Life and Health Insurance
what percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 Year Convertible Term
A 15-year mortgage is best protected by what kind of life policy?
15 year decreasing term
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
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
A policy loan is made possible by which of these life insurance policy features?
Cash value provision
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
A Family Income Policy is a combination of Whole Life and...
Decreasing Term insurance
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
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
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 requires an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:
Modified Whole Life
All of the following statements are true regarding a policy's Grace period, EXCEPT:
Past due premiums are waived
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
Premium payments can vary
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
What 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
The common disaster clause provides that if both the insured and the sole name beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured's estate
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
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Variable Life
What is an element of a variable life policy?
a fixed, level premium
Which of the following Dividend options results in taxable income to the policyowner?
accumulation at interest
A cost of living rider gives the insured....
additional death benefits
How long does the coverage normally remain on a limited-pay life policy?
age 100
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
irrevocable beneficiary
dividends paid from a life insurance policy are
issued by the insurer
Credit Life Insurance is...
issued in an amount not to exceed the amount of the loan
which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
it is taxed as ordinary income
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
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
T took out a 50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
50,000
Multi-line insurer
An insurance company selling more than one line of insurance
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
A Return of Premium Life insurance policy is:
Whole life and Increasing term
which of the following statements is correct regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?
all proceeds are income tax free in the year they are received
what action can a policyowner take if an application for a bank loan requires collateral?
assign policy ownership to the bank
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
The automatic premium loan provision is designed to:
avoid a policy lapse
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
beneficiary will be paid the death benefit
The investment gains from a Universal Life Policy usually go toward
cash value
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 these actions is taken when a policyowner uses a Life insurance policy as collateral for a bank loan?
collateral assignment
Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?
conversion
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his/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 statement regarding the Misstatement of Age provision is considered to be true?
coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
What term life policy is normally used when covering an insured's mortgage balance?
decreasing
Credit life insurance is typically issued with which of the following types of coverage?
decreasing term
Additional coverage can be added to a Whole Life policy by adding a(n):
decreasing term rider
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 of age 65
which of these statements is incorrect regarding the federal income tax treatment of life insurance?
entire cash surrender value is taxable
which of the following nonforfeiture options offers the highest death benefit?
extended term
How are policyowner dividends treated in regards to income tax?
interest on accumulations is taxed
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
life income
a whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
life settlement contract
A policyowner is allowed to pay premiums more than once a year under which provision?
mode of premium
Which of these life products is not considered interest-sensitive?
modified whole life
Which of these is NOT an element of Life insurance premiums?
morbidity rate
which statement is true regarding a minor beneficiary?
normally, a guardian is required to be appointed in the beneficiary clause of the contract
A policyowner is able to choose the frequency of premium payments through what policy feature?
premium mode
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
proceeds will go to the contingent beneficiary
Which of these Nonforfeiture Options continue a build-up of cash value?
reduced paid-up
T is covered by an Accidental Death and Dismemberment policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
request of the change will be refused
What is the Suicide provision designed to do?
safeguard the insurer from an applicant who is contemplating suicide
Which of the following types of permanent life insurance policies offer the highest initial cash value?
single premium
How does a typical Variable Life Policy investment account grow?
stocks, mutual bonds
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
Which of these life insurance riders allows the applicant to have excess coverage?
term rider
divisible surplus
that portion of an insurer's surplus that is declared as a dividend to be distributed to policyowners as stated in policy's divisible surplus provision
what is the underlying concept regarding level premiums?
the early years are charged more than what is needed
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
the full face amount
The Consideration clause in a life insurance policy indicates the a policyowner's consideration consists of a completed application and...
the initial premium
The consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and....
the initial premium
The amount of coverage on a group credit life policy is limited to:
the insured's total loan value
which statement regarding the change of beneficiary provision is true?
the policyowner can change the beneficiary
A level premium indicates:
the premium is fixed for the entire duration of the contract
Which of the following Life insurance policies combine term insurance with an investment element
universal life
A term life insurance policy matures when....
upon the insured's death during the term of the policy
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
Life insurance immediately creates an estate upon death of an insured. What policy is characterized by a guaranteed minimum death benefit?
variable life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
variable universal life
which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner control of the investment aspect of the plan?
variable universal life
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
waived one of its legal rights
What does the ownership clause in a life insurance policy state?
who the policyowner is and what rights the policyowner is entitled to
