Xcel Solutions chapter 3 - Type of Insurance Policies
K pays on a $20,000 20-year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
G purchased a Family Income policy at age 40. The Policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
Which of the following types of Term Life policies most likely contains a Renewability feature?
10-year convertible Term
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
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
What type of policy would offer a 40-year-old the quickest accumulation of cash value?
20-pay life
N is a 40 year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid up at retirement. Which of these should N purchase?
30 pay Life
Which of these is an element of variable life policy?
A fixed, level premium
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed death benefit is provided
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
What statement about whole life policy is true
Cash value may be borrowed against
Under an Interest Sensitive Whole life policy.
Cash values are determined by interest rates
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT:
Change policy's interest rate
S is covered by a whole life policy. which insurance product can cover his children?
Child term rider
Which provision allows the policyowner to change a term policy to a permanent one without providing proof of good health?
Conversion
When a policy owner exchanges A term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
A ________ term life policy is normally used when covering an insured's mortgage balance
Decreasing
The combination of Whole life and ____ term insurance is referred to as a family income policy
Decreasing
Credit life insurance is typically issued with which of the following types of coverage
Decreasing term
What type of life policy has a death benefit that adjust periodically and is written for a specific period of time
Decreasing term
Which of these types of policies may not have the automatic premium loan provision attached to it
Decreasing term
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
Additional coverage can be added to a whole life policy by adding a
Decreasing term rider
A variable insurance policy:
Does not guarantee a return on investment account
P owns a $25,000 Life policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at age 70
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 a recognized as a life insurance contract
A Universal Life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance, and the
Expense charges
All of these are characteristics of an adjustable life policy, except
Face amount can be adjusted using policy dividends
What does a Face Amount Plus Cash Value policy pay upon the Insured's death?
Face amount plus the policy's cash value
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family maintenance policy
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies
Family maintenance policy
Variable life products require a producer to
Hold a life insurance license and a securities license
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life policy
Increase face amount
Who has the option to renew a Renewable Term policy?
Insured
Which of these needs is satisfied by Adjustable Life insurance?
Insured's need for flexible premiums
Credit life insurance is:
Issued in an amount not to exceed the amount of the loan
What type of life policy covers two lives and pays the face amount after the first one dies
Joint life policy
K, age 45, and his wife, age 43, have three children. They purchase a family policy that covers K's wife to age 65. All of these situations will pay a death benefit except
K's wife dies at age 66
An architecture firm Would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the farm purchase on its project manager?
Key person insurance
K is looking to purchase Renewable Term insurance. Which of these types of term insurance may be renewable?
Level
What kind of premium does a Whole Life policy have?
Level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Which of these would be considered a Limited-pay life policy?
Life Paid-up at age 70
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited pay life
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
J is issued a life insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. which type of life insurance policy is this?
Modified Premium Life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXPECT for:
Modified Whole Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
K buys a policy where the premium stays fix for the first five years. The premium then increases in year six and stays level there after, all the while the death benefit remains the same. What kind of policy is this
Modified whole life
Whole life insurance policies are contractually guaranteed to provide each of the following EXCPET:
Partial withdrawal features beyond a surrender charge period
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Who benefits in investor-originated life insurance (IOLI) when the insured dies?
Policyowner
Which is true concerning a variable universal life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured
Which of the following actions is NOT possible with a universal Life policy?
Premiums may be applied as a credit against income tax
T has a term policy that allows him to continue the coverage of the initial policy period. What type of term coverage is this?
Renewable
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
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 are credit policies issued as?
Term
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term Life
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 parents
Term rider
The investment gains from a universal life policy usually go toward
The cash value
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age
The cost
Whole Life insurance is sometimes referred to as "Straight Life". What does the word "straight" indicate when using this phrase?
The duration of premium payments
What advantage does the renewability feature give to a term policy?
The insured may extend the coverage period
The amount of coverage on a group credit life policy is limited to:
The insured's total loan value
All of these statements about Equity indexed Life insurance are correct, EXCEPT
The premiums can be lowered or raised, based on investment performance
How does a typical variable life policy investment account grow?
Through mutual funds, stocks, bonds
Which of the following is considered an element of a variable life policy
Underlying equity investment
K purchased a life insurance policy in 1986 which paid 10% interest in the early years of the policy. 20 years later after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much higher premium Is paid because of falling interest rates. This type of policy is known as a _______ life policy.
Universal
The cash Value is a ____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors
Universal
S, age 40, is looking to buy life insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal life
When is the face amount paid under a joint life and survivor policy?
Upon death of the last insured
A term life insurance policy matures:
Upon the insured's death during the term of the policy
In order to sell a ________ Life policy, A producer is required to register with the financial industry regulatory Authority
Variable
a _____ life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
A life policy with a death benefit in cash value that can fluctuate according to the performance of it's underlying investment portfolio is referred to as
Variable Life
which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life
Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options
Variable life
An ____ ______ Life policy combines investments choices with a form of Term Coverage
Variable universal
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of plans?
Variable universal life
A life policy that contains a monthly mortality charge as well as a self-directed investment choices is called a
Variable universal life policy
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable whole life
Term life policy that will have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
Varies according to the contract
At what point does a Whole Life Insurance policy Endow
When the cash value equals the death benefit
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
What kind of life policy either pays the face value upon death of the insured or when the insured reaches age 100
Whole life
A policy that becomes a modified endowment contract (MEC)
Will lose many of its tax advantages
If a 10-year term life policy contains a renewable provision, the policy will renew
Without evidence of insurability
How long does the coverage normally remain on a limited-pay life policy?
age 100
Under a Graded Premium policy, the premiums
are lower during the policy's early years
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
family maintenance policy
Under a renewable term policy
the renewal premium is calculated on the basis of the insured's attained age
Which of the following life insurance policies combine term insurance with an investment element?
universal life