Life and Health Exam 1 Questions And Answers Solutions Guaranteed.

for life insurance purposes, all persons are considered to be statistically "dead" at age A. 88 B. 96 C. 100 D. 92 - Correct AnswersC. 100 when a policyowner borrows money from a bank, a life insurance policy with some cash value accumulation A. is not taken into consideration by the bank officials when determining the worth of the individual B. cannot be used as collateral because the insured cannot use any cash value until the policy matures C. can normally be used as collateral for the loan D. is rarely used as collateral for a loan - Correct AnswersC. can normally be used as collateral for the loan Al purchases an estate builder (jumping juvenile) policy for his 5-year-old son, Donald. When Donald reaches age 21, his father presents him with the policy as a gift. Which of the following statements is NOT correct? A. Donald does not have to continue to make the premium payments to keep the policy in force B. the policy should have accumulated cash value by that time C. Donald has enjoyed protection against the problems of premature death D. the face value of Donald's policy has increased by 5 times - Correct AnswersA. Donald does not have to continue to make the premium payments to keep the policy in force Mortality figures are normally developed by studying and interpreting statistics A. from small groups of people over 10 year periods of time B. developed from the deaths of millions of persons over long periods of time C. gathered by interviewing many persons in selected cities across the nation D. obtained by surveys of insured persons - Correct AnswersB. developed from the deaths of millions of persons over long periods of time The money paid by the insured to the insurance company for insurance protection is called the A. consideration B. dividend C. benefit D. assignment - Correct AnswersA. consideration A mother purchases an estate builder (jumping juvenile) policy for her child, having a face value of $5,000. When the child reaches age 21, the face amount of the policy would normally be A. $5,000 B. $10,000 C. $25,000 D. $50,000 - Correct AnswersC. $25,000 A life insurance policy that continues to provide protection after the premium period has ended is called a A. whole life policy B. limited pay life policy C. level term policy D. decreasing term policy - Correct AnswersB. limited pay life policy Which of the following statements about the average number of people who die each year is true? A. it is called the mortality rate B. it cannot be predicted with any accuracy C. it cannot be used to determine insurance rates D. it is the principal factor in risk selection - Correct AnswersA. it is called the mortality rate Money taken out of a modified endowment contract (MEC) A. may be subject to unfavorable tax rules B. is always received income tax-free C. is considered to be a return of premium D. will result in the policy being voided - Correct AnswersA. may be subject to unfavorable tax rules One factor common to all estate builder (jumping juvenile) policies is A. the cash value automatically increases three time at age 21 B. it is issued on the application of a parent or legal guardian but insured the life of a child C. the original face count of the policy increases five times at age 18 D. after the purchase of the original policy, the child is always permitted to purchase additional insurance at age 21, regardless of insurability at that time - Correct AnswersB. it is issued on the application of a parent or legal guardian but insured the life of a child In exchange for a consideration, the insurance company in a life insurance contract agrees to pay a specified sum of money A. in installments of $100 each B. in amounts based on the mortality probability of the beneficiary C. in cash equivalent to premiums paid D. in cash or equivalent income - Correct AnswersD. in cash or equivalent income A life insurance policy is a unilateral contract because A.only the insured is bound to live up to his or her side of the agreement B. only the insurance company is bound to live up to its side of the agreement C. either party may default on the agreement D. neither party may default on the agreement - Correct AnswersB. only the insurance company is bound to live up to its side of the agreement To what does the statement "spreading the result of financial loss created by an individual's death among many persons, so the cost for each individual is small" refer? A. the principal of mortality B. the principle of life insurance C. the principle of indemnity D. the principle fo risk - Correct AnswersB. the principle of life insurance In a universal life policy with a guaranteed interest rate of 5% and a current interest rate of 9%, what would be the dollar amount of the annual policy load generated by not paying excess interest on the first $1,000 in the cash value account? A. there is usually no annual loan after the first year B. $40 C. $50 D. $90 - Correct AnswersB. $40 In a universal life policy, the two adjustments usually made to the cash value account are A. guaranteed interest and current interest are credited B. premium and excess interest are charged C. guaranteed interest is charged and premium is credited D. cost of insurance protection is