If an insured's age on a life insurance policy has been misstated, what is the insurer's liability if the insured dies?
  • A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age(In this situation, the insurer must pay a prorated amount of the policy based on the amount of insurance the insured's premiums would have been if purchased at the correct age.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
  • Adjustable Life(Adjustable Life allows the policyowner to change two policy features: premium and face amount.)
  • A modified life contract which enjoys all the tax advantages of whole life insurance(A Modified Endowment Contract (MEC) can be described as a life insurance contract that has accumulated cash values higher than the IRS allows.)
The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is
  • The shorter the payment period, the higher the premium
  • Period of time after the premium is due but the policy remains in force(The grace period is a period of time after the premium is due but the policy remains in force.)
  • level premiums(A decreasing term policy is issued with a decreasing death benefit and level premiums.)
  • When a whole life policy is surrendered, income taxes may be owed(Income taxes may be due when a whole life policy is surrendered. This statement is true.)
A provision in a whole life policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is called a(n)
  • nonforfeiture provision(. A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.)
  • commercial aviation(Life insurance policies routinely cover losses arising from commercial aviation.)
  • minus indebtedness and without interest(The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid minus indebtedness and without interest.)
  • hedge against inflation(The securities component of index whole life insurance is considered an effective hedge against inflation.)
A life insurance policy that has premiums fully paid up within a stated time period is called
  • without producing proof of insurability(". If Term Life insurance is renewable, the policyowner is purchasing the right to renew the policy without showing proof of insurability.)
  • hedge against inflation(The securities component of index whole life insurance is considered an effective hedge against inflation.)
  • stated payment insurance (Limited payment insurance is characterized by premiums that are fully paid up within a stated period, after which no further premiums are required.)
  • variable life insurance(A life insurance producer needs to possess a securities license to sell variable annuities.)
A Renewable Term Life insurance policy can be renewed
  • at a predetermined date or age, regardless of the insured's health(, regardless of the insured's health". Renewable Term Life insurance guarantees the policy can be renewed to a predetermined date or age, regardless of the insured's health status.)
  • provide coverage for a home mortgage(A common use for decreasing term life insurance is to cover a home mortgage.)
  • without producing proof of insurability(". If Term Life insurance is renewable, the policyowner is purchasing the right to renew the policy without showing proof of insurability.)
  • minus indebtedness and without interest(The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid minus indebtedness and without interest.)
The type of multiple protection coverage that pays on the death of the last person is called a(n)
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
  • Whole life policy with premiums paid up after 20 years
  • Endowment policy(". A type of life insurance policy which provides for the payment of the face amount at the end of the specified period if the insured is still alive is an endowment policy.)
  • survivorship life policy(Under a multiple protective policy, the policy that pays on the death of the last person is called a survivorship life policy.)
All of these are valid options for an Adjustable Life Policy EXCEPT
  • accumulate without interest(Policyowner dividends normally accumulate WITH interest.)
  • disability(Disability is not one of the standard exclusions found in life insurance policies.)
  • A nonforfeiture option can be used to increase the death benefit
  • A nonforfeiture option can be used to increase the death benefit(Increasing the death benefit by using one of the nonforfeiture options is not an option in an Adjustable Life Policy.)
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid
  • nonforfeiture provision(. A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.)
  • minus indebtedness and without interest(The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid minus indebtedness and without interest.)
  • hedge against inflation(The securities component of index whole life insurance is considered an effective hedge against inflation.)
  • decreasing term life(The least expensive option to pay off a 30-year mortgage balance would be decreasing term life.)
Which of these riders will pay a death benefit if the insured's spouse dies?
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
  • level premiums(A decreasing term policy is issued with a decreasing death benefit and level premiums.)
  • When a whole life policy is surrendered, income taxes may be owed(When a whole life policy is surrendered, income taxes may be owed". Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • Family term insurance rider(A Family Term Insurance rider provides a death benefit if the spouse of the insured dies.)
All of these statements concerning whole life insurance are false EXCEPT
  • When a whole life policy is surrendered, income taxes may be owed(When a whole life policy is surrendered, income taxes may be owed". Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • level premiums(A decreasing term policy is issued with a decreasing death benefit and level premiums.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
  • Endowment policy(". A type of life insurance policy which provides for the payment of the face amount at the end of the specified period if the insured is still alive is an endowment policy.)
