XCEL Solutions: Chapter 1 Types of Insurance Policies
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for
Modified Whole Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life Policy
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which statement 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
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase?
Term life
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
A(n) _______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities
Variable
In order to sell a(n) _______ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA)
Variable
A(n) ____ ____ Life policy combines investment choices with a form of Term coverage
Variable Universal
A life policy with a death benefit and cash value 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 the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable 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
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Variable universal life policy
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
A life insurance policy that provides a policyowner with cash value along with a level face amount is called:
Whole life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole life
what kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole life
Which of these is an element of Variable Life policy?
a fixed, level premium
Which statement is TRUE regarding a Variable Whole Life policy?
a minimum guaranteed Death Benefit is provided
How long does the coverage normally remain on a limited-pay life policy
age 100
Variable Whole Life Insurance can be described as
both an insurance and securities product
Under an interest sensitive whole life policy
cash values are determined by interest rates
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 or her insurance without providing evidence of insurability
conversion privilege
A universal life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the
cost of insurance
A(n) ______ term life policy is normally used when covering an insured's mortgage balance
decreasing
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
A variable insurance policy
does not guarantee a return on its investment accounts
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the
expense charges
Term insurance has which of the following characteristics?
expires at the end of the policy period
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
Who has the option to renew a renewable term policy?
insured
Which of these needs is satisfied by Adjustable Life insurance?
insured's need for flexible premiums
Credit life insurance is:
issued in an amount not to exceed the amount of the loan
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is this?
modified premium life
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
policyowner
A limited-pay life policy has:
premium payments limited to a specified number of years
Which of the following actions is NOT possible with a Universal Life policy?
premiums may be applied as a credit against income tax
What type of life policy covers two people and pays upon the death of the last insured?
survivorship
What type of life insurance are credit policies issued as?
term
What kind of life insurance covers children under their parent's policy
term rider
The investment gains from a Universal Life Policy usually go toward
the cash value
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is:
the cost
Whole Life Insurance is sometimes referred to as "Straight Life". What does the word "Straight" indicate using this phrase?
the duration of premium payments
What advantage does the renewability feature give to a term policy?
the insured may extend the coverage period
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
Under a Graded Premium Whole Life policy,
the premium increases each year during the early years of the contract and remains the same after that time
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):
third-party with no insurable interest
Which of the following is considered an element of a Variable Life Policy?
underlying equity investment
Which of the following life insurance policies combine term insurance with an invested element
universal life
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
A term life insurance policy matures
upon the insured's death during the term of the policy
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
variable life
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
varies according to the contract
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
without evidence of insurability
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
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
Which statement about a whole life policy is true?
Cash value may be borrowed against
S is covered by a whole life policy. Which insurance product can cover his children?
Child term rider
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
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 type of policy covers two lives and pays the face amount after the first one dies?
Joint Life Policy
An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?
Key Person insurance
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:
Limited Pay life
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 Year Convertible Term
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
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
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20 pay life accumulates cash value faster than straight life
What type of policy would offer a 40-year old the quickest accumulation 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
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible term
The Combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy
Decreasing
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing term
What type of policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at Age 70
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index 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
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
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
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable
Which of the following types of permanent life insurance policies offers the highest initial cash value
Single premium
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life
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
The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
Universal
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
Which of the following Life insurance policies combine term insurance with an investment element?
Universal life
