All of the following are characteristics of Term Insurance, except:
A) No permanent cash or loan value.
B) High premium outlay in early years.
C) Can be written separately or with other types of insurance.
D) Will expire at an attained age or after a specified period.
Answer B is correct.
Term Insurance is characterized by a low initial premium outlay when the insured is young and increases as the insured's age advances.
Frieda wants coverage until she has paid back her business loan in 10 years. The ideal contract with the least expense would be:
A) 10-pay Life
B) Graded Premium
C) Decreasing Term
D) 10-year Endowment
Answer C is correct.
Decreasing Term reduces in death benefit as the loan obligation reduces in balance. It is the least expensive form of term insurance as the insurer's obligation, in the way of death benefit, reduces over the period of the note or loan.
A Term Insurance Policy with a Convertibility Option may be:
A) Converted to major medical
insurance.
B) Converted to cash, after the fifth year.
C) Converted to another company.
D) Converted to permanent insurance.
Answer D is correct.
The Convertibility Option of a Term Policy allows the policy to be converted to a permanent policy without proof of insurability. The premium upon conversion is based upon either attained age or issue age dependent upon the insurer.
Which best describes a Renewable Term Policy?
A) A policy with increasing cash value at each renewal.
B) A policy with decreasing premium at each renewal.
C) A policy with an increased face value at each renewal.
D) A policy with increased premium at each renewal.
Answer D is correct.
Whether the policy period is 1 year, 5 years, 10 years, etc., the premium will increase
at each renewal to sustain the same specified death benefit that was purchased when the policy was written. Remember, the Renewability Option is based upon attained age.
Which of the following are types of Term Policies?
A) Increasing, Decreasing, Re-entry, Level and Life-Expectancy
B) Renewable, Convertible
C) Straight, Level, Increasing, Decreasing.
D) Single Premium, Level
Premium, Decreasing Premium.
Answer A is correct.
The question is asking about types of Term Policies, not options available to Term Policies. Straight is a type of permanent insurance; not term insurance.
Mary decides to convert her Term Policy to permanent protection. Which of the following statements is true regarding the
conversion?
A) She may convert after proof of insurability.
B) She may convert without evidence of insurability.
C) Premiums and the amount of coverage remain the same.
D) She may convert if her health has not deteriorated.
Answer B is correct.
The Conversion Option of a Term Policy allows conversion to a Permanent Policy without evidence of insurability.
Bess received information in regard to her individual Term Insurance explaining that she could convert the policy by agreeing to which of the following conditions?
A) Prove insurability and pay the same level premium.
B) Proof of insurability is not required and pay premiums computed at a higher rate class.
C) Sign the conversion application agreeing to pay premiums computed at her attained age.
D) Prove insurability and pay
premiums based on her current health status.
Answer C is correct.
Bess does not have to prove insurability to convert her individual Term Policy, but she will pay a higher premium with the conversion application because she is older than when she purchased the Term Policy, and is converting to a Permanent Policy.
Which of the following
statements regarding Whole Life is incorrect?
A) The longer the premium paying period, the higher the annual premium.
B) It has a level premium and a level face amount.
C) An insured that lives to maturity (age 100) will receive the face amount.
D) Provides protection for life and may augment retirement income for the insured.
Answer A is correct.
The shorter the premium-paying period, the higher the annual premium, a
$100,000 Limited Pay Policy at Age 65 will have a higher annual premium than a $100,000 Straight Whole Life Policy, because the Limited Policy at Age 65 will be paid-up, in terms of premium, at age 65 as opposed to age 100. Both policies will mature at age 100.
Which of the following are types of Ordinary Whole Life policies?
A) Level, Adjustable, Flexible
B) Level, Straight, Limited pay
C) Straight, Limited pay, Universal
D) Straight, Limited pay, and Single pay
Answer D is correct.
Straight, limited pay, and Single pay policies are all considered Ordinary whole life policies. Level is a type of term insurance, and flexible, adjustable, and universal are nontraditional whole life policies.
Albert purchased an Adjustable
Life Policy that has all of the following characteristics, except:
A) An increase in death benefit does not require evidence of insurability.
B) Changes and adjustments may be made without adding or converting the existing policy.
C) Cash value develops when the premiums paid exceed the cost of the policy.
D) Increased premiums may lengthen the protection period if the policy is in the term range.
Answer A is
correct.
An increase in death benefit usually requires evidence of insurability.
Which of the following riders is used to increase the death benefit if death is the result of an unintended fatal injury, paying a multiple level of the face amount?
A) Living Need Rider
B) Accidental Death
C) Payor Benefit
D) Viatical Trust Settlement Agreement
Answer B is correct.
If death is ruled to be accidental, the Accidental Death Rider pays a multiple (usually double) of the death benefit of the underlying policy.