A whole life insurance policy accumulates cash value that becomes
  • level premiums(A decreasing term policy is issued with a decreasing death benefit and level premiums.)
  • When a whole life policy is surrendered, income taxes may be owed(Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • When a whole life policy is surrendered, income taxes may be owed(When a whole life policy is surrendered, income taxes may be owed". Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • the policy loan value which the insured may borrow against(The accumulated cash value of a whole life insurance policy becomes the policy loan value upon which the insured may borrow.)
A provision that allows a policyowner to withdraw a policy's cash value interest free is a(n)
  • Accumulation at Interest Option(The Accumulation at Interest Option invests the policyowner's money and adds interest earnings to the initial amount of the dividends.)
  • Coverage is eliminated
  • partial surrender(A partial surrender allows the policyowner to withdraw the policy's cash value interest free.)
  • A nonforfeiture option can be used to increase the death benefit(Increasing the death benefit by using one of the nonforfeiture options is not an option in an Adjustable Life Policy.)
How are survivorship life insurance policies helpful in estate planning?
  • Provide funds to help pay taxes
  • A modified life contract which enjoys all the tax advantages of whole life insurance(A Modified Endowment Contract (MEC) can be described as a life insurance contract that has accumulated cash values higher than the IRS allows.)
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
All of these are standard exclusions found in a life insurance policy EXCEPT
  • collateral assignment(A collateral assignment provision allows a person to temporarily give up a portion of their ownership rights to secure a loan.)
  • equal the face amount of the policy
  • disability(Disability is not one of the standard exclusions found in life insurance policies.)
  • A nonforfeiture option can be used to increase the death benefit
What kind of life insurance policy covers two or more people with the death benefit payable upon the last person's death?
  • A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age(In this situation, the insurer must pay a prorated amount of the policy based on the amount of insurance the insured's premiums would have been if purchased at the correct age.)
  • Provide funds to help pay taxes
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
  • Variable Whole Life(A Variable Whole Life policy has cash values that vary according to the investment performance of common stocks.)
A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called
  • variable life insurance(A life insurance producer needs to possess a securities license to sell variable annuities.)
  • without producing proof of insurability(". If Term Life insurance is renewable, the policyowner is purchasing the right to renew the policy without showing proof of insurability.)
  • universal life(Universal life has a guaranteed interest rate with the possibility to earn an interest rate that is higher than the guaranteed rate.)
  • at a predetermined date or age, regardless of the insured's health(, regardless of the insured's health". Renewable Term Life insurance guarantees the policy can be renewed to a predetermined date or age, regardless of the insured's health status.)
The least expensive option to pay off a 30-year mortgage balance would be
  • accidental death
  • variable life insurance(A life insurance producer needs to possess a securities license to sell variable annuities.)
  • decreasing term life
  • commercial aviation(Life insurance policies routinely cover losses arising from commercial aviation.)
A securities license is required for a life insurance producer to sell variable life insurance
  • hedge against inflation(The securities component of index whole life insurance is considered an effective hedge against inflation.)
  • provide coverage for a home mortgage(A common use for decreasing term life insurance is to cover a home mortgage.)
  • nonforfeiture provision(. A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.)
  • variable life insurance(A life insurance producer needs to possess a securities license to sell variable annuities.)
Rob purchased a standard whole life policy with a $500,000 death benefit when he was ageHis insurance agent told him the policy would be paid up if he reached ageThe present cash value of the policy equals $250,Rob recently died at ageThe death benefit would be
  • Separate account investments(Premium payments for a Universal life policy are NOT used for separate account investments.)
  • "Can be converted to permanent coverage without evidence of insurability".(An advantage of a children's term rider is the ability to convert to permanent insurance without evidence of insurability.)
  • $500,000(". In this situation, the death benefit would be the $500,000 face amount.)
  • disability(Disability is not one of the standard exclusions found in life insurance policies.)
What is the automatic continuance of insurance coverage referred to as?
