Ch 3 Life Insurance Policies (Part 1)
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
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
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A Whole Life Policy with an Other Insured Rider
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
A Whole Life Insurance Policy endows when the
Cash value equals the death benefit
Which statement about a whole life policy is correct?
Cash value may be borrowed against
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
The Universal Life Policy is called an unbundled Life Policy because the policyholder can see the expense charges, the interest earned, and the
Cost of insurance
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at Age 65
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
A 15-year mortgage is best protected by what kind of life policy?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
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 it recognized as a life insurance contract
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint life policy
L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances?
L's spouse dies at age 66.
Which of these would be considered a Limited-Pay Life policy? 10-year Renewable and Convertible Term Life Paid-Up at Age 70 Straight Whole Life Renewable Term to Age 100
Life Paid-Up at Age 70
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
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 of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
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 after expiration of the initial policy period. What type of term coverage is this?
Renewable
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
When applied to Whole Life insurance, the word "straight" denotes
The duration of premium payments
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
Which of these is an element of a Variable Life policy?
a fixed, level premium
Variable Whole Life Insurance can be described as
both an insurance and securities product
The investment gains from a Universal Life Policy usually go toward
cash value
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 life policy to a permanent one without providing proof of good health?
conversion
A Family Income Policy is a combination of Whole Life and
decreasing term
Term insurance has which of the following characteristics?
expires at the end of the policy period
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
A Renewable Term Policy is renewable at the option of the
insured
What kind of premium does a Whole Life policy have?
level
What type of life insurance are credit policies issued as?
term
What type of life insurance gives the greatest amount of coverage for a limited period of time?
term life
A(n) ______ 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 that can fluctuate according to the performance of its 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
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
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
Credit life insurance is typically issued with which of the following types of coverage?
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(n)
decreasing term rider
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?.
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
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
limited pay life
Which of these life products is NOT considered interest-sensitive?
modified whole life
A Limited-Pay Life policy has
premium payments limited to a specified number of years
The amount of coverage on a group credit life policy is limited to
the insureds total loan value
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?
universal life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
universal life
A life insurance policy that provides a policyowner with cash value along with a level face amount is called
whole life
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
whole life
What type of insurance offers permanent life coverage with premiums that are payable for life?
whole life
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
A variable insurance policy
does not guarantee a return on its investment accounts
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
modified premium life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
modified whole life
What kind of life insurance product covers children under their parent's policy?
term rider
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
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
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums
Credit Life insurance is
issued in an amount not to exceed the amount of the loan
Which of the following statements is CORRECT about the period in which a Term Policy can be converted?
it varies according to contract
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
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
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
What type of policy would offer a 40-year old the quickest accumulation of cash value? Paid-up at 65 20-pay life 30-pay life Straight whole life
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
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
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 characteristics is CORRECT about Interest Sensitive Whole Life?
There is a flexible premium payment
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT
partial withdrawal features beyond a surrender charge period
Which of the following policies combines investment choices with a form of Term coverage?
variable universal life
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
How long does the coverage normally remain on a limited-pay life policy?
age 100
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
convertible term
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
Variable Life products require a producer to
hold a Life Insurance license and a Securities license
Which of the following types of policies BEST identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors?
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
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
variable life
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 is
the cost
