Life Insurance Policies Flashcards
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
AUniversal Life – Option A
BUniversal Life – Option B
CEquity Indexed Universal Life
DVariable Universal Life
Which statement is NOT true regarding a Straight Life policy?
A. Its premium steadily decreases over time, in response to its growing cash value.
B. The face value of the policy is paid to the insured at age 100.
C. It usually develops cash value by the end of the third policy year.
D. It has the lowest annual premium of the three types of Whole Life policies.
A. Its premium steadily decreases over time, in response to its growing cash value.
Straight Life policies charge a level annual premium throughout the insured’s lifetime and provide a level, guaranteed death benefit.
Which of the following best describes annually renewable term insurance?
A. It requires proof of insurability at each renewal.
B. Neither the premium nor the death benefit is affected by the insured’s age.
C. It provides an annually increasing death benefit.
D. It is level term insurance.
D. It is level term insurance.
An annual renewable term is a form of level term insurance that offers the most insurance at the lowest cost.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
A. Decreased death benefit at each renewal.
B. Required a premium increase each renewal.
C. Built cash values.
D. Required proof of insurability every year.
B. Required a premium increase for each renewal.
Annually Renewable Term policies’ premiums are adjusted each year to the insured’s attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
Which type of life insurance policy generates immediate cash value?
A. Decreasing Term
B. Continuous Premium
C. Single Premium
D. Level Term
C. Single Premium
Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.
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 only by exchanging the existing policy for a new one.
B. The death benefit can be increased by providing evidence of insurability.
C. The death benefit cannot be increased.
D. The death benefit can be increased only when the policy has developed a cash value.
B. The death benefit can be increased by providing evidence of insurability.
The Policy holder (insured) would need to prove insurability for the amount of the increase
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
B. Single Premium Whole Life
C. Interest-sensitive Whole Life
D. Decreasing Term
A. Adjustable Life
Correct! Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. Any increase in face amount requires proof of insurability.
The LEAST expensive first-year premium is found in which of the following policies?
A. Level Term
B. Annually Renewable Term
C. Increasing Term
D. Decreasing Term
B. Annually Renewable Term
Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured’s attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
A. A securities license.
B. A life insurance license.
C. SEC registration.
D. FINRA registration.
C. SEC registration
Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.
A Straight Life policy has what type of premium?
A. An increasing annual premium for the life of the insured
B. A decreasing annual premium for the life of the insured
C. A variable annual premium for the life of the insured
D. A level annual premium for the life of the insured
D. A level annual premium for the life of the insured
Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.
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
B. Interest-sensitive whole life
C. Life annuity with period certain
D. Increasing term
A. Limited pay whole life
Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
An Adjustable Life policy owner can change which of the following policy features?
A. The insured
B. The coverage period
C. The mortality expense
D. The investment account
B. The coverage period
Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.
All of the following are characteristics of a group life insurance plan EXCEPT
A. There is a requirement to prove insurability on the part of the participants.
B. The participants receive a Certificate of Insurance as their proof of insurance.
C. A minimum number of participants is required in order to underwrite the plan.
D. The cost of the plan is determined by the average age of the group.
A. There is a requirement to prove insurability on the part of the participants.
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
A. Require a higher premium.
B. Prolong the open enrollment period.
C. Increase medical requirements on existing members.
D. Require evidence of insurability.
D. Require evidence of insurability.
In group underwriting the evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside of the normal enrollment period.
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.
B. The premiums are higher than in an individual policy because there is no medical exam.
C. The group sponsor receives a Certificate of Insurance.
D. The policy can be converted to an individual term insurance policy.
A. The cost of coverage is based on the ratio of men and women in the group.
Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.
