Life Insurance Ch. 3 - Life Policies & Life Provisions Exam Questions and Answers Rated A+

When a life insurance policy exceeds certain IRS table values, the result would create which of the following? A. 1035 Exchange B. An investment C. Modified Endowment Contract (MEC) D. Endowment - C. Modified Endowment Contract (MEC) What kind of life insurance product covers children under their parent's policy? A. Family Maintenance rider B. Term rider C. Family Income rider D. Payor benefit - B. Term Rider Variable Whole Life Insurance can be described as A. both an insurance and securities product B. an insurance product only C. a securities product only D. the insurance company assumes the investment risk - A. both an insurance and securities product When is the face amount paid under a Joint Life and Survivor policy? A. when policy reaches maturation B. upon death of the first insured C. upon death of the last insured D. when one of the insureds becomes disabled and no longer able to make premium payments - C. upon death of last insured K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?. A. Increasing B. Decreasing C. Adjustable D. Level - D. Level F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? A. Level term policy B. Whole life policy C. Limited-pay policy D. Decreasing term policy - D. Decreasing term policy What type of policy would offer a 40-year old the quickest accumulation of cash value? A. Paid-up at 65 B. 20-pay life C. 30-pay life D. Straight whole life - B. 20-pay life Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? A. Joint Life B. Adjustable Life C. Variable Universal Life D. Universal Life - C. Variable Universal Life Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options? A. Modified Whole Life B. Variable Life C. Universal Life D. Adjustable Life - B. Variable Life A Family Income Policy is a combination of Whole Life and A. Decreasing Term insurance B. Level Term insurance C. Deposit Term insurance D. Increasing Term insurance - A. Decreasing Term insurance Life insurance that covers an insured's whole life with level premiums paid over a limited time is called A. Adjustable Life B. Renewable Term C. Limited Pay Life D. Joint Life - C. Limited Pay Life What type of life policy covers two people and pays upon the death of the last insured? A. Shared B. Survivorship C. Adjustable D. Joint - B. Survivorship What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability? A. Endowment policy B. Limited-Pay Whole life C. Convertible Term D. Decreasing Term - C. Convertible Term L, aged 50, and L's spouse, 48, have one natural child and one adopted child. They purchase a Family Policy that covers L's spouse to age 65. A death benefit will NOT be paid in which of the following circumstances? A. L's spouse dies at age 62. B. L's spouse dies at age 66. C. Their natural child dies at age 18. D. Their adopted child dies at age 18. - B. L's spouse dies at age 66 When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply? A. Extended term option B. Conversion provision C. 1035 Exchange D. Incontestable period - B. Conversion provision A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as A. Adjustable Life B. Graded-Premium Life C. Variable Life D. Modified Whole Life - C. Variable Life S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase? A. Equity index insurance B. Endowment C. Graded whole life policy D. Return of premium policy - A. Equity index insurance A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? A. Straight life accumulates faster than Limited-pay Life B. 20-Pay Life accumulates cash value faster than Straight Life C. Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating D. 20-Pay Life and Straight Life accumulate cash value at the same rate - B. 20-Pay Life accumulates cash value faster than Straight Life Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? A. Variable Life B. Credit Life C. Universal Life D. Interest-Sensitive Whole Life - A. Variable Life A variable insurance policy A. guarantees a minimum rate of return B. does not allow the policyowner to assume the investment risk C. does not guarantee a return on its investment accounts D. does not guarantee an assignment provision - C. does not guarantee a return on its investment accounts What type of life insurance incorporates flexible premiums and an adjustable death benefit? A. Endowment Policy B. Modified Whole Life C. Decreasing Term D. Universal Life - D. Universal Life P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase? A. Family Benefit policy B. Family Maintenance policy C. Family Income policy D. Family Survivor policy - B. Family Maintenance policy K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? A. Return of premiums paid B. Cash value plus interest C. $20,000 death benefit D. Face amount plus interest - C. $20,000 death benefit Which of these statements describe a Modified Endowment Contract (MEC)? A. Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract B. Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract C. The 7-pay test is used to determine the minimum death benefit of the policy D. The 7-pay test is used to determine the maximum death benefit of the policy - B. Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract What type of life insurance are credit policies issued as? A. Whole B. Variable C. Term D. Universal - C. Term Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health? A. Modification B. Conversion C. Exchange D. Adjustable - B. Conversion What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100? A. Term Life B. Whole Life C. Credit Life D. Universal Life - B. Whole Life D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed? A. Limited-pay life B. Graded Premium C. Level term D. Endowment - C. Level Term