charged and current interest is credited - Correct AnswersD. cost of insurance protection is charged and current interest is credited Loan values and retirement income are A. called the living benefits of life insurance B. available from all life insurance policies C. available only from term policies D. available only as part of the business uses of life insurance - Correct AnswersA. called the living benefits of life insurance Which of the following policies could be expected to have the lowest premiums? A. 15-pay endowment at age 65 B. 20-pay life C. 30-pay life D. whole life - Correct AnswersD. whole life In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as A. legal purpose B. offer and acceptance C. competent parties D. a contract of utmost good faith - Correct AnswersC. competent parties Which of the following normally comprise a deceased's final expense? A. a home loan or mortgage B. the family's future living expense C. education or college fund for the children D. medical and funeral expenses plus debts or current bills - Correct AnswersD. medical and funeral expenses plus debts or current bills Life insurance is the most practical means of meeting obligations arising from an individual's premature death because A. it creates an immediate estate B. it always provides the most money C. it is more accessible than savings or stocks D. it earns the greatest interest - Correct AnswersA. it creates an immediate estate The contract between an insurer and an insured is called a/an A. insurance policy B. bilateral contract C. two-sided contract D.contract of the entirety - Correct AnswersA. insurance policy From the standpoint of premium cost, which is the most advantageous age when converting a term policy? A. attained age B. original age C. age next birthday D. age last birthday - Correct AnswersB. original age The type of premium for term insurance that remains the same throughout a policy period of more than one year is the A. step rate premium and it's used for 1-year renewable term policies B. step rate premium and it's used for level and decreasing term policies C. level premium and it's used for level and decreasing term policies D. level premium and it's used for 1-year renewable term policies - Correct AnswersC. level premium and it's used for level and decreasing term policies The cash value accumulation in a life insurance policy A. cannot be used until the policy matures B. can be used for loans or later as retirement income C. is always so small that the policyowner can do very little with it D. is taxed as income to the policyowner as it accumulates - Correct AnswersB. can be used for loans or later as retirement income The type of policy that can be changed from one that does nt accumulate cash values to one that does is a A. renewable term policy B. convertible term policy C. whole life policy D. level term policy - Correct AnswersB. convertible term policy Warren and Wilma have a joint life policy. Warren dies, and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a A. limited pay life policy B. convertible term policy C. variable life policy D. survivorship or second-to-die policy - Correct AnswersD. survivorship or second-to-die policy The number of years excluded from the conversion privilege on a convertible term policy A. is 3 years B. is 5 years C. varies among insurance companies D. there is no exclusion - Correct AnswersC. varies among insurance companies The situation below that most likely calls for the purchase of term insurance is A. tanya plans to retire at 59 with enough income to travel abroad B. George has 2 years of medical school to complete. He and his wife have 1 child C. Leonard is 42 years old and owns a thriving business. He is married, with 2 teenage children D. Marge, widowed, has one married son, age 30 - Correct AnswersB. George has 2 years of medical school to complete. He and his wife have 1 child A policy affording pure protection that diminishes to nothing by the time the policy expires is a A. level term policy B. whole life policy C. limited pay policy D. decreasing term policy - Correct AnswersD. decreasing term policy In a family plan A. coverages are customarily a combination of permanent and term insurance B. the husband and wife are usually insured for equal amounts C. only the spouse and the children are included D. all family member must have permanent insurance - Correct AnswersA. coverages are customarily a combination of permanent and term insurance If children are born or adopted after a family policy is issued A. term insurance will automatically be provided for the child under the same policy B. a new family policy will ave to be purchased C. term insurance will be provided under the same policy, but for an additional premium D. coverage will be provided for the child under the same policy, but only after a waiting period and proof of insurability - Correct AnswersA. term insurance will automatically be provided for the child under the same policy A renewable term policy A. may be renewed with proof of insurability B. may be renewed with no proof of insurability C. keeps the same premium with each renewal D. is available only as a rider on a permanent policy - Correct AnswersB. may be renewed with no proof of insurability All of the following