Which of the following is not a characteristic of a Universal Life policy?
A) The policyowner may determine the amount and mode of premium payments and adjust the face amount to reflect
needs as they change.
B) It is a combination of life insurance and a current interest savings plan.
C) The owner receives a biannual statement detailing expenses, mortality, and earnings.
D) Each month a mortality charge is deducted from the policy's cash value for the cost of the insurance protection and expenses.
Answer C is correct.
The owner of the policy receives an annual statement detailing expenses, mortality, and
interest earnings.
This policy's premium and death benefits are flexible, the excess cash is placed in a separate account(s), and the insurer allows the policyowner to switch from one account to another during the life of the policy. This describes a(n):
A) Modified Variable Universal Life
B) Universal Life
C) Adjustable Life
D) Variable Universal Life
Answer D is correct.
The characteristics as stated in the question are descriptive of Variable Universal Life, offering the ultimate in flexibility of the flexible design policies.
All of the following are characteristics of a Family Income Policy, except:
A) Family Income is more expensive than Family Maintenance.
B) Provides a specified
monthly income from the date of the insured's death until a specified future date.
C) At the end of the income period, the Whole Life face amount is payable.
D) It is a combination of Whole Life and Decreasing Term insurance.
Answer A is correct.
Family Income would be less expensive than Family Maintenance for a like amount of insurance because it uses Decreasing Term as opposed to Level Term to accomplish its objective. In
addition, the term benefit is payable only until a specified future date as opposed to a selected period of years beginning with the insured's death.
All members of a family are covered by this contract with Whole Life Coverage on the wage earner and Level Term Coverage on the spouse and children. Which policy has these characteristics?
A) Family Income Rider
B) Family Policy
C) Family
Maintenance
D) Multiple Protection Plan
Answer B is correct.
The Family Policy (Family Protection Plan) covers all members of the family with Whole Life Coverage on the head (wage earner) of the family and Level Term Coverage in the form of a rider on the spouse and children.
What type of policy is a single policy covering two or more
lives, resulting in premium savings, that pays benefits upon the death of the first insured?
A) Joint Survivorship Life
B) Joint Life
C) Modified Whole Life
D) First Death Policy
Answer B is correct.
A Joint Life Policy covers two or more lives under a single policy, resulting in a reduction in premium, with the death benefit payable upon the death of the first to die.
Which characteristic is unique to a Graded Premium Whole Life Policy?
A) In the later years, premiums are the same as a typical Whole Life Policy.
B) Premiums are higher than a typical Whole Life Policy in the early years.
C) Premiums increase each of the early years and remain level thereafter.
D) Premiums are flexible throughout the life of the contract.
Answer C is
correct.
A Graded Premium Whole Life Policy increases in premium each year for a specified period, such as five years, with the premiums becoming level thereafter. This feature makes Permanent Insurance affordable when the cost of traditional Whole Life products might be prohibitive.
Which statement is false?
A) When separate account(s) are used in a Life Insurance Policy, a securities
license is required in addition to a life license.
B) Juvenile Insurance is any policy written on the life of a minor.
C) Under Variable Life policies, the policyowner assumes the investment risk.
D) A Joint Survivorship Life Policy pays the death benefit upon the first insured's death.
Answer D is correct.
A Joint Survivorship Life Policy pays the death benefit upon the death of the last insured to die.
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) Guaranteed Insurability Rider
B) Waiver of Premium Rider
C) Cost of Living Rider
D) Children's Rider.
Answer A is correct.
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.
If an insured becomes totally disabled, normally after a 6-month elimination period, premiums are waived for the duration of the disability if the _______ Rider is attached.
A) Waiver of Premium
B) Waiver of Payors Premium
C)
Waiver of Premium/Disability Income
D) Living Need
Answer A is correct.
The Waiver of Premium Rider would waive premiums for a disabled insured. If the insured also wanted to replace income due to disability, then they would purchase the Waiver of Premium/Disability Income Rider.
Ned insures his grandchild with a Variable Life Policy
that will increase in value as the child gets older. This policy has all of the following traits, except:
A) Premiums are paid into separate investment accounts.
B) Policy has a guaranteed minimum face amount.
C) The policyowner has control over the investment fluctuations and risks.
D) It is designed to provide a hedge against inflation.
Answer C is correct.
Under a Variable Life Policy, the policyowner has no
control over the investment fluctuations, but assumes the investment risk.
All of the following statements regarding the Living Need Rider are true, except:
A) The annual report must include the amount of benefit remaining.
B) Allows a partial payment of the face amount before death if the insured becomes terminally ill.
C) At death, the early payment is deducted from the beneficiary's
benefit.
D) It could also include nursing home benefits and dreaded disease benefits.
Answer A is correct.
A monthly report details the benefit amount remaining, not an annual report.