  • A nonforfeiture option can be used to increase the death benefit
  • Coverage is eliminated
  • renewal
  • A nonforfeiture option can be used to increase the death benefit(Increasing the death benefit by using one of the nonforfeiture options is not an option in an Adjustable Life Policy.)
Which of these is NOT considered to be a common life insurance nonforfeiture option?
  • Pre-death distributions will become taxable(The tax consequence of a Modified Endowment Contract is pre-death distributions are likely to become taxable.)
  • Pre-death distributions are typically taxable".(Failing to meet the seven-pay test results in pre-death distributions likely to become taxable.)
  • Separate account investments(Premium payments for a Universal life policy are NOT used for separate account investments.)
  • Which of these is NOT considered to be a common life insurance nonforfeiture option?(. All of these are common life insurance nonforfeiture options EXCEPT a life income annuity.)
A life insurance policy which contains cash values that vary according to its investment performance of stocks is called
  • Variable Whole Life(A Variable Whole Life policy has cash values that vary according to the investment performance of common stocks.)
  • A prorated death benefit based on the amount of insurance the insured's premiums would have been if purchased at the correct age(In this situation, the insurer must pay a prorated amount of the policy based on the amount of insurance the insured's premiums would have been if purchased at the correct age.)
  • the policy loan value which the insured may borrow against(The accumulated cash value of a whole life insurance policy becomes the policy loan value upon which the insured may borrow.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?
  • Payor benefit(A payor benefit will waive the premium on a juvenile life insurance policy if the parent paying the premium dies.)
  • "Can be converted to permanent coverage without evidence of insurability".(An advantage of a children's term rider is the ability to convert to permanent insurance without evidence of insurability.)
  • Accumulation at Interest Option(The Accumulation at Interest Option invests the policyowner's money and adds interest earnings to the initial amount of the dividends.)
  • the insured outlived the beneficiary(A common disaster provision states that if the beneficiary dies from the same accident as the insured individual, the insurer will proceed as if the insured outlived the beneficiary. This allows the proceeds to go to the contingent beneficiary.)
An insurer will accept a premium from the insured and continue the coverage in full force as though it was NOT late during which time period?
  • Grace period(The grace period is the amount of time an insurer continues coverage in full force and will accept the premium from the insured as though it was NOT late.)
  • Period of time after the premium is due but the policy remains in force(The grace period is a period of time after the premium is due but the policy remains in force.)
  • Group policy(. A type of life insurance policy most commonly used by businesses for employees is a group policy.)
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
A Modified Endowment Contract (MEC) is best described as
  • A modified life contract which enjoys all the tax advantages of whole life insurance(A Modified Endowment Contract (MEC) can be described as a life insurance contract that has accumulated cash values higher than the IRS allows.)
  • When a whole life policy is surrendered, income taxes may be owed(When a whole life policy is surrendered, income taxes may be owed". Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • Equity index whole life(The type of policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index is equity index whole life.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
A policyowner may change two policy features on what type of life insurance?
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
  • A modified life contract which enjoys all the tax advantages of whole life insurance(A Modified Endowment Contract (MEC) can be described as a life insurance contract that has accumulated cash values higher than the IRS allows.)
  • Adjustable Life(Adjustable Life allows the policyowner to change two policy features: premium and face amount.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
A business will typically use which type of life insurance to cover their employees?
  • Family term insurance rider(A Family Term Insurance rider provides a death benefit if the spouse of the insured dies.)
  • level premiums(A decreasing term policy is issued with a decreasing death benefit and level premiums.)
  • Group policy(. A type of life insurance policy most commonly used by businesses for employees is a group policy.)
  • Adjustable Life(Adjustable Life allows the policyowner to change two policy features: premium and face amount.)
Under a Modified Endowment Contract, what are the likely tax consequences?
  • disability(Disability is not one of the standard exclusions found in life insurance policies.)
  • Payor benefit(A payor benefit will waive the premium on a juvenile life insurance policy if the parent paying the premium dies.)
  • accumulate without interest(Policyowner dividends normally accumulate WITH interest.)
  • Pre-death distributions will become taxable(The tax consequence of a Modified Endowment Contract is pre-death distributions are likely to become taxable.)
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
  • collateral assignment(A collateral assignment provision allows a person to temporarily give up a portion of their ownership rights to secure a loan.)
