FX: Life Insurance Practice Exam. Questions with Answers
1. An insured purchased a variable life insurance policy with a face amount of
$50,000. Over the life of the policy, stock performance declined and the cash value fell to
$10,000. If the insured dies, how much will be paid out?: $50,000
2. Which of the following documents must be provided to the policyowner or applicant
during policy replacement?: Notice Regarding Replacement.
3. The president of a manufacturing company has offered one of the compa- ny's officers
a special individual annuity plan that is unavailable to lower-ech- elon employees. This
plan would be funded with before-tax corporate dollars, and it does not meet government
approval standards. This annuity plan is: A nonqualified annuity plan.
4. During replacement of life insurance, a replacing insurer must do which of the following?:
Obtain a list of all life insurance policies that will be replaced
5. An individual has just borrowed $10,000 from his bank on a 5-year install- ment loan
requiring monthly payments. What type of life insurance policy would be best suited to
this situation?: Decreasing term.
6. 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:
Single premium whole life.
7. Which of the following statements is TRUE concerning the Accidental Death Rider?: It will
pay double or triple the face amount.
8. Which of the following statements concerning a Simplified Employee Pen- sion plan
(SEP) is INCORRECT?: SEPs are suitable for large companies.
9. In insurance, an offer is usually made when: An applicant submits an application to the insurer.
,10. An individual is purchasing a permanent life insurance policy with a face
value of $25,000. While this is all the insurance that he can afford at this time, he wants to
be sure that additional coverage will be available in the future. Which of the following
options should be included in the policy?: Guaranteed insurability option
11. Who can make a fully deductible contribution to a traditional IRA?: An individual not
covered by an employer-sponsored plan who has earned income
12. A producer is helping a married couple determine the financial needs of their
children in the event one or both should die prematurely. This is a personal use of life
insurance known as: Survivor protection.
13. When is the earliest a policy may go into effect?: When the application is signed and a check is
given to the agent
14. Which of the following is a key distinction between variable whole life and
variable universal life products?: Variable whole life has a guaranteed death benefit.
15. When an insured makes truthful statements on the application for insur-
ance and pays the required premium, it is known as which of the following?-
: Consideration
16. A policy will pay the death benefit 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?: Level term
17. A Return of Premium term life policy is written as what type of term cover- age?:
Increasing
18. All of the following are duties and responsibilities of producers at the time of
application EXCEPT: Change any incorrect statement on the application by personally initialing next to the corrected statement.
, 19. The policyowner pays for her life insurance annually. Until now, she has collected
a nontaxable dividend check each year. She has decided that she would rather use the
dividends to help pay for her next premium. What option would allow her to do this?: Reduction
of premium
20. An insured pays a $100 premium every month for his insurance coverage, yet the
insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance
contract does this describe?: Aleatory
21. The proposed insured makes the premium payment on a new insurance policy.
If the insured should die, the insurer will pay the death benefit to the beneficiary if
the policy is approved. This is an example of what kind of contract?: Conditional
22. What does "level" refer to in level term insurance?: Face amount
23. What is the purpose of a free-look period in insurance policies?: It allows the insured
to reject the policy with a full refund.
24. Which provision of a life insurance policy states the insurer's duty to pay
benefits upon the death of the insured, and to whom the benefits will be paid?: Insuring
clause
25. Which of the following best describes annually renewable term insurance?-
: It is level term insurance.
26. All of the following are examples of third-party ownership of a life insurance policy
EXCEPT: An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the
loan.
27. All of the following are true regarding the guaranteed insurability rider EXCEPT:
This rider is available to all insureds with no additional premium.
1. An insured purchased a variable life insurance policy with a face amount of
$50,000. Over the life of the policy, stock performance declined and the cash value fell to
$10,000. If the insured dies, how much will be paid out?: $50,000
2. Which of the following documents must be provided to the policyowner or applicant
during policy replacement?: Notice Regarding Replacement.
3. The president of a manufacturing company has offered one of the compa- ny's officers
a special individual annuity plan that is unavailable to lower-ech- elon employees. This
plan would be funded with before-tax corporate dollars, and it does not meet government
approval standards. This annuity plan is: A nonqualified annuity plan.
4. During replacement of life insurance, a replacing insurer must do which of the following?:
Obtain a list of all life insurance policies that will be replaced
5. An individual has just borrowed $10,000 from his bank on a 5-year install- ment loan
requiring monthly payments. What type of life insurance policy would be best suited to
this situation?: Decreasing term.
6. 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:
Single premium whole life.
7. Which of the following statements is TRUE concerning the Accidental Death Rider?: It will
pay double or triple the face amount.
8. Which of the following statements concerning a Simplified Employee Pen- sion plan
(SEP) is INCORRECT?: SEPs are suitable for large companies.
9. In insurance, an offer is usually made when: An applicant submits an application to the insurer.
,10. An individual is purchasing a permanent life insurance policy with a face
value of $25,000. While this is all the insurance that he can afford at this time, he wants to
be sure that additional coverage will be available in the future. Which of the following
options should be included in the policy?: Guaranteed insurability option
11. Who can make a fully deductible contribution to a traditional IRA?: An individual not
covered by an employer-sponsored plan who has earned income
12. A producer is helping a married couple determine the financial needs of their
children in the event one or both should die prematurely. This is a personal use of life
insurance known as: Survivor protection.
13. When is the earliest a policy may go into effect?: When the application is signed and a check is
given to the agent
14. Which of the following is a key distinction between variable whole life and
variable universal life products?: Variable whole life has a guaranteed death benefit.
15. When an insured makes truthful statements on the application for insur-
ance and pays the required premium, it is known as which of the following?-
: Consideration
16. A policy will pay the death benefit 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?: Level term
17. A Return of Premium term life policy is written as what type of term cover- age?:
Increasing
18. All of the following are duties and responsibilities of producers at the time of
application EXCEPT: Change any incorrect statement on the application by personally initialing next to the corrected statement.
, 19. The policyowner pays for her life insurance annually. Until now, she has collected
a nontaxable dividend check each year. She has decided that she would rather use the
dividends to help pay for her next premium. What option would allow her to do this?: Reduction
of premium
20. An insured pays a $100 premium every month for his insurance coverage, yet the
insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance
contract does this describe?: Aleatory
21. The proposed insured makes the premium payment on a new insurance policy.
If the insured should die, the insurer will pay the death benefit to the beneficiary if
the policy is approved. This is an example of what kind of contract?: Conditional
22. What does "level" refer to in level term insurance?: Face amount
23. What is the purpose of a free-look period in insurance policies?: It allows the insured
to reject the policy with a full refund.
24. Which provision of a life insurance policy states the insurer's duty to pay
benefits upon the death of the insured, and to whom the benefits will be paid?: Insuring
clause
25. Which of the following best describes annually renewable term insurance?-
: It is level term insurance.
26. All of the following are examples of third-party ownership of a life insurance policy
EXCEPT: An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the
loan.
27. All of the following are true regarding the guaranteed insurability rider EXCEPT:
This rider is available to all insureds with no additional premium.
