Life Insurance policies (17%)
In a Universal Life policy, interest is usually credited to the: Select one: a. cash value b. mortality assessment c. premiums paid d. dividend account
a
All of the following are other terms for Whole Life Insurance EXCEPT: Select one: a. Universal Life b. Ordinary Life c. Straight Life Insurance d. Permanent Life
a Universal Life
Which of the following statements about the coverage offered by a group credit life policy is correct? Select one: a. The policy's cash value may be invested in mutual funds or tied to an equity index. b. A creditor may require an individual to take out coverage through the creditor as a requirement for obtaining a loan through the creditor. c. The death benefit can never be more than the value of the loan it is protecting. d. The policy's face value stays level during the entire contract
c The death benefit of a group credit life policy can never be more than the value of the loan it is protecting, but an individual policy can either decrease with the loan balance or remain level and give more protection than the actual loan value. Group credit life policies are term policies and do not have cash value.
A contributory group policy is one in which: Select one: a. The employee pays the full premium. b. The employee pays all or a portion of the cost. c. The employer pays the full premium. d. The employer pays all or a portion of the cost.
b A contributory plan is one in which the employee pays (contributes) all or some of the premium. If the employer pays all of the premium cost, the plan is considered non-contributory.
A level term policy can be converted to which of the following? Select one: a. Decreasing term b. Whole life, with no evidence of insurability c. Whole life, with evidence of insurability d. Renewable term
b A level term policy may be converted to a whole life policy at the same face value with the same company with no evidence of insurability.
Why would premiums be higher for an increasing term policy than for a level term policy? Select one: a. Because of the age of the insured b. An increasing term policy has a death benefit that increases over time, so more coverage is provided. c. Because there is a decrease in the death benefit over time d. Because there exists an increase in the probability that the insured will die
b As the face value of an increasing term policy gets greater, more premium is required to pay for the increased death benefit.
Premiums that increase every 3-5 years over a period of time (i.e., up to 15 years) is characteristic of which of the following: Select one: a. Level Premium b. Graded Premium c. Periodic Premium d. Modified Premium
b The premiums of graded premium or stepped premium policies increase every few years over a longer period of time, while modified premium policies increase once after a period of 3-5 years and remain level for a longer period of time.
Which of the following statements about graded premium whole life policies is correct? Select one: a. Total of premiums paid for a Graded Whole Life policy will be less than for a Straight Life Policy. b. Coverage increases proportionally as premium costs increase. c. A Graded Premium Policy is a variation of a Permanent Life Policy. d. Premiums, which are initially low, increase every year for a period of 3-5 years and stay level thereafter.
c A Graded Premium Policy is a variation of a Whole Life, Ordinary Life, Permanent Life or Straight Life Policy. Graded Premium Whole Life Policies typically have a lower premium during the early years of the policy and the premiums increase every 3-5 years over a 15 year period at which point they level off and are fixed for the remainder of the policy. Coverage stays level throughout the insured's life and cash values accrue to equal the face value when the policy endows at maturity.
Which of the following is an example of a Limited Pay Whole Life policy? Select one: a. Single Premium Whole Life b. Modified Whole Life c. Single Premium Endowment-at-65 d. Life Expectancy Contract
a Limited Pay Whole Life Policies are permanent life insurance in which premiums are payable for only a specified number of years. Cash values grow to equal the face amount at policy maturity (endowing at age 100). Premiums will be higher than for standard whole life policies, because they are paid for a shorter period. the Single Premium Whole life policy is a type of Limited Pay policy that requires only one premium payment which is large enough for the policy to remain in effect for life
M is graduating from college and starting her first job. Which of the following policies would be BEST for her to buy if M wants to purchase a permanent coverage life insurance plan with little risk but that would allow her to pay less premium for the first few years while she is getting settled with her new career? Select one: a. Adjustable Life b. Modified Premium Whole Life c. Variable Life d. Variable Universal Life
b Modified Premium Whole Life policies have premiums that are low initially and increase after a period of 3 or 5 years, staying level after this initial increase.
What type of policy is usually written to cover mortgage redemption? Select one: a. Annuity b. Term c. Whole Life d. Limited - Pay Lif
b Mortgage redemption insurance is usually covered by a term policy, and more particularly by a decreasing term policy.
