Types of Policies and Riders Chapter 3 Test

If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance: A) On his own life at specified periods, but must prove insurability B) Anytime before the age of 65 C) On his own life at specified periods of time at a fixed guaranteed premium D) On his own life at certain specified ages without proof of insurability

D) On his own life at certain specified ages without proof of insurability A guaranteed insurability rider guarantees that more permanent insurance can be purchased at specific ages without further proof of insurability at a rate based upon your attained age at the time the increase is purchased.

All of the following are true of a Universal Life policy, except: A) Any borrowing or partial withdrawal from the cash value account terminates the policy B) The cash value account earns interest at the current rate with a guaranteed minimum rate established C) Adjustments to the face amount may be requested by the policyowner to reflect changes in need D) It allows the owner to make additional contributions that increase the cash value or skip some premiums if the owner desires to do so

A) Any borrowing or partial withdrawal from the cash value account terminates the policy Any borrowing or partial withdrawal from the cash value would not terminate the policy. However, loans might reduce the interest amount credited to the cash value as well as reducing the overall payout upon death to the beneficiary.

All of the following are correct regarding renewable term insurance, except: A) Evidence of insurability is required to renew the policy B) The policy renews as long as the premium continues to be paid C) The policy is renewable until the expiration date D) The premium increases at renewal based on attained age

A) Evidence of insurability is required to renew the policy Evidence of insurability is not required upon renewal. As long as the premium continues to be paid, the policy will renew until the expiration date and the premiums will increase based on attained age.

All of the following regarding convertible term life insurance is true, except: A) The conversion can take place at any time B) Conversion is without evidence of insurability C) Conversion can be based on either the attained or original issue age of the insured D) The new premium will be higher on the conversion policy compared to the original policy

A) The conversion can take place at any time The right to convert the existing term policy to a permanent policy without evidence of insurability is only available during the conversion period specified in the contract.

Which of the following traditional whole life policies has the highest first-year annual premium, all other factors being equal? A) 20-pay life B) 10-pay life C) 40-pay life D) 30-pay life

B) 10-pay life The shorter the premium paying period, the higher the premium. A Limited Pay Life policy of 10 years would have a higher premium than a 20-pay, 30-pay, or 40-pay life policy.

A and B are married. They have two minor age children. A and B feel that all family members should have coverage on their lives, not just A. What would be the least expensive way to accomplish this? A) Buy a traditional whole life policy on B, and juvenile policies on the children B) Add a term life insurance rider to this policy to provide additional coverage on the spouse and children C) Add accidental death coverage riders on B and the two children D) Buy traditional whole life policies on B and the two children

B) Add a term life insurance rider to this policy to provide additional coverage on the spouse and children The policyowner may add a term rider to this policy to provide additional coverage on the primary insured, a spouse, or children.

All of the following about Universal Life are true, except: A) The fixed expense charges from the policy are deducted monthly from the cash values B) Increases in face amount do not require proof of insurability if under $100,000 C) The premium paid can be increased, decreased, or even skipped D) The mortality charge is determined annually, based on age

B) Increases in face amount do not require proof of insurability if under $100,000 The insured can increase or decrease the face amount. Any increase in the face amount will require evidence of insurability.

Which of the following life insurance policies is ideally suited for estate planning purposes? A) Variable Whole Life B) Joint Survivorship Life C) Joint Life D) Universal Life with death benefit Option B

B) Joint Survivorship Life If owned by an irrevocable trust, a Joint Survivorship policy can keep the value of the policy out of the estate and create much needed cash to pay for estate taxes, which come due 9 months after the second spouse dies.

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) The Cash Value Premiums in excess of what is necessary to cover the cost of pure insurance (i.e. term) create cash value as an internal savings component in all permanent policies.

What is the risk to the purchaser in a viatical settlement transaction? A) The purchaser paid too little for the policy B) The insured does not die within the time period anticipated C) The insured dies sooner than expected D) The check given to the seller does not clear the bank

B) The insured does not die within the time period anticipated The risk to the purchaser is that the insured does not die within the time period anticipated and therefore the purchaser could lose money on the transaction.

All of the following are considered specialized policies, except: A) Juvenile Life B) Whole Life C) Joint Survivorship D) Joint Life

B) Whole Life Whole Life is considered an ordinary, not a specialized, policy.

What is the fastest way to pay up a traditional whole life policy? A) Use the dividend features available B) Double up on premium payments C) Buy a single premium policy D) Borrow against the policy's cash values to pay off any premium balance

C) Buy a single premium policy A single premium life policy only requires one premium payment to be made therefore this would pay up the policy the quickest.

Increases in insurance protection to keep a Current Assumption policy from endowing is provided: A) With full underwriting B) With simply part 1 of the application completed C) Without evidence of insurability D) With limited underwriting

C) Without evidence of insurability It is possible that the cash value will increase too quickly and could cause the policy to mature prior to age 100. To prevent this from happening, the insurer will add a corridor of insurance protection without requiring evidence of insurability to keep the policy from endowing.

Ed purchased policies on behalf of his grandchildren. He wanted to be certain they could purchase additional policies at specified ages. He was able to do this by adding which rider? A) Child Rider B) Guaranteed Insurability Rider C) Waiver of Premium Rider D) Cost of Living Rider

The Guaranteed Insurability Rider would allow his grandchildren at future specified dates, ages, or events to purchase additional amounts of insurance without evidence of insurability.