An insured dies within the time limit of an Increasing Term Rider and the beneficiary receives the face amount plus the value of all paid premiums. Which
rider is attached to the policy?
A) Return of Cash Value
B) Return of Premium
C) Waiver of Premium
D) Not allowed, insurers do not return premiums in this manner.
Answer B is correct.
With a Return of Premium Rider, if the insured dies within the period of the term, the beneficiary receives the death benefit of the Whole Life Policy and, through an increasing term rider, the equivalent of the premiums paid on the
Whole Life Policy.
With Joint Life Insurance policies, the age is based on:
A) Age of the youngest insured.
B) Age of the oldest insured.
C) Average age of both insureds.
D) The age of the premium payor.
Answer C is correct.
The premium on a Joint Life Policy is calculated on the average age of both insureds.
If one purchases a 20-Pay Life Policy, with a face amount of $25,000 and dies 15 years later, what amount will the beneficiary receive?
A) $15,000
B) $18,750
C) $25,000
D) Total premiums paid plus interest
Answer C is correct.
All premiums will be paid in 20 years, but the cash value will not be equal to the face amount until
age 100. If death occurs at any point prior to age 100, the beneficiary receives the death benefit of $25,000.
Individual Term policies are generally stand-alone policies, but may be written with other types of policies as a(n):
A) Endorsement
B) Rider
C) Group Contract
D) Accidental Death Benefit
Answer B is
correct.
Through a rider, term coverage may be added to a Permanent Policy. A Term Rider cannot be added to a Term Policy.
What is a characteristic of both Whole Life and Endowment policies?
A) The shorter the payment period is, the higher the premium is.
B) Both place more emphasis on savings rather than benefits.
C) Both mature at age 100.
D) They are straight continuous
coverage.
Answer A is correct.
Endowments and Whole Life policies have the common characteristic that the shorter the premium-paying period is, the higher the premium is.
The Double Indemnity Rider expires within _____ days of the accident.
A) 90
B) 120
C) 180
D) 365
Answer A is correct.
Death must occur within 90 days of the accident for the Accidental Death (Double Indemnity) Rider benefit to be paid.
A working couple conveys to you that upon a premature death, the survivor would need money to maintain the present living standard. Which of the following policies would you suggest?
A) Family Maintenance Policy
B) Survivorship Life
C) Joint
Life
D) Universal Life
Answer C is correct.
Under a Joint Life Policy, the proceeds are paid upon the death of the first to die so that the surviving spouse has the policy proceeds to maintain a present living standard, among other objectives.
A life insurance premium is paid each month; the insurer subtracts a mortality charge and
expenses from the policy's cash value. This describes a:
A) Whole Life
B) Adjustable Whole Life
C) Variable Life
D) Universal Life
Answer D is correct.
All premiums paid to a Universal Life Policy are placed in the policy's cash value account. The mortality charge (cost of protection) and expenses are then deducted from the cash value account.
Your client wants a policy that provides good coverage, but lets her choose where she might invest her excess premiums. Which of the following policies is best for her situation?
A) Level Term
B) Family Income Policy
C) Variable Universal Life
D) Reentry Term Plan
Answer C is correct.
The concern is for the owner to be in control of where she might invest the excess
premiums. Of the choices given, the only one that allows this flexibility is Variable Universal Life through the separate account(s).
What is the main difference between a Whole Life Policy and a Universal Life Policy?
A) There is not any difference.
B) Whole Life is rated by age and gender and Universal Life is not rated by gender.
C) Universal Life premium is flexible and a Whole
Life premium is fixed.
D) Whole Life is purchased by units and a Universal Life policy is purchased by multiple units.
Answer C is correct.
Universal Life offers a flexible premium feature, whereas with Whole Life the premium is level and fixed.
Which policy could be used when a married couple wants to defer the estate taxes until both
are deceased?
A) Medicare Supplement
B) Modified Whole Life
C) Family Maintenance Policy
D) Joint Survivorship Life
Answer D is correct.
Joint Survivorship Life pays upon the death of the last to die, and for this reason is a popular policy with couples who want to defer estate taxes until both are deceased.
Which rider
allows a disabled insured policyowner to forgo future premiums while continuing to enjoy policy benefits?
A) Accidental Death
B) Return of Cash Value
C) Waiver of Premium
D) Cost of Living Benefit
Answer C is correct.
If the insured policyowner were to become totally disabled, the Waiver of Premium Rider would waive future premiums for the duration of the disability and still allow the cash value and dividends to
continue as though the premiums were being paid.
If a father were to add a Child Rider to a policy to cover his children, how old must a newborn be before coverage is in force?
A) At birth
B) At 14 or 15 days of age
C) At 14 or 15 weeks of age
D) At 1 year of age
Answer B is correct.
