Life 2

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Life 2 1. Dividend projections may be included in a proposal for a life insurance policy when which of the following is true? The applicant has requested that they be included. There is a clear statement that payment of future dividends is not guaranteed. The projected amounts are calculated on the basis of the Commissioners Standard Ordinary Mortality Tables. The projected amounts do not exceed the dividends previously paid by the same insurance company. 2. Which is correct concerning a GRADED PREMIUM WHOLE LIFE policy? It is a form of term insurance. Premiums are reduced each year during the early policy years and then remain level. Premiums are payable to age 65. Premiums start low, increasing each year during the early years of the contract and then remain constant for life. 3. All of the following are a parts of a life insurance policy EXCEPT: Insuring clause Conditional receipt Copy of the application Incontestability clause 4. The incontestable clause cannot be used for: 1) Intent to murder 2) Impersonation 3) Misrepresentation 4) If insured did not pay premiums 1 only 1 & 2 3 only 3 & 4 5. The incontestable clause permits insurers to contest a death claim: for any misrepresentations, regardless of the elapsed time. for material misrepresentation beyond 2 years. for material misrepresentations if under 2 years. whenever there is a question of self destruction. 6. Cloreen has a life insurance policy for $180,000. Her husband is a 50% beneficiary and each of her two children is a 25% beneficiary. Cloreen has a $30,000 loan against her policy. Cloreen dropped dead. How much does the husband receive? $75,000 $150,000 $90,000 $60,000 7. All of the following are true about JUVENILE Policies EXCEPT: The policy is usually owned by the applying adult(s). The policy may be an Ordinary or Industrial type. Because of the low premiums, the Insurance Commission recommends large Face Value policies on children. A special form of JUVENILE policy may multiply the face amount 5 times when the child reaches age 21. 8. Which of these is not a common form of term insurance? Level Increasing Decreasing Modified Graded 9. A standard risk male is insured under a WHOLE LIFE Policy with an ACCIDENTAL DEATH RIDER. Which of the following is/are true? 1. The accidental death benefit is often equal to, or may be twice, the face value of the policy, depending on the contract. 2. If the insured died at age 72, the Accidental Death rider would still be in effect. 1 only 2 only Both 1 and 2 Neither 1 or 2 10. Joe the Ragman buys a $100,000 policy. He has a $50,000 mortgage from the bank. He assigns his policy as collateral to the bank, with the remaining balance, if any, to be paid to his wife Josephine. Joe has set up a/an: 1. Collateral Assignment 2. Bilateral Assignment 3. Absolute Assignment 4. Irrevocable Assignment 1 1 & 2 3 1 & 4 11. Which of the following statements about the Reinstatement Provision is true? 1. A new incontestable period begins at reinstatement. 2. A new suicide period begins at reinstatement. 3. All loans must be repaid. 4. No medical evaluation is required. 1, 2, & 3 1, 2 & 4 2, 3, & 4 1 & 3 12. Features that may be included in most Term policies include which of the following? 1. Convertibility 2. Renewability 3. Waiver of Premium provision 1 and 2 only 1 and 3 only 2 and 3 only 1, 2, and 3 13. The provision in a life insurance policy that provides protection against unintentional policy lapse is known as the: Reduction of Premium option Waiver of Premium benefit Payor clause Automatic Premium Loan provision 14. Which of the following would provide more death benefit for your premium dollar while still accumulating cash value, assuming issue age 25? 20 pay life 10 year term whole life endowment at 65 15. A Variable Life insurance policy would be regulated by: The Securities & Exchange Commission and the Department of Financial Services The Securities & Exchange Comission and the Chief Financial Officer The N.A.S.D and the S.E.C. The N.A.S.D. and the Department of Financial Services 16. When term insurance is renewed, the premium amount rises to reflect the increased mortality risk due to the insured's increased age. What phrase best describes this approach to increasing premiums? Variable rate Targeted rate Step rate Seniority rate 17. With regard to 10 year Family Income and Family Maintenance Plans, Fanny dropped dead in year 3. Which of the following is true? Family Income would pay for 10 years and Family Maintenance for 3 years. Family Income would pay for 10 years and Family Maintenance for 7 years. Family Income would pay for 3 years and Family Maintenance for 3 years. Family Income would pay for 7 years and Family Maintenace for 10 years. 18. What is the maximum interest rate an insurance company can charge the policyowner for a fixed or adjustable rate? 10% for a fixed rate, for an adjustable the rate will be tied to Moody's Bond Index 12% for a fixed rate, for an adjustable