LA Chapter 3
What type of policy has an endowment date, a face amount, and cash value? A A mortgage life insurance policy B A permanent life insurance policy C A traditional group life insurance policy D A decreasing term life insurance policy
B: A permanent life insurance policy
Money accumulated in a permanent policy that the policyowner may borrow via a policy loan or receive if the policy is surrendered, refers to: A Accumulated at Interest Account B The Cash Value C Savings Account D Deferred Savings Account
B: Cash Value
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, death benefit, and premiums may be changed C Adjustable death benefit, premiums are fixed for life D Death benefit options, premiums fixed for life
B: Death benefit options, death benefit, and premiums may be changed
All of the following policies end when an insured dies, except: A Variable Universal Life B Joint Survivorship C Joint Life D Juvenile Life
B: Joint Survivorship
A level term policy means that the _____________ remains the same throughout the lifetime of the policy. A Policyowner B Policy proceeds C Cash value D Pure cost of insurance
B: Policy proceeds
Which of the following provides the basis for the benefit amount paid to an insured under a disability income rider? A The length of time income payments are to be paid out B The face amount of the policy C The elimination period D The amount of monthly benefit selected
B: The face amount of the policy
Which of the following term life insurance policies would have the highest 1st-year annual premium, all other factors being equal? A 1-year B 5-year C 15-year D 10-year
C: 15 years
What "jumps" in a jumping juvenile policy? A The premium increases by a factor of five on the child's 21st or 25th birthday B The premium jumps five times over the life of the policy, beginning at age 21 or 25 C The premium and the face amount jump by a factor of five after 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
D: The face amount jumps one time, usually to five times the amount of insurance, at age 21 or 25
The face amount of insurance is also referred to as the: A The maximum loan value B The cash value C The cash surrender value D The limit of liability
D: The limit of liability
A _______________ policy has a death benefit that can increase or decrease over time based on stock market performance, a guaranteed minimum death benefit, a choice of subaccounts in which cash value may be allocated, and a fixed premium. A Variable Universal Life B Investment Grade Whole Life C Equity Indexed Universal Life D Variable Life
D: Variable Life
Which of the following term life insurance policies would have the lowest 1st-year annual premium, all other factors being equal? A 1-year B 5-year C 10-year D 15-year
A: 1 year
A producer is explaining the concept of limited-pay life insurance to her client. Which of these statements is incorrect? A By paying over a shorter period of time, each of the payments will be lower B Paying over a longer period of time will make the total payments higher C By paying over a shorter period of time, each of the payments will be higher D A policy fully paid up at age 65 will not endow until age 100
A: By paying over a shorter period of time, each of the payments will be lower
How does an Option A death benefit feature of a Universal Life policy work? A It pays out the policy's face amount B It pays out the policy's cash values C It pays out the policy's face amount plus the cash values D It pays out the face amount less the cash values
A: It pays out the policy's face amount
Which of these best describes a disability income rider? A Pays a percentage of the death benefit as monthly income to the insured when totally disabled B Pays a percentage of the annual premiums as monthly income to the insured if they are totally disabled C Automatically creates an unlimited loan fund in the amount of the death benefit, secured by the cash value, when an insured is totally disabled D Provides for double the face amount if the insured is disabled and has no income
A: Pays a percentage of the death benefit as monthly income to the insured when totally disabled
All of the following are correct pertaining to Decreasing Term, except: A The premium declines throughout the term of the policy B The death benefit decreases C The premium stays level D Its most common use is in credit life insurance
A: The premium declines throughout the term of the policy
A Last-to-Die policy would be the most appropriate recommendation for which of the following? A 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 B A corporation concerned that its CEO might die before the end of his employment contract. C A husband and wife concerned about paying estate taxes after they have died D A business owner who wants to make sure his wife has enough money to buy the business from his partner if he dies before his partner does
C: A husband and wife concerned about paying estate taxes after they have died
Term life insurance will not pay out a death claim in which of the following situations? A Death while at work B Death as a result of sickness C Death after the term expires D Death as a result of accident
C: Death after the term expires
Sara applies for a $100,000 30 year level term life insurance policy. The producer quoted her a price of $750 annually if issued as applied for. She wants to make sure that the policy premiums are taken care of just in case she has a total disability. The policy is issued but the premium is now $825. What is the most likely reason why the overall premium increased? A The policy was not issued at the underwriting class quoted B Sara was most likely issued a policy type other than applied for C Sara now has added a waiver of premium rider, which requires an additional premium payment D Sara just increased the face amount of the policy and the premiums reflect that
C: Sara now has added a waiver of premium rider, which requires an additional premium payment
Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except: A If interest rates increase premiums can be reduced or cash values can increase at a faster rate B The insurance company can change the interest rate credited to the policy C The death benefit is not guaranteed D The insurance company can change the premium
C: The death benefit is not guaranteed
A viatical settlement is made between the 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 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 D The lender who owns the mortgage on the terminally ill insured's home or business property
C: 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
To waive an insured's premium, most companies require an individual's disability to be: A A disability expected to last less than 6 months B A temporary total disability expected to last 6 months but no longer than one year C Total and permanent D A partial disability and still able to perform some type of work
C: Total and permanent
If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, upon his death the amount of the benefit payable to the beneficiary would be _________ if the policy had $25,000 in cash values. A $225,000 B $250,000 C Nothing D $275,000
D: $275,000
C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. What is the insurer's net amount at risk? A $30,000 B $100,000 C $130,000 D $70,000
D: $70,000
Which of the following is not a feature of term life insurance? A Level premium B Pure protection C Temporary coverage D Cash value guarantees
D: Cash value guarantees
What does a long-term care rider offer that a Living Needs 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 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 C 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 D Provides up to 100% of the death benefit in a daily or monthly amount for the non-hospital expenses of a chronically ill person who cannot perform any 2 of the 6 activities of daily living
D: Provides up to 100% of the death benefit in a daily or monthly amount for the non-hospital expenses of a chronically ill person who cannot perform any 2 of the 6 activities of daily living
In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the _______. A The earned interest B The MEC limit C The cash value D Risk corridor
D: Risk corridor
When a whole life policy endows, what happens to the policy's cash value? A Cash value is only found in term life policies, not whole life B The cash value reverts to the insurance company C The cash value is deducted from the death benefit and the remainder is paid to the policyowner D The cash value equals the face amount, and the face amount is paid to the policyowner
D: The cash value equals the face amount, and the face amount is paid to the policyowner