  • Pre-death distributions are typically taxable".(Failing to meet the seven-pay test results in pre-death distributions likely to become taxable.)
  • Payor benefit(A payor benefit will waive the premium on a juvenile life insurance policy if the parent paying the premium dies.)
  • Entire Contract(The provision that the policy and a copy of an application is endorsed upon or attached to the policy when issued is the entire contract provision.)
Index whole life insurance contains a securities component that acts as a(n)
  • commercial aviation(Life insurance policies routinely cover losses arising from commercial aviation.)
  • decreasing term life(The least expensive option to pay off a 30-year mortgage balance would be decreasing term life.)
  • hedge against inflation(The securities component of index whole life insurance is considered an effective hedge against inflation.)
  • accidental death
A provision that allows a policyowner to temporarily give up ownership rights to secure a loan is called a(n)
  • collateral assignment(A collateral assignment provision allows a person to temporarily give up a portion of their ownership rights to secure a loan.)
  • Pre-death distributions are typically taxable".(Failing to meet the seven-pay test results in pre-death distributions likely to become taxable.)
  • Accumulation at Interest Option(The Accumulation at Interest Option invests the policyowner's money and adds interest earnings to the initial amount of the dividends.)
  • Separate account investments(Premium payments for a Universal life policy are NOT used for separate account investments.)
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST
  • provide evidence of insurability to the insurer(. In order to activate the reinstatement clause of a lapsed life insurance policy, the insured must provide evidence of insurability to the insurer.)
  • nonforfeiture provision(. A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.)
  • universal life(Universal life has a guaranteed interest rate with the possibility to earn an interest rate that is higher than the guaranteed rate.)
  • without producing proof of insurability(". If Term Life insurance is renewable, the policyowner is purchasing the right to renew the policy without showing proof of insurability.)
Decreasing term life insurance is often used to
  • nonforfeiture provision(. A nonforfeiture provision in a cash value life insurance policy allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type.)
  • minus indebtedness and without interest(The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid minus indebtedness and without interest.)
  • provide coverage for a home mortgage(A common use for decreasing term life insurance is to cover a home mortgage.)
  • revoke an absolute assignment
Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?
  • When a whole life policy is surrendered, income taxes may be owed(Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • the policy loan value which the insured may borrow against(The accumulated cash value of a whole life insurance policy becomes the policy loan value upon which the insured may borrow.)
  • Endowment policy(". A type of life insurance policy which provides for the payment of the face amount at the end of the specified period if the insured is still alive is an endowment policy.)
  • Whole life policy with premiums paid up after 20 years
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
  • Which of these is NOT considered to be a common life insurance nonforfeiture option?(. All of these are common life insurance nonforfeiture options EXCEPT a life income annuity.)
  • "Can be converted to permanent coverage without evidence of insurability".(An advantage of a children's term rider is the ability to convert to permanent insurance without evidence of insurability.)
  • Separate account investments(Premium payments for a Universal life policy are NOT used for separate account investments.)
  • Accumulation at Interest Option(The Accumulation at Interest Option invests the policyowner's money and adds interest earnings to the initial amount of the dividends.)
Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?
  • Variable Whole Life(A Variable Whole Life policy has cash values that vary according to the investment performance of common stocks.)
  • Equity index whole life(The type of policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index is equity index whole life.)
  • The correct answer is "Provide funds to help pay taxes". (Survivorship life insurance policies are useful in estate planning because they can provide money to pay taxes on assets.)
  • Last Survivor Life insurance(". Coverage of two or more individuals with the death benefit payable upon the last person's death is a feature of last survivor insurance.)
Which of these would be the best example of a limited pay life insurance policy?
  • Endowment policy(". A type of life insurance policy which provides for the payment of the face amount at the end of the specified period if the insured is still alive is an endowment policy.)
  • Whole life policy with premiums paid up after 20 years
  • When a whole life policy is surrendered, income taxes may be owed(When a whole life policy is surrendered, income taxes may be owed". Income taxes may be due when a whole life policy is surrendered. This statement is true.)
  • the policy loan value which the insured may borrow against(The accumulated cash value of a whole life insurance policy becomes the policy loan value upon which the insured may borrow.)
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