Chapter 3: Types of Policies and Riders (In-Course Quiz)
Whole life policies written in more recent years may mature at what age?
121 years old
A Last-to-Die policy would be the most appropriate recommendation for which of the following? A. A business owner who wants to make sure their spouse has enough money to buy the business from his partner if he dies before his partner does B. A corporation concerned that its CEO might die before the end of their employment contract C. Two business partners who are concerned about the future success of the business and want to provide funds to purchase the business from the decedent's family D. A married couple concerned about paying estate taxes after they have died
A married couple concerned about paying estate taxes after they have died Married couples worried about estate taxes would be best served in most cases by a Last-to-Die, or Survivorship, policy.
A producer is explaining the concept of Limited-Pay Life insurance to their client. Which of these statements is incorrect? A. By paying over a shorter period of time, each of the payments will be lower B. By paying over a shorter period of time, each of the payments will be higher C. A policy fully paid up at age 65 will not endow until age 100 D. Paying over a longer period of time will make the total payments higher
By paying over a shorter period of time, each of the payments will be lower The basic concept of insurance premiums is that by paying less often, a person will pay less in total premium. However, in cash value policies, because the payments are funding the cash value, the actual amount per payment in a Limited Payment policy will be higher as the number of payments is reduced. A 10-Pay policy will have higher premium payments than a 20-Pay policy, but the total of the 10 payments will be much less than the total of the 20 payments.
Which of the following is not a feature of Term Life insurance? A. Cash surrender value B. Limited duration C. Low cost D. Pure protection
Cash surrender value Term Life insurance has no cash value and is often referred to as providing pure protection. Compared to the same face amount of Whole Life insurance, Term Life will cost less.
Which of the following are characteristics of Universal Life insurance policies? A. Fixed death benefit for life, premiums may be increased or decreased B. Death benefit options, premiums fixed for life C. Death benefit options, death benefit and premiums may be changed D. Adjustable death benefit, premiums are fixed for life
Death benefit options, death benefit and premiums may be changed Death benefits options are a key characteristic of all forms of Universal Life insurance. All UL policies permit the policyowner to make changes in both the amount and timing of premium payments, including making no payments at all, and the death benefit may be increased or decreased in accordance with the terms and provisions of the policy.
Which of these best describes a Disability Income Rider? A. Pays a percentage of the annual premiums as monthly income to the insured if they are totally disabled B. Automatically creates an unlimited loan fund in the amount of the death benefit, secured by the cash value, when an insured is totally disabled C. Provides for double the face amount if the insured is disabled and has no income D. Pays a percentage of the death benefit as monthly income to the insured when totally disabled
Pays a percentage of the death benefit as monthly income to the insured when totally disabled A Disability Income Rider pays monthly income to a totally disabled insured. The income is a specified number of dollars per $1,000 of death benefit, which may be expressed as a percentage of the death benefit. Waiver of Premium allows the insured to avoid paying premiums when totally disabled. Money paid as income under a Disability Income Rider does not affect the death benefit in any way.
A Level Term policy means that the _________ remains the same throughout the lifetime of the policy. A. Cash value B. Policy proceeds C. Pure cost of insurance D. Policyowner
Policy proceeds The policy proceeds are also known as the death benefit or face amount of insurance, which will remain the same in a Level Term policy. In Term Life, the premium will increase based on the age of the insured at each renewal. The pure cost of insurance is gross premium minus the insurer's expenses and profit and without adjustment for interest earnings on reserves.
What does a Long-Term Care Rider do that a Living Needs (Terminal Illness) rider does not? A. Provides money equal to a portion of the death benefit to an insured expected to die in the next 2 years B. Pays a percentage of the death benefit as monthly income for an insured who cannot perform any 1 of the 6 activities of daily living C. Establishes a trust fund for the insured's family so that home health care can be paid for with insurance premiums instead of paying the money to the life insurance company D. Provides an advance payment of the death benefit for the covered expenses of long term care a chronically ill person may incur
Provides an advance payment of the death benefit for the covered expenses of long term care a chronically ill person may incur A Long-Term Care Rider provides an advance payment of the death benefit for the covered expenses of long-term care a chronically ill person may incur.
What "jumps" in a jumping juvenile policy? A. The premium jumps five times over the life of the policy, beginning at age 21 or 25 B. The premium and the face amount jump by a factor of five after the child's 21st or 25th birthday C. The premium increases by a factor of five on the child's 21st or 25th birthday D. The face amount jumps one time, usually to five times the amount of insurance, at age 21 or 25
The face amount jumps one time, usually to five times the amount of insurance, at age 21 or 25 A "Jumping Juvenile" policy will normally increase the face amount of insurance by a factor of five with no change in premium at the next anniversary after the child turns anywhere from age 21-25, depending on the policy. Ownership of the policy also changes at that time to the child, who is now an adult.
When a Whole Life policy endows, what happens to the policy's cash value? A. The cash value is deducted from the death benefit and the remainder is paid to the policyowner B. The face amount of the policy is paid to the policyowner C. Cash value is only found in Term Life policies, not Whole Life D. The cash value reverts to the insurance company
The face amount of the policy is paid to the policyowner At endowment, because the insured has not already died, a whole life policy's cash value will equal the face amount of insurance. The policy ends, and the face value is paid to the policyowner.
What is the face amount of life insurance? A. The cash value B. The cash surrender value C. The limit of liability D. The maximum loan value
The limit of liability The face amount of insurance is the stated death benefit, and is referred to as the insurer's limit of liability. This is the most the policy will pay to the beneficiary in the event of the insured's death.
A viatical settlement is made between a purchaser of a person's life insurance policy and ____________________. A. The agent representing the family of the terminally ill insured B. The terminally ill insured person's spouse and children who don't want to wait until the insured dies to collect the death benefit C. The lender who owns the mortgage on the terminally ill insured's home or business property D. The terminally ill insured who must receive at least as much as would be available from the insurance company under any full cash surrender or Living Needs Rider
The terminally ill insured who must receive at least as much as would be available from the insurance company under any full cash surrender or Living Needs Rider The Viatical Life Settlement laws which have been adopted by the states are intended to protect a terminally ill person from exploitation. They must not obtain a lesser benefit than they could obtain on their own by taking a loan or cash surrender from their life insurance company or through a Living Needs Provision or Rider in their policy.
A _______________ policy has a death benefit that can increase or decrease over time based on stock market performance, has a guaranteed minimum death benefit, a choice of subaccounts in which cash value may be allocated, and a fixed premium. A. Variable Life B. Investment Grade Whole Life C. Equity Indexed Universal Life D. Variable Universal Life
Variable Life Only Variable Life, also known as Variable Whole Life, has all of these characteristics. Variable Universal Life adjusts the death benefit in relation to stock market performance but does not have a guaranteed minimum death benefit. Equity Indexed Universal Life does not permit allocation of cash value in stock-based funds. There is no such thing as Investment Grade Whole Life.