Chapter 1 exam- life policies
A premature distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
All of these are considered features of whole life insurance except
Initial premium is lower than for an equivalent amount of term insurance
Straight whole life insurance can be accurately described in all of these statements EXCEPT
Policy protection normally expires at age 65
What is a juvenile life insurance policy?
A life policy that covers the life of a minor
A material change in a modified endowment contract (MEC) results in
the seven pay test, adjusted for cash value, applies again
Which is and accurate description of the premium in a graded premium life insurance policy?
Annual increases in premium for a stated number of years then remains level
When does the insured stop making payments under a thirty-payment whole life policy?
At the time of death or 30 years after the policy's inception, whichever comes first
What kind of life policy typically offers mortgage protection?
Decreasing term
Which statement concerning a decreasing term life policy is accurate?
Face amount decreases over the policy period
Which of these may NOT. Be deducted from premium payments or cash value of a variable life insurance policy?
Federal premium taxes
A policy owner has just borrowed from a life insurance policy's cash value. Which of these statements is true?
In the event of death, the loan amount is deducted from the policy proceeds
The insurance coverage in a variable life insurance policy may vary based on the value of
It's underlying investments
Which of these statements accurately portrays an adjustable life insurance policy?
Policy can alternate between forms of term and whole life insurance
Which of these policies is considered a whole life policy?
Single premium life
Which statement concerning adjustable life insurance is accurate?
The face amount and premiums can be changed simultaneously by the policyowner
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
Which of these is NOT a reason to buy a term life policy?
To accumulate savings
An insurance policy that can also be classified as a securities product is called
Variable Life
Which type of life insurance policy allows a policy owner the choice of investments along with flexible premium payments?
Variable universal life
When would evidence of insurability be required for a person already covered with a variable universal life policy?
When the death benefit is increased
