Ch. 3 (Life Insurance Policies)

Question 1

What is the purpose of establishing the target premium for a life insurance policy?

Answer 1

To prevent the policy from lapsing.

Question 2

Under option B in a universal life policy, what happens to the death benefit?

Answer 2

The death benefit increases each year by the amount of the cash value increases.

Question 3

If an employee wants to join group life insurance coverage outside of an open enrollment period, what would the employee have to provide?

Answer 3

Evidence of insurability.

Question 4

What does level refer to in level term insurance?

Answer 4

Face amount.

Question 5

What are the death benefit options in universal life policies?

Answer 5

Option A: level death benefit, and Option B: increasing death benefit.

Question 6

Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

Answer 6

The full death benefit.

Question 7

The individual has just borrowed $10,000 on a five year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?

Answer 7

Decreasing term.

Question 8

Regarding taxation, how does the cash value of a universal life policy accumulate?

Answer 8

Tax deferred.

Question 9

In annually renewable term policies, what is the annual premium based upon?

Answer 9

The insured’s attained age.

Question 10

Who owns a group life insurance contract?

Answer 10

The employer (also known as the sponsor of the group)

Question 11

Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?

Answer 11

Universal life.

Question 12

What is the main advantage to converting from group life insurance to individual coverage?

Answer 12

Evidence of insurability is not required.

Question 13

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?

Answer 13

Limited-pay whole life.

Question 14

In term policies, what happens to the premium throughout the term of the policy?

Answer 14

The premium remains level.

Question 15

What is the major difference between the most common types of whole life policies: Straight Life, Limited Payment, and Single Premium?

Answer 15

Premium payment mode.

Question 16

What is the major difference between the most common types of whole life policies: Straight Life, Limited Payment, and Single Premium?

Answer 16

Premium payment mode.

Question 17

What universal life option has a gradually increasing cash value and a level death benefit?

Answer 17

Option A

Question 18

What type of premium is charged on a straight life policy?

Answer 18

A level premium for the life of the insured.

Question 19

When would a 20-pay whole life policy endow?

Answer 19

When the insured reaches age 100.

Question 20

What are the living benefits of whole life insurance?

Answer 20

Loan values.

Question 21

When does an adjustable life policy accumulate cash value?

Answer 21

When the premiums paid are more than the cost of the policy.

Question 22

Why are policy loans not available on term insurance?

Answer 22

There is no cash value to borrow against.

Question 23

What happens to the cash value when a whole life insurance policy matures?

Answer 23

Cash value is paid to the policyowner.

Question 24

How is the premium determined in joint life insurance policy?

Answer 24

The premium is based on the average age of the insureds.

Question 25

What type of life insurance policy provides permanent protection?

Answer 25

Whole life.

Question 26

Whole life policies provide protection until the insured reaches what age

Answer 26

Age 100

Question 27

Who is entitled to the cash values in a life insurance policy?

Answer 27

The policyowner.

Question 28

Group life insurance policies are written as what type of insurance?

Answer 28

Annually renewable term.

Question 29

Universal life policies have two types of interest rates - what are they?

Answer 29

Guaranteed and current.

Question 30

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Answer 30

Variable.

Question 31

What type of life insurance policy offers pure death protection?

Answer 31

Term.

Question 32

In a joint life policy when is the death benefit paid?

Answer 32

Upon the first death.

Question 33

What are the characteristics of the group that underwriters will consider before issuing a group life insurance policy?

Answer 33

Group purpose, size, financial strength, and turnover.

Question 34

What happens to the premium in an annually renewable term life policy?

Answer 34

The premium increases with each renewal.

Question 35

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Answer 35

Universal life.

Question 36

In variable universal life insurance, to what policy component does the term variable refer?

Answer 36

Cash value and death benefit.

Question 37

What type of policy issues certificates of insurance to the insureds?

Answer 37

Group policy.

Question 38

Who is insured under a juvenile life policy?

Answer 38

A minor.

Question 39

The death protection component of a universal life policy is expresses what type of coverage?

Answer 39

Annually renewable term.

Question 40

What type of life insurance policy is life Paid-up at age 65?

Answer 40

Limited-pay Whole Life.

Question 41

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?

Answer 41

For 20 years or until the insured’s death, whichever occurs first.

Question 42

What type of policy is typically issued without proof of insurability from the the insured?

Answer 42

Group policy.

Question 43

The policyowner of a whole life policy is also the insured. What age must the insured attain in order receive the policy’s face amount?

Answer 43

Age 100.

Question 44

What is the purpose of establishing the target premium for a universal life policy?

Answer 44

To prevent the policy from lapsing.

Question 45

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

Answer 45

Evidence of insurability.

Question 46

What type of whole life insurance policy generates immediate cash value?

Answer 46

Single premium whole life.

Question 47

What policy component must decrease in decreasing term insurance?

Answer 47

Face amount.

Question 48

What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured’s age 100?

Answer 48

Single premium whole life.

Question 49

A policy states that it will pay a specified face amount if the insured dies during the 20-year premium paying period and nothing if death occurs after the 20 year period. What type of policy is this?

Answer 49

20-year level term.

Question 50

What elements of an adjustable life policy can be changed by the policyowners?

Answer 50

The amount and payment period of the premium, the face amount, and the period for protection.