Children born after the rider is
issued are covered automatically after 14 or 15 days, depending on the insurer, at no additional premium.
Which statement is correct?
A) Term Insurance is permanent protection.
B) Term Insurance must be used to protect a home mortgage.
C) Term Insurance is always used with another type of coverage.
D) Term rates are based on the insured's age.
Answer D is correct.
Term Insurance provides temporary, not permanent, protection. Term Insurance may (not must) be used to protect a home mortgage. Term Insurance can be written stand-alone as well as with another type of coverage.
Which statement is true of Term Insurance?
A) Premiums decrease as the insured's age increases.
B) Term is less
expensive as the insured's age increases.
C) Term may be written for a specified number of years.
D) Term insurance usually has cash value when it expires.
Answer C is correct.
Term premiums increase as the insured's age increases. Term is more expensive as the insured's age increases. Term Insurance provides protection, but does not generate a cash value.
Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect?
A) Split Level Term.
B) Ordinary Term
C) Renewable Term
D) Decreasing Term
Answer D is correct.
Decreasing Term reduces in death benefit while the policy is in effect.
Which of the following is not a trait of an Endowment Policy?
A) Places more emphasis on the death benefit than the savings element.
B) Normally, premiums are higher than the premium for other types of life insurance.
C) Policy builds cash, loan, and nonforfeiture values prior to age 100.
D) The shorter the premium-paying period, the higher the premium.
Answer A is
correct.
Endowment policies place greater emphasis on savings than on the death benefit.
Compare 3 contracts, all with the face value of $100,000; put them in order from most expensive to least expensive.
A) 10-Pay Life, Life Paid-Up in 20 years, Straight Life
B) Term, Whole Life, Endowment
C) Endowment at age 75, Endowment at age 65, 10-Pay Life
D) Straight Life, Endowment,
Limited-Pay Life.
Answer A is correct.
The proper order from most expensive to least expensive would be 10 Pay Life (all premiums paid up in 10 years; matures age 100); Life Paid-Up in 20 years (all premiums paid up in 20 years; matures age 100); and Straight Life (premiums paid to age 100; matures age 100). The earlier one pays up the premium on a policy, the greater the cost.
The face amount of a Whole Life Policy is:
A) The amount available for policy loans.
B) The amount payable to the beneficiary upon the insured's death.
C) The amount of premiums and cash value.
D) The sum of all premiums plus the cash value.
Answer B is correct.
Face amount is the same as the death benefit. In other words, the face amount is the amount payable to the
beneficiary upon the insured's death.
All of the following are characteristics of Ordinary Whole Life Insurance, except:
A) Premiums are designed to be paid throughout the life of the insured.
B) Premiums remain uniform.
C) The policy pays the face value if insured dies before age 100.
D) If insured lives to age 100 the lifetime total of all premiums are returned.
Answer D is correct.
If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value.
If an insured has a Life Paid-Up at 75 Policy (a limited-pay life paid-up at age 75), what would the beneficiary receive if the insured died at age 68?
A) Face amount
B) Cash
value
C) Face amount minus the cash value
D) There would be no death benefit payable for 7 additional years
Answer A is correct.
The full-face amount (death benefit) is payable to the beneficiary anytime death occurs while the policy is in force.
If Alvin purchases a Variable Life Policy with a face amount of $250,000, upon his
death the amount of benefit payable to the beneficiary must be at least:
A) $250,000, minus any loans and loan interest.
B) Exceed $250,000.
C) Equal to or less than $250,000.
D) There is no guaranteed death benefit.
Answer A is correct.
The original face amount (death benefit) is guaranteed under a Variable Life Policy. The amount payable to the beneficiary upon Alvin's death must at least equal $250,000, less any
loans and loan interest.
The premium charged for exercising the Guaranteed Insurability Rider is based upon:
A) Issue age
B) Attained age
C) Assumed age
D) Original Age
Answer B is correct.
Anytime the Guaranteed Insurability Rider is exercised, the premium charged for the additional amount of insurance is based on the
attained age of the insured.
Under which rider are the insured and owner two different individuals?
A) Waiver of Premium
B) Waiver of Payors Premium
C) Waiver of Premium/Disability Income
D) Accelerated Death Benefit
Answer B is correct.
Under the Waiver of Payors Premium Rider, the insured is typically a child and the
owner is the adult parent. If the adult owner and premium payor becomes disabled, the premiums are waived, sparing the policy from lapse.
David's Family Income Policy will provide an income for 10 years. If David dies on the policy's 7th anniversary, how many years will the family receive an income benefit?
A) 10 years
B) 7 years
C) 3 years
D) 0 years
Answer C is correct.
If the insured dies during the income period, a specified monthly income is paid from the date of the insured's death until a specified future date. Since David died 7 years into the 10-year income period, his family would receive an income for 3 years.
