Chapter 3: Life Insurance Policies
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?
$100,000
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50,000
If a person has group life insurance and get canned, how long do they have to have the insurance for them to be able to pull it over to a personal plan?
5 years
A Straight Life policy has what type of premium? A variable annual premium for the life of the insured A level annual premium for the life of the insured An increasing annual premium for the life of the insured A decreasing annual premium for the life of the insured
A level annual premium for the life of the insured
The LEAST expensive first-year premium is found in which of the following policies? Annually Renewable Term Increasing Term Decreasing Term Level Term
Annually Renewable Term
The type of term insurance that provides increasing death benefits as the insured ages is called Interest-sensitive term. Age-sensitive term. Increasing term. Flexible term.
Increasing term.
Which of the following is correct regarding credit life insurance? It has a maximum term of 20 years. It insures the life of a debtor. It is purchased on an installment basis. It insures the life of a creditor.
It insures the life of a debtor.
Which statement is NOT true regarding a Straight Life policy? The face value of the policy is paid to the insured at age 100. It usually develops cash value by the end of the third policy year. 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.
Its premium steadily decreases over time, in response to its growing cash value.
An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and Pay a lower renewal premium by proving insurability. Change the type of insurance by proving insurability. Pay a lower renewal premium without evidence of insurability. Change the type of insurance without evidence of insurability.
Pay a lower renewal premium by proving insurability.
If an agent wishes to sell variable life policies, what license must the agent obtain? Securities Adjuster Surplus Lines Personal Lines
Securities
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? She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. She will still be covered under the group plan, but will have to pay an individual policy premium. She can only convert her coverage without proof of insurability if she has the master policy. She must apply for a new policy, which requires her to provide proof of insurability
She can convert her group policy to an individual policy without proof of insurability within 31
All of the following entities regulate variable life policies EXCEPT The SEC. The Insurance Department. The Guaranty Association. Federal government.
The Guaranty Association.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? The insured would not need to prove insurability for a conversion policy. The insured may convert coverage to an individual policy within 31 days. The premium for individual coverage will be based upon the insured's attained age. The insured may choose to convert to term or permanent individual coverage.
The insured may choose to convert to term or permanent individual coverage.
Which of the following determines the cash value of a variable life policy? The policy's guarantees. The premium mode The performance of the policy portfolio The company's general account
The performance of the policy portfolio
What does "level" refer to in level term insurance? Face value Premium Cash value Interest rate
face value
All of the following statements are correct regarding credit life insurance EXCEPT Benefits are paid to the borrower's beneficiary. The amount of insurance permissible is limited per borrower. Premiums are usually paid by the borrower. Benefits are paid to the creditor.
Benefits are paid to the borrower's beneficiary.
Who would be the beneficiary in credit life insurance?
Creditor
Which of the following is NOT allowed in credit life insurance? Creditor requiring that a debtor buys insurance from a certain insurer Creditor having a collateral assignment on the policy Creditor requiring that a debtor has a life insurance Creditor becoming a policy beneficiary
Creditor requiring that a debtor buys insurance from a certain insurer
A individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? Decreasing term Variable life Universal life Whole life
Decreasing term
Which policy component decreases in decreasing term insurance? Cash value Dividend Premium Face amount
Face amount
What type of premium do both Universal Life and Variable Universal Life policies have? Flexible Level fixed Decreasing Increasing
Flexible
Which of the following is an example of a limited-pay life policy? Level Term Life Straight Life Life Paid-up at Age 65 Renewable Term to Age 70
Life Paid-up at Age 65
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the deathof the insured?
Option B
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 Until the policyowner's age 100, when the policy matures. For 20 years or until death, whichever occurs first. Until the policyowner reaches age 65. For at least 20 years.
For 20 years or until death, whichever occurs first.
What are the two components of a universal policy? Mortality cost and interest Separate account and policy loans Insurance and cash account Insurance and investments
Insurance and cash account
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? Joint Life Decreasing Term Whole Life Ordinary Life
Joint Life
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? Single premium policy Jumping juvenile policy Limited pay whole life policy Modified life insurance policy
Jumping juvenile policy
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? Interest-sensitive whole life Life annuity with period certain Increasing term Limited pay whole life
Limited pay whole life
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? Variable Life Adjustable Life Graded Premium Life Limited-pay Life
Limited-pay Life
All of the following are characteristics of group life insurance EXCEPT Amount of coverage is determined according to nondiscriminatory rules. Individuals covered under the policy receive a certificate of insurance. Certificate holders may convert coverage to an individual policy without evidence of insurability. Premiums are determined by the age, sex and occupation of each individual certificate holder.
Premiums are determined by the age, sex and occupation of each individual certificate holder.
An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario? Preferred premium reduction Contract review Revision of consideration Re-entry
Re-entry
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may Prolong the open enrollment period. Increase medical requirements on existing members. Require evidence of insurability. Require a higher premium.
Require evidence of insurability.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT A life insurance license. SEC registration. FINRA registration. A securities license.
SEC registration.
Which of the following statements about group life is correct? The group sponsor receives a Certificate of Insurance. The policy can be converted to an individual term insurance policy. The cost of coverage is based on the ratio of men and women in the group. The premiums are higher than in an individual policy because there is no medical exam.
The cost of coverage is based on the ratio of men and women in the group.
Which of the following is TRUE regarding the insurance amount in a credit life policy? The amount of coverage can be greater than the amount owed. The creditor can only insure the debtor for the amount owed. The creditor may insure the debtor for an unlimited amount of coverage. Allowable amount of coverage is determined by the State Insurance Commissioner.
The creditor can only insure the debtor for the amount owed.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance.
Which of the following statements is correct regarding a whole life policy? The policyowner is entitled to policy loans. Cash values are not guaranteed. The policy premium is based on the attained age. The death benefit may increase or decrease during the policy period.
The policyowner is entitled to policy loans.
All of the following are true about variable products EXCEPT The cash value is not guaranteed. Policyowners bear the investment risk. The premiums are invested in the insurer's general account. The minimum death benefit is guaranteed.
The premiums are invested in the insurer's general account.
All of the following are characteristics of a group life insurance plan EXCEPT The participants receive a Certificate of Insurance as their proof of insurance. A minimum number of participants is required in order to underwrite the plan. The cost of the plan is determined by the average age of the group. There is a requirement to prove insurability on the part of the participants.
There is a requirement to prove insurability on the part of the participants.
Which of the following is NOT a characteristic of variable annuities? The contract owner bears the investment risk. Benefits are dependent on the performance of securities. The cash value is adjusted for inflation. They offer guaranteed stock performance.
They offer guaranteed stock performance.
What is the purpose of establishing the target premium for a universal life policy? To cover all policy expenses To keep the policy in force To accumulate cash value faster To pay up the policy faster
To keep the policy in force
Which type of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
Universal Life
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? Universal Life - Option B Equity Indexed Universal Life Variable Universal Life Universal Life - Option A
Universal Life - Option A
Which of the following is a key distinction between variable whole life and variable universal life products? Variable universal life is regulated solely through FINRA. Variable whole life allows policy loans from the cash value. Variable universal life has a fixed premium. Variable whole life has a guaranteed death benefit.
Variable whole life has a guaranteed death benefit.