If an insured owns has a life insurance policy as a child that allows them to increase the face amount at age 21, by what amount may the face amount may be increased? Select one: a. 50% of the policy's original face amount b. 5 times the policy's face amount c. The policy face amount plus a specified amount d. The policy's face amount
b youth policies typically do this
D purchased a $100,000 Survivorship Life policy that covered his father and mother. Ten years later, his father died. How much will D receive from the policy at that time? Select one: a. $50,000 b. $100,000 c. $0 d. $200,000
c
Will insurance coverage always end on a Term-to-65 contract? Select one: a. The coverage always ceases at the insureds age 65. b. Premiums are payable to age 65 c. Coverage is not convertible at age 65 d. Coverage is convertible to whole life at age 65
d A Term-to-65 contract expires at the insured?s age 65, at which time it may be convertible to a whole life policy.
G inherited a large sum of money and wants to purchase a life insurance policy that will give her coverage her whole life and will only require one payment. Which of the following should the insurance producer recommend? Select one: a. Limited Pay Whole Life b. Single Premium Whole Life c. Modified Endowment Whole Life d. Single Premium Deferred Annuity
b The Single Premium Whole Life policy allows G to pay only one premium payment which will keep the policy in effect her entire life.
Q and S are married and want to buy a life insurance policy. However, because Q has recently gone into remission from cancer, they are having a hard time getting insurance. What type of policy should their agent recommend in this situation? Select one: a. Survivorship Life b. Family Policy c. Joint Life d. Universal Life
a An individual who might have difficulty obtaining insurance on his own may have an easier time obtaining a Survivorship Life policy because benefits are paid only after the second of the insured individuals dies. Underwriting will look more closely at S's health and not as strictly at Q's.
P is an up and coming executive and wants to purchase a life insurance policy that will allow him to accumulate cash value quickly. He also wants to be able to direct in which investment options the cash values are invested. His agent should recommend which type of policy? Select one: a. Endowment at age 65 b. Variable Life c. Universal Life d. Interest Sensitive Whole Life
b Of the choices listed, only a variable life policy allows the policy owner to select where the cash values are invested; there is also the possibility of losing cash value quickly if the stock market drops. Variable Universal Life also includes this feature, but with Universal Life the insurer chooses the investments. The endowment policy would accumulate money quickly, but there is no investment choice option.
Which of the following types of term life insurance allows the insured to change coverage to permanent insurance without undergoing a medical examination? Select one: a. Renewable b. Deposit c. Convertible d. Reentry
c The Guaranteed Convertible Option gives the promise that a policy may continue at the current face value under another form of insurance at the current premium for the attained age of the new policy, without underwriting by the company.
All of the following could sponsor a group life insurance plan EXCEPT: Select one: a. A labor union with 250 members b. An association for its 24 members c. A sole proprietor with a single employee d. A bank, for its 350 creditors
c To be eligible for a group life insurance policy, the group must be an employer with 10 or more employees, have 10 or members as a labor union or an association, be a creditor with 10 or more debtors, or it must be a Multiple Employer Trust (MET) or a MEWA
L has a group life insurance policy when the entire group's coverage is terminated. L wants to convert the coverage to an individual policy, but is denied. For which reason might coverage be denied? Select one: a. L decides to convert the policy 5 days after the group policy was terminated. b. L wants coverage to stay the same. c. L was covered for less than 3 years. d. L was covered for less than 5 years.
d If an entire group's policy is terminated and the individual was covered for at least 5 years, the individual can purchase an individual policy up to the group policy's face amount or $10,000, whichever is less.
Which of the following is NOT a characteristic of Continuous Premium Whole Life insurance? Select one: a. Level coverage b. Level premiums c. Coverage lasts until the insured dies, whatever the age d. Cash value
c Continuous premium (straight life) insurance stays in force until the insured dies or until age 100. If the insured reaches age 100, the cash value in the policy equals the policy's face amount and the policy "endows," meaning that the cash value is paid to the policy owner.
Annually renewable level term insurance premiums often do which of the following? Select one: a. Increase each year or period of years b. Remain constant each year c. Decrease each year or period of years d. Follow the trends of the market
a Premiums usually increase because of the insured's increased probability of death each year.
Which of the following policies can typically be purchased as either a single contract or as a rider to another type of policy? Select one: a. A COLA policy b. Optional Term c. Decreasing Term d. Increasing Term
c Decreasing Term may be purchased as either a separate policy or as additional insurance on a policy rider. COLAs, cost of living adjustments, might be an endorsement to a policy. Increasing term insurance is usually sold as a rider, not as a separate policy.