Quentin has terminal cancer with a life expectancy of 1 year. XYZ Inc. purchased
his policy for less than the face amount and is now the policyowner and premium payor. This was which of the following transactions?
A) Long Term Care Agreement
B) Waiver of Premium Disability Income claim
C) Buy/Sell Agreement
D) Viatical Trust Settlement Agreement
Answer D is correct.
A Viatical Trust Settlement Agreement is a transaction between a business firm (XYZ Inc.) and a life insurance policyowner (Quentin)
insuring the life of an individual with a life threatening or terminal illness.
What is the time limit on life expectancy for a Viatical Trust candidate?
A) 5 years
B) 4 years
C) 3 years
D) 2 years
Answer D is correct.
The time limit of life expectancy for a Viatical Trust candidate is normally a life expectancy of two
years or less.
Bill and Janet are both insured under a whole life policy that is designed to help cover federal estate taxes by paying upon the death of whichever of them is the last to die. The policy is a:
A) Modified Whole Life policy.
B) Joint Life policy.
C) Graded Premium policy.
D) Joint Survivorship Life policy.
Answer
D is correct.
The question stipulates covering two lives under one policy with death benefits paid upon the last death as opposed to upon the first death in the case of Joint Life.
Timothy is the insured/owner of a whole life policy and is concerned that in the event of disability the policy might lapse. He also wants to replace some of his lost income due to the disability. Which rider would
accomplish Tim's objective?
A) Waiver of Payors Premium Rider.
B) Waiver of Premium Rider.
C) Waiver of Premium/Disability Income Rider.
D) Guaranteed Insurability Rider.
Answer C is correct.
Tim is both the insured and owner so that eliminates Waiver of Payors Premium Rider and Waiver of Premium Rider. Would waive premiums but would not replace any lost income. Guaranteed Insurability Rider is not a disability based
rider.
Jacob owns a policy that pays a $100,000 death benefit only if he dies within the 20-year policy period. If Jacob dies anytime within the 20-year policy period, Wanda, his beneficiary, will receive the $100,000 death benefit and the premium that Jacob will pay for this policy will be the same throughout the 20-year policy period. Jacob owns a:
A) Limited Payment Whole Life policy.
B) Family Maintenance policy.
C) Level Term policy.
D) Life-Expectancy Term policy.
Answer C is correct.
The question specifies a death benefit only; the death benefit is constant (level) throughout the 20-year policy period; and the premium is the same (level) throughout the policy period.
Erika owns a permanent policy in which the
cash value and the death benefit will be equivalent at age 75. Erika owns a:
A) Enhanced Ordinary Life Policy.
B) Limited Payment at age 75 Whole Life Policy.
C) Endowment at age 75 Policy.
D) Endowment at age 100 Policy.
Answer C is correct.
Endowments mature or endow prior to age 100. In this case the cash value and death benefit become the same amount (matures/endows) at age 75.
Will owns a whole life insurance policy with a 10 year level term rider on himself. If Will were to die, his widow would receive the lump sum of the policy plus a monthly check for 10 years. Will owns a:
A) Family Policy
B) Family Maintenance Policy
C) Family Income Policy
D) A Whole Life policy with a Family Rider
Answer B is correct.
The
question establishes that one person is being insured not an entire family unit, and that the policy is whole life with a level term rider attached. Remember, Family Maintenance utilizes level term to accomplish the objective and Family Income utilizes decreasing term.
All of the following are true of a Universal Life policy, except:
A) Adjustments to the face amount may be requested by the
policyowner to reflect changes in need.
B) It adjusts to interest rate changes and allows the owner to make additional contributions that increase the cash value or skip some premiums if the owner desires to do so.
C) The death benefit is in the form of 1 year renewable term, while the cash value account earns interest at the current rate with a guaranteed minimum rate established.
D) Any borrowing or partial withdrawal from the cash value account terminates the policy.
Answer D is correct.
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.
Which combination requires both a life and securities license to sell?
A) Adjustable and Universal.
B) Universal and Variable.
C) Variable Universal and
Variable.
D) Variable and Adjustable.
Answer C is correct.
Both Variable Life and Variable Universal Life require a securities and life license to market. A securities license is not required for Adjustable Life or Universal Life.
Monica wants to renew her $50,000 Level Term life insurance policy with options, which of the following is
true?
A) Monica will have to prove insurability, and the renewal premium will be based upon her age at the time the policy was issued.
B) Monica will not have to prove insurability, and the renewal premium will be based upon her age at the time the policy was issued.
C) Monica will have to prove insurability, and the renewal premium will be based on her now current age.
D) Monica will not have to prove insurability, and the renewal premium will be based on her now current
age.
Answer D is correct.
The Renewal Provision to a term policy does not require evidence of insurability, and the renewal premium is based on attained age, not issue age.
