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Life insurance > chap. 3 > Flashcards

chap. 3 Flashcards

1
Q

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

A

A: Group policy

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2
Q

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

A

A: Group policy

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3
Q

Q: What are the death benefit options in universal life policies?

A

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

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4
Q

Q: 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?

A

A: Variable

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5
Q

Q: What type of life insurance policy offers pure death protection?

A

A: Term

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6
Q

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

A

A: Cash value and death benefit

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7
Q

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

A

A: The premium increases with each renewal

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8
Q

Q: What type of life insurance is best suited to cover a mortgage?

A

A: Decreasing term

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9
Q

Q: What type of life insurance policy is Life Paid-up at Age 65?

A

A: Limited-pay Whole Life

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10
Q

Q: How is the premium determined in a joint life insurance policy?

A

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

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11
Q

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

A

A: Universal life

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12
Q

Q: If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

A

A: Whole life

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13
Q

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

A

A: Age 100

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14
Q

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

A

A: Group’s purpose, size, financial strength and turnover

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15
Q

Q: Universal life policies have two types of interest rates. What are they?

A

A: Guaranteed and current

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16
Q

Q: 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?

A

A: Limited-pay whole life

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17
Q

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

A

A: To prevent the policy from lapsing

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18
Q

Q: 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?

A

A: 20-year level term

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19
Q

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

A

A: Evidence of insurability

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20
Q

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

A

A: The policyowner

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21
Q

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

A

A: Evidence of insurability is not required.

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22
Q

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

A

A: The insured’s attained age

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23
Q

Q: 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?

A

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

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24
Q

Q: Who is insured under a juvenile life policy?

A

A: A minor

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25
Q

Q: When would a 20-pay whole life policy endow?

A

A: When the insured reaches age 100

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26
Q

Q: Who owns a group life insurance contract?

A

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

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27
Q

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

A

A: Evidence of insurability

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28
Q

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

A

A: Universal life

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29
Q

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

A

A: Annually renewable term

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30
Q

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

A

A: Cash value is paid to the policy owner

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31
Q

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

A

A: Upon the first death

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32
Q

Q: What are the living benefits of whole life insurance?

A

A: Loan values

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33
Q

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

A

A: Option A

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34
Q

Q: Why are policy loans not available on term insurance?

A

A: There is no cash value to borrow against.

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35
Q

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

A

A: Tax deferred

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36
Q

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

A

A: The premium remains level

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37
Q

Q: Under Option B in a universal life policy, what happens to the death benefit?

A

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

38
Q

Q: The death protection component of a universal life policy is expressed as what type of coverage?

A

A: Annually renewable term

39
Q

Q: Whole life policies provide protection until the insured reaches what age?

A

A: Age 100

40
Q

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

A

A: A level premium for the life of the insured

41
Q

Q: 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?

A

A: Single premium whole life

42
Q

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

A

A: Premium payment mode

43
Q

Q: 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?

A

A: The full death benefit

44
Q

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

A

A: Single premium whole life

45
Q

Q: When does an adjustable life policy accumulate cash value?

A

A: When the premiums paid are more than the cost of the policy

46
Q

Q: What does level refer to in level term insurance?

A

A: Face amount

47
Q

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

A

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

48
Q

Q: An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?

A

A: Decreasing term

49
Q

Q: What type of life insurance policy provides permanent protection?

A

A: Whole life

50
Q

Q: What policy component must decrease in decreasing term insurance?

A

A: Face amount

51
Q

The premium of a survivorship life policy compared with that of a joint life policy would be

A

Lower

52
Q

Which of the following are generally NOT considered when underwriting group insurance?

A

The insured’s’ medical history

53
Q

When an applicant purchased a life insurance policy, the agent dated the application 4 months prior. When asked by the applicant, the agent said he was allowed to backdate policies up to 6 months if it would

A

Lower the insured’s premium

54
Q

To sell variable life insurance policies, an agent must receive all of the following EXCEPT

A

SEC registration.

55
Q

Which of the following statements concerning buy-sell agreements is true?

A

Buy-sell agreements are normally funded with a life insurance policy

56
Q

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

A

Standard risk is representative of the majority of people.

57
Q

In group life policies, individual certificates are given to

A

Each insured person

58
Q

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

A

Require evidence of insurability.

59
Q

A Straight Life policy has what type of premium?

A

A level annual premium for the life of the insured

60
Q

Which of the following types of policies allows for a flexible premium and a variable investment component?

A

Variable universal life insurance

61
Q

An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and

A

Pay a lower renewal premium by proving insurability.

62
Q

Which of the following best describes annually renewable term insurance?

A

It is level term insurance.

63
Q

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

A

The death benefit can be increased by providing evidence of insurability.

64
Q

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

A

$100,000

65
Q

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

A

It will increase because the insured will be 5 years older than when the policy was originally purchased.

66
Q

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

A

Joint Life

67
Q

Which of the following is TRUE regarding the insurance amount in a credit life policy?

A

The creditor can only insure the debtor for the amount owed.

68
Q

Which of the following is NOT allowed in credit life insurance?

A

Creditor requiring that a debtor buys insurance from a certain insurer

69
Q

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

A

Credit life

70
Q

Which of the following types of insurance policies is most commonly used in credit life insurance?

A

Decreasing term

71
Q

All of the following are true regarding a decreasing term policy EXCEPT

A

The payable premium amount steadily declines throughout the duration of the contract.

72
Q

The following statement is NOT correct regarding credit life insurance

A

Benefits are paid to the borrower’s beneficiary.

73
Q

What type of premium do both Universal Life and Variable Universal Life policies have?

A

Flexible

74
Q

Concerning Juvenile Life insurance, the following statement is INCORRECT

A

Juvenile Life is classified as any life insurance purchased by a minor.

75
Q

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured’s age 100 is called

A

Single premium whole life

76
Q

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

A

Limited pay whole life

77
Q

Which of the following policies would be classified as a traditional level premium contract?

A

Straight Life

78
Q

Which statement is NOT true regarding a Straight Life policy?

A

Its premium steadily decreases over time, in response to its growing cash value.

79
Q

All of the following are characteristics of group life insurance EXCEPT

A

There is a requirement to prove insurability on the part of the participants.

80
Q

Which of the following statements about group life is correct?

A

The cost of coverage is based on the ratio of men and women in the group.

81
Q

A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?

A

The purpose of the group was to purchase life insurance.

82
Q

In a group life insurance policy, the employer may select all of the following EXCEPT

A

The beneficiary

83
Q

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

A

Limited-pay Life

84
Q

Which of the following is an example of a limited-pay life policy?

A

Life paid-up at 65

85
Q

In a survivorship life policy, when does the insurer pay the death benefit?

A

Upon the last death

86
Q

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

A

Universal Life – Option A

87
Q

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

A

For 20 years or until death, whichever occurs first.

88
Q

When would a 20-pay whole life policy endow?

A

When the insured reaches age 100

89
Q

At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?

A

Adjustable life

90
Q

Which of the following would be the beneficiary in credit life insurance?

A

Creditor

91
Q

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

A

Those who have been insured under the plan for at least 5 years

Life insurance (8 decks)

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