Which of the following is a characteristic of combined term and permanent insurance plans? Select one: a. They offer higher amounts of insurance at a lower cost than straight term insurance. b. They are only offered through business continuation type policies. c. They offer lower amounts of insurance at a higher cost than whole life insurance. d. They offer higher amounts of insurance at a lower cost than straight whole life insurance.
d An insured would buy a combined whole life/term policy in order to purchase more insurance for less money than a straight whole life policy. This option may be chosen when they need the extra insurance for a certain period of time, such as until a child is old enough to move out on their own. The insured would still be able to build cash value that would not be available in a straight term policy.
Group life insurance is a policy on a group of people under a single master policy, and has all of the following characteristics except: Select one: a. All of the policyholders assist in the plan's administration. b. Individual group members are usually issued certificates of coverage. c. When the employer is the master policyholder and pays premiums, premium costs on policies with a face amount of up to $50,000 are income tax deductible for the employer. d. Coverage is generally term life but can be permanent insurance.
a
B has a $10,000 life policy that will pay the face amount to B if B lives to age sixty-five, or to B's beneficiary if B dies before age sixty-five. B owns which of the following types of policies? Select one: a. Endowment at Age 65 b. Limited-Pay Life c. Term to age 65 d. Whole Life Paid-Up at Age 65
a An endowment at 65 policy provides life insurance until the insured reaches age 65. During the insurance period cash value builds quickly so that it equals the policy's face value at age 65. If the insured is still alive at age 65, the policy owner will receive the cash value as an endowment and life insurance coverage ceases.
What is a main difference between an individual credit life policy and a group credit life policy? Select one: a. The insurer of the group policy is the creditor; the insurer of the individual is an independent insurance company. b. Group credit life policies are decreasing term policies; Individual credit life policies are level term. c. The owner can choose anyone as the beneficiary of an individual policy but the credit institution is the beneficiary of a group credit life policy. d. A group credit life policy is used to pay a creditor in the event of the insured's default on a loan and the individual policy protects the family from loan foreclosure
A person who purchases an individual credit life policy has full ownership privileges, including the right to choose or change a beneficiary. The beneficiary can then choose to pay off the loan immediately or over time. The group credit life policy has the creditor as the beneficiary and the creditor will use any death benefit to pay off the loan. The death benefit of a group credit life policy can never be more than the value of the loan it is protecting, but an individual policy can either decrease with the loan balance or remain level and give more protection than the actual loan value.
Juvenile insurance is written on children up to how many years old? Select one: a. 15 years b. 16 years c. 12 years d. 18 years
a
Which of the following is NOT a characteristic of Level Term insurance? Select one: a. Premiums stay level from the date of issue until the insured's death. b. There is a level or constant face value from date of issue to date of expiration. c. The policy is usually convertible to a whole life policy from the same company with no proof of insurability. d. There is no cash value.
a With Level Term insurance, there is a level or constant face value from date of issue to date of expiration. Premiums often increase each year or period of years because of increased probability of death. Often renewable to a certain age, such as age 60 or age 65. Level term insurance is usually convertible to a permanent policy up to the value of the level term policy?s face value.
A person insured with level coverage and level premium whole life insurance lives to be 100 years old. At this time, the policy: Select one: a. Endows. b. Expires. c. Premiums are split into Pure Insurance Costs and Cash Values. d. No longer has cash value.
a endows/endownment =100 years
Annual renewable level term insurance is: Select one: a. Often renewable for only 30 years from the date of purchase. b. Often renewable to a certain age, such as age 60 or 65. c. Often renewable until the policyholder reaches 76 years old. d. Often renewable for an unlimited number of years.
b
J has an interest sensitive whole life insurance policy. Which of the following applies? Select one: a. Interest rate can vary but cash value amounts cannot. b. There is a guaranteed minimum for interest rates and cash value amounts. c. Interest rates cannot vary. d. Premium rates are fixed and are known as the cap.
b
Which of the following describes an Equity-Indexed Universal Life policy? Select one: a. Interest rates and cash value amounts of the policy may vary but there is a guaranteed minimum cash value. b. Includes interest credits that are a combination of a guaranteed interest rate and an interest rate based on a percentage of the increase in an equity index c. Permanent life insurance in which the timing and amount of premiums as well as the death benefit can be changed by the policy owner. d. The policy owner directs in which investment options (stocks, money market, etc.), the cash value funds are invested, and cash value varies as investments incur profits or losses.
b Equity-Indexed Universal Life policies include interest credits that are a combination of a guaranteed interest rate and an interest rate based on a percentage of the increase in an equity index, such as the S&P 500.