The Return of Premium Rider, the Return of Cash Value Rider, and the Cost of Living Rider all use which type of term insurance to accomplish their objective?
A)
Increasing Term
B) Decreasing Term
C) Level Term
D) Re-Entry Term
Answer A is correct.
The purpose behind each of the 3 riders in the question is to increase the death benefit to fulfill the objective of the rider.
Graded Premium life insurance is a type of:
A) Endowment
B) Whole Life
C) Term Life
D) Variable
Life
Answer B is correct.
Graded Premium Life insurance is a type of Whole Life insurance.
A payor benefit rider is used to keep what type of policy in force?
A) A spouses policy
B) A jumping juvenile policy
C) A family income policy
D) A family maintenance policy
Answer B is correct.
A jumping juvenile policy would commonly use a payor benefit rider to protect the minors policy in the event the policyowner/payor were to die or become disabled prior to the minor attaining age 21 or 25.
Which Whole Life policy would require you to put the least amount of premium into the plan over the total life of the plan?
A) Single Pay/Premium
B) Whole
Life
C) 10 Pay Whole Life
D) 15 Pay Whole Life
Answer A is correct.
A Single Pay Premium pays the total premium up front at a discounted rate. This method of premium would result in the least amount of total premium over the life of the plan. The insured is discounted for paying the total premium up front.
Who pays all future
premiums after the Viatical Settlement.
A) The Viatical Company
B) The Insured
C) The Insured's Beneficiary
D) The Policy Owner
Answer A is correct.
The Viatical would immediately become the owner and beneficiary of the policy and would be responsible for all future premium payments until death occurs. At death, the Viatical company would receive the entire Death benefit from the insurance company.
When does the payor benefit rider take effect on a policy?
A) Only if the policy owner/payor dies before the insured attains the age of 21 or 25.
B) Only if the insured dies before reaching age 21 or 25.
C) Only if the policy owner/payor dies or becomes disabled before the insured attains the age of 21 or 25.
D) Anytime the policy owner/payor dies or becomes disabled regardless of the insured’s
age.
Answer C is correct.
A payor benefit rider pays the premium when the policy owner/payor Dies OR becomes Disabled. Once the insured reaches the age stipulated in the policy (21 or 25) the insured is responsible for the premiums.
If Mary is 30 years old and buys a 15 pay life policy, how old will Mary be when she stops paying
premiums?
A) 45
B) 50
C) 60
D) 100
Answer A is correct.
15 Pay means that the policy is guaranteed to be paid up in 15 years. The policy still endows at age 100.
Which of the following IS true regarding a Living Need (Accelerated Benefit) Rider?
A) Reduces the cash value by the amount withdrawn.
B) Reduces
the death benefit by the amount withdrawn.
C) Both A and B
D) Neither A nor B
Answer B is correct.
This is an advance of the policy’s death benefit, not the cash value, therefore, the amount withdrawn would reduce the death benefit.
Which of the following riders is used to provide an automatic increase in insurance as the Consumer
Price Index increases?
A) Guaranteed Insurability rider.
B) Payor Benefit rider.
C) Cost of Living Adjustment “COLA” rider.
D) Living Need rider.
Answer C is correct.
The COLA rider uses increasing term insurance that increases as the CPI increases. Adjustments are normally made each anniversary and require premium adjustments to pay for the increases. COLA is an acronym for Cost Of Living Adjustment rider.
If Greg’s policy has a Guaranteed Insurability rider, it means that he can purchase more insurance
A) At any time during his life, on his own life, without proof of insurability.
B) On the lives of his dependents at certain specified ages.
C) On his own life at certain specified ages provided he is insurable.
D) On his own life at certain specified ages without proof of
insurability.
Answer D is correct.
GI rider allows the insured to purchase additional amounts of insurance at certain ages, events or specified dates in the future without any proof of insurability. You are basically purchasing the guaranteed right to purchase more insurance later, regardless of health.
Which of the following uses
convertible term to help lower premiums initially and then allows you the right to purchase permanent insurance?
A) Graded premium whole life
B) Modified whole life
C) Universal life
D) Variable life
Answer B is correct.
This modifies a whole life policy to use term at the beginning to lower premiums and then converts to whole life later. The purpose is to make whole life affordable in the early years.
Amounts paid out under the accelerated benefits rider
A) may be used as a disability income benefit if disabled.
B) are deducted from the policy's death benefit.
C) are also considered to be accidental death benefits.
D) can be used as a Medicare supplement policy.
Answer B is correct.
An accelerated or living benefits rider
allows insureds who need funds for health care to collect some or all of the policy's death benefit while they are still living. The amount withdrawn is deducted from the policy's death benefit.
Which of the following riders require the insured being totally and permanently disabled before it becomes effective?
