insurability if she has the master policy. B She must apply for a new policy, which requires her to provide proof of insurability. C She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. D She will still be covered under the group plan, but will have to pay an individual policy premium.
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. - If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability.
Which statement is NOT true regarding a Straight Life policy? A Its premium steadily decreases over time, in response to its growing cash value. B The face value of the policy is paid to the insured at age 100. C It usually develops cash value by the end of the third policy year. D It has the lowest annual premium of the three types of Whole Life policies.
Its premium steadily decreases over time, in response to its growing cash value. - Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
