Types of Life Policies (Section II)

Index-linked life insurance plans have their benefit determined by an index which provides an indication of the effects of inflation on the purchasing power of the dollar. Which index is typically used to do this?

The Consumer Price Index

All of the following statements regarding variable life insurance are true, EXCEPT:

The insurance company assumes the investment risk

A life insurance policy dividend is

legally defined as a return of excess premium and not taxable

Non-participating policies:

will not pay a dividend

When premiums are paid into a universal life insurance policy, insurers must make certain adjustments to the cash value. The company will add the current premium paid, and:

Deduct for expenses and mortality costs, then add current interest

A husband and wife have a disabled child who is financially dependent upon them. The death of one parent would not result in financial disaster for the disabled child, but the death of both parents would. Which policy should they purchase?

Second-to-die policy

A child born or adopted after a family policy is issued has what effect on the policy?

The child will have term insurance coverage under the same contract.

All of the following statements about survivorship life insurance are true, EXCEPT:

The policy face amount is paid out only upon the death of the first insured to die

All of the following statements about universal life insurance are correct, EXCEPT:

just a small minimum premium payment is required each year

The adjustments that insurers make to the cash value account in a universal life policy each time a payment is made includes all of the following EXCEPT:

subtract the policy surrender charges

At what age does a "jumping juvenile" policy increase the benefit from $1000 to $5000?

21

The premiums for a variable universal life insurance contract:

Can vary in payment schedule and amount

Which of the following replaces the universal life's purely fixed fund cash value with a facility for the policy owner to select the investment media in which the cash value is placed?

Flexible premium variable life

Which policy covering two or more individuals pays the face amount only when the first person dies?

Joint life policy

Domestic life insurance companies can invest in all the following, EXCEPT:

Junk bonds of small European countries

A type of life insurance policy called a first-to-die policy is very helpful in business situations whereby a partner can purchase the interest of a deceased partner at death. This policy can also be used by a husband and wife by naming each other as beneficiaries. Select the incorrect statement about first-to-die plans from below.

They pay a reduced amount upon the death of the last surviving insured

Which type of insurance coverage has both a savings element and a flexible premium option?

Universal life

Which policy allows the insured to choose where the assets backing the cash value are invested?

Variable life

A participating life insurance policy is defined as a contract that

allows the policy owner to receive a share of surplus in the form of policy dividends

All of the following statements apply to the child coverage in a family policy, EXCEPT

coverage applies only to children born before the policy is issued