A) Spouse rider
B) Accidental death rider
C) Living need rider
D)
Waiver of premium rider
Answer D is correct.
The waiver of premium rider, which exempts a disabled policyowner from paying premiums during disability, requires that disability be permanent and total before taking effect.
If an insured's policy includes the waiver of premium rider, what happens when the age is reached where the rider no
longer applies?
A) The premium for the policy is reduced.
B) No changes occur.
C) The costs of the rider are now incorporated into the policies cash values.
D) Premiums are waived for the duration of the policy.
Answer A is correct.
When the insured's age causes a waiver of premium rider to expire, the insurer lowers the premium charged to reflect the loss of the rider's protection.
If a policy contains an accidental death benefit and the insured also has an outstanding policy loan, in the event of accidental death
A) double the face amount is paid regardless of the outstanding loan.
B) double the face amount is paid with the beneficiary repaying the outstanding loan balance.
C) twice the face amount is paid with a deduction equal to the size of the policy loan.
D) the loan
cancels the accidental death benefit rider and only the amount of the primary initial face amount is paid out.
Answer C is correct.
The accidental death rider does not affect the way policy loans are treated, so for a double indemnity rider on a policy with an outstanding loan, the insurer would pay twice the face amount for accidental death, minus the loan amount and any interest due.
Jill, whose policy contains a waiver of premium rider, becomes disabled for two years during which time the company pays over $400 in premiums. Jill recovers and now must
A) remove the waiver of premium rider on the policy.
B) cancel the policy and start over.
C) begin paying a substandard rated up premium due to her recent disability.
D) begin paying the premiums as they become due.
Answer D is correct.
When the policyowner recovers from the disability he or she must start to pay premiums again. Premiums remain the same.
A payor rider is used to keep what type of policy in force?
A) A joint life policy.
B) A viatical settlement.
C) Graded premium policy.
D) A juvenile insurance policy.
Answer D is correct.
The rider provides waiver of premium on the juvenile policy payor, generally a parent, so if the payor dies or becomes disabled before the insured juvenile reaches a specified age the policy will remain in force.
To waive an insured's premium, most companies require an individual's disability to be
A) a disability expected to last less than six months.
B) total
and permanent.
C) a temporary total disability expected to last six months but no longer than one year.
D) a partial disability and still able to perform some type of work.
Answer B is correct.
Disability must be total and permanent before waiver of premium can be activated.
For the insurance company to pay the accidental death
benefit, most companies require that the insured
A) die within 30 days of the accident.
B) die within one year of the accident.
C) satisfy the policy incontestability period of two years prior to the accident occurring.
D) die within 90 days of the accident.
Answer D is correct.
To qualify as accidental death, the insured must have died in an accident or as the result of an accident within a specified length of
time, usually 90 days.
In determining whether disability is permanent, most companies call for a
A) 30 day elimination period.
B) 90 day elimination period.
C) three- to six-month waiting period.
D) one year waiting period.
Answer C is correct.
The three to six month waiting period after the onset of disability
allows the insurer to determine if the disability is permanent.
The normal waiting period for benefits under the disability income rider is
A) three to six months.
B) 30 days
C) 60 days
D) one year
Answer A is correct.
The waiting period for the disability income rider is generally three to six months, like the waiting
period for the waiver of premium rider.
The cash value accumulation in a life insurance policy
A) can only be used when the policy endows.
B) can be used for loans or later as retirement income.
C) is always equal to the death benefit.
D) can only be accessed by the named beneficiary.
Answer B is correct.
The cash value
of a life insurance policy is available to the policy owner and can be used for retirement income, for loans, or for loan collateral. It is considered to be a living benefit of life insurance.
The number of years excluded from the conversion privilege on a convertible term policy
A) is ten years.
B) is fifteen years.
C) varies among insurance companies.
D) is eight years.
Answer C is correct.
The conversion periods on term policies are established by insurance companies and can vary from one company to the next.
One of the greatest advantages of convertible and renewable term policies is that
A) they provide living benefits.
B) they always renew or convert at the insured's original issue age.
C) the
insured isn't required to show proof of insurability in order to renew or convert.
D) the insured is guaranteed the right to renew or convert at any age with no increase in premium.
Answer C is correct.
Both convertible and renewable term policies allow the insured to get new insurance, at their attained age, when the original term of coverage has expired without proving insurability.
When the cash value account of a universal life policy reaches zero, the policyowner must make a premium payment or
A) the policy is lapsed.
B) the policy goes into the grace period.
C) the policy becomes void.
D) the reduced paid-up non-forfeiture option is automatically exercised.
Answer B is correct.
When the cash value account reaches zero, it has actually made
its last premium payment, at that time it has entered the grace period. At the end of the grace period, if no premium payment has been made, the policy then lapses.