Another term for Interest sensitive whole life insurance is: Select one: a. Equity-Indexed Whole Life. b. Current Assumption Whole Life Insurance. c. Adjustable Life. d. Variable Life.
b Interest sensitive insurance products have cash value amounts that are invested in variable investment vehicles such as mutual funds, or tied to indexes that can make the face and cash values of the policy fluctuate. Cash values are not guaranteed and can disappear altogether. These are sometimes also called current assumption whole life insurance. Variable and Equity-indexed policies are TYPES of interest sensitive products but are not other terms for same.
All of the following information must be included in a Whole Life policy EXCEPT the policy's: Select one: a. paid-up insurance value b. guaranteed dividend table c. Extended Term provision d. cash value
b One of the things that is certain about dividends is that they are NOT guaranteed. Also, dividends are only offered on policies by mutual companies, not by stock companies, so stock companies couldn't even show a projection of dividends to the policy owner.
Which of the following is not a privilege that an individual leaving a group can receive within 31 days when converting to a personal policy? Select one: a. If the individual dies during the conversion period without having made a decision to convert the policy, benefits will be paid minus the cost of the premium. b. When the group policy terminates, all members can purchase an individual policy up to the group policy's face amount or $10,000. c. Conversion amount can be up to the face amount of the group benefit. d. They can continue being insured.
b Only members of the group who were covered for at least 5 years can take advantage of the conversion privilege when the group's policy is terminated.
T is beginning a medical practice and knows his income will gradually grow over the next several years. He wants to take out a life insurance policy now that will have a large face amount and build cash value, but cannot afford the premium for an Ordinary Whole Life policy at this time. Which of the following policies should the insurance producer recommend? Select one: a. Increasing Term b. Graded Premium Whole Life c. Limited Pay Whole Life d. Annual Renewable Term
b With a Graded or Stepped Premium Whole Life policy, premiums start lower than standard whole life policies, and the increase periodically (every 3-5 years) for a longer period of time (i.e., up to 15 years).
The PRIMARY purpose of a Limited-Pay Life policy is to allow an: Select one: a. insurance company to sell policies to selected groups of risks only b. insurance company to reduce its risk exposure c. insured to pay premiums for a predetermined period of time d. insured to purchase coverage that will pay death benefits under specified circumstances only
c A limited policy allows the insured to choose the length of time during which the insured will pay premiums. The premium will be higher during the shorter payment period, but once the payment period is over the policy will remain in full force and continue to increase in cash value.
Juvenile Life Insurance: Select one: a. may only be written on children older than 30 days. b. may be increased to up to 5 times the original face amount when the insured reaches 25 years of age. c. may be written on children up to 15 years old. d. must be written as a rider to the application of the child's parent or guardian.
c Juvenile life insurance may be written on children from one day up to 15 years old. It is usually, but not necessarily, a rider to the application of the parent or guardian.
What is usually the maximum value that a level term insurance policy will convert into a permanent policy? Select one: a. Up to twice the value of the level term policy's face value b. Half the value of the level term policy's face value c. Up to the value of the level term policy's face value d. It cannot be converted into a permanent policy
c Level term is usually convertible to a permanent policy with the same company up to the value of the level term policy's face value.
Which is not a characteristic of an endowment policy? Select one: a. It has higher premiums and faster cash value growth than a standard whole life policy. b. It is designed to mature before the insured's age 100. c. It provides the death benefit if the insured dies before the policy's term or pays the face amount to the policy owner if the insured lives until the end of the policy term. d. Benefits are always paid in the form of an annuity.
d Endowment policies are a type of life insurance policy that are designed to endow before the insured's 100th birthday. There is no required benefit payout format, but the default automatic option for payout on a life insurance policy is as a lump sum if another e.g. annuity, option is not chosen.
To be eligible for a group life insurance policy: Select one: a. A labor union must consist of at most 10 members. b. An employer must have at least 5 employees. c. A creditor must have at most 5 debtors. d. An association must have at least 10 members.
d To be eligible for a group life insurance policy: an association, employer, labor union or creditor must have 10 or more employees/members/debtors.