are elements of a contract EXCEPT A. legal purpose B. offer and acceptance C. consideration D. assignment - Correct AnswersD. assignment A whole life policy A. requires a single payment after which coverage is afforded for the the life of the insured B. requires the insured to pay the premium for life and endows at age 100 C. is paid up at some specific time and endows at 65 D. is paid up at some specific time and endows at 100 - Correct AnswersB. requires the insured to pay the premium for life and endows at age 100 A limited life policy A. requires level premium payments for the entire lifetime of the insured B. is available only for small face amounts C. requires premium payments for a specified number of years or until a specified age is reached D. cannot be purchased any longer due to tax law restrictions against it - Correct AnswersC. requires premium payments for a specified number of years or until a specified age is reached A variable life policy A. always offers a variable premium B. death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum C. death benefit is fixed; what varies is the cash value D. cash values are fixed; what varies is the death benefit - Correct AnswersB. death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum "Annuity period" refers to which of the following? A. the time during which payments are made to the annuitant B. the time during which premiums are paid to fund the annuity C. the process of determining the amount of the annuity payment D. the principal factor in determining the annuity premium - Correct AnswersA. the time during which payments are made to the annuitant One of the greatest advantages of convertible and renewable term policies is that A. they are considerably less expensive than other term policies B. these features are automatically included in all term policies C. the insured isn't required to show proof of insurability in order to renew or convert D. they accumulate cash values - Correct AnswersC. the insured isn't required to show proof of insurability in order to renew or convert At age 35, Kerry purchases a home with a 20 year mortgage that he wants to cover with term insurance. The most practical term policy for his situation is A. level term B. decreasing term C. convertible term D. 1-year renewable term - Correct AnswersB. decreasing term When the cash value account of a universal life policy reaches 0, the policyowner must make a premium payment or A. the policy is lapsed B. the policy goes into the grace period C. the policy is indefinitely suspended D. nothing happens because the cash value account can never reach 0 - Correct AnswersB. the policy goes into the grace period The premium for a yearly renewable term policy is a A. step rate premium B. level premium C. decreasing premium D. variable premium - Correct AnswersA. step rate premium When the cash value accumulation of a policy equals the face amount, we can say the policy A. expires B. endows C. is a whole life policy D. is a limited pay life policy - Correct AnswersB. endows Term insurance differs from permanent insurance in that term A. builds cash value but ays no death benefit B. insurance repays money to living insured C. builds no cash value, pays a death benefit only D. has a higher premium per $1,000 of insurance - Correct AnswersC. builds no cash value, pays a death benefit only The type of policy that is paid up after a specified period of years and endows at age 100 is a/an A. single premium policy B. whole life policy C. endowment policy D. limited pay policy - Correct AnswersD. limited pay policy When converting a term policy to a whole life policy at attained age, the cash values at age 65 will be A. higher than if ordinary life had been purchased at original age B. lower than if ordinary life had been purchased at original age C. practically the same as if ordinary life had been purchased at original age D. exactly the same as if ordinary life had been purchased at original age - Correct AnswersB. lower than if ordinary life had been purchased at original age A level term policy is one on which A. the premium remains the same as the protection is reduced B. the premium and the protection remain constant for the term of the policy C. protection remains level while premium is decreased D. protection remains constant for the term of the policy while the premium increases - Correct AnswersB. the premium and the protection remain constant for the term of the policy A family income rider differs from a decreasing term rider in that the family income rider A. always costs less B. pays a lump sum upon the death of the insured C. pays monthly income upon the death of the insured D. pays an annual income during a specified number of years from the time of the insured's death - Correct AnswersC. pays monthly income upon the death of the insured An annuitant has a temporary annuity certain and dies shortly after the payments start but before the certain period of 10 years has elapsed. Any money remaining is A. kept by the company B. paid to the beneficiary for the rest of the certain period C. paid to the beneficiary in one lump sum D. paid to the annuitant's estate - Correct AnswersB. paid to the beneficiary for the rest of the certain period A family income policy is comprised of