All of the following are living benefits of life insurance EXCEPT
A) loan values.
B) burial expenses.
C) retirement income.
D) cash withdrawals.
Answer B is
correct.
Burial expenses are not considered one of the living benefits of life insurance. Living benefits are those which one can access while living.
All of the following provisions of an adjustable life policy may be changed to meet the policy-holders needs EXCEPT
A) the face amount of the policy.
B) the amount and/or frequency of premium payments.
C) the period of insurance
protection.
D) the person named as the insured on the policy.
Answer D is correct.
With an adjustable life policy, the policyholder can change the premium payment or frequency; face amount of the policy; and the period of insurance protection. This is considered a flexible type policy.
The current rate of interest paid to the cash value
account of a universal life policy consists of
A) guaranteed interest plus excess interest.
B) guaranteed interest plus equity earnings.
C) excess interest plus equity earnings.
D) none of the above.
Answer A is correct.
The current interest in a universal life policy is simply the guaranteed interest plus all excess interest earnings that the insurance company is earning at that time.
In a universal life policy, the amount of the death benefit can equal the policy's cash value
A) when the insured reaches age 65.
B) when the insured reaches age 75.
C) when the insured reaches age 95.
D) none of the above.
Answer C is correct.
The cash value in a permanent policy equals the death benefit when the policy endows. With
universal life, that age is normally age 95. According to federal law, to be considered an insurance contract for tax purposes, cash value policies must contain an amount at risk until a specified age, which is referred to as the endowment age.
If a universal life policy with the increasing death benefit option has an initial face amount of $75,000 and cash value of $10,000, the actual death benefit
would be
A) $75,000.00
B) $85,000.00
C) $100,000
D) $10,000
Answer B is correct.
The increasing death benefit option (Option B) of a universal life policy equals the face amount of the policy plus the cash value accumulated.
A universal life policy may be surrendered for its cash value
A) only at endowment.
B) at anytime.
C) only when the cash value has grown to exceed the amount of death benefit.
D) at no time.
Answer B is correct.
A policyowner may cash surrender a policy anytime there is an accumulation. This is an example of a non-forfeiture option and may be exercised by the policyowner anytime.
Producers selling variable life
insurance
A) must have a valid variable license only.
B) must have a valid life license and must also be registered with the NASD/FINRA.
C) must have a valid life and health license only.
D) must be registered with the SEC only.
Answer B is correct.
All variable products require the agent to have 2 licenses; a valid life license and a securities license. To be registered with the NASD/FINRA is to be securities
licensed. The policyowner is bearing all investment risk in the stock market and all products that have investment risk are considered securities.
The death benefit of a variable life policy
A) always remains level.
B) is never guaranteed.
C) is totally at risk.
D) may go up or down but will never fall below the face amount of the policy.
Answer D is correct.
Changes in investment results can cause changes in the amount of death benefit as well as cash values of a variable life policy, but the death benefit amount will never fall below the guaranteed minimum, which is equal to the policy's initial face amount.
The cash value of a variable life policy
A) is determined by the
investment experience of the separate account.
B) is determined by the insurers general account performance.
C) is never at any risk.
D) offers a variable interest rate with a stated guaranteed minimum rate included.
Answer A is correct.
The cash value of a variable life policy is determined daily by the investment performance of the separate accounts, which are in the stock market. The policyowner allocates which funds to
put them into and bears all investment risk.
Premiums for a variable universal life policy
A) are fixed and must be paid at the specified intervals.
B) can vary in amount as well as payment schedule.
C) are fixed but may vary in payment schedule.
D) are determined by using the AIR method of rate calculation.
Answer B is
correct.
Variable universal life premiums can be paid in any amount and at any frequency within certain limitations. What makes the premiums so flexible is the fact that this is a universal type policy. Universal simply means flexible.
Premium payments made into a variable universal life policy
A) are always invested in the insurance company general account.
B) are required to be
invested in government securities.
C) may only be invested in one specific fund at a time by the policyowner.
D) are invested in one or more investment portfolios at the policyowners option.
Answer D is correct.
Premiums for a variable universal life policy can be placed in a number of separate account portfolios at the policyowners discretion, that will change in value in response to investment experience.
A universal life policy with a back end load
A) adds a service charge to each premium to cover operating expenses.
B) makes a service charge when the policy is surrendered.
C) is applied anytime a policyowner surrenders a policy prior to age 59 1/2 and is imposed by the IRS.
D) causes the cash value to accumulate slower than that of a front end load.
Answer B is correct.
A life policy with a back-end load allows cash value to accumulate more quickly since the money stays in the policy longer. Surrender charges are made when the money is withdrawn or the policy is surrendered. Surrender charges represent the back-end load and usually are put in place at policy issue and for a specified period of time on a decreasing scale. (Ex.) 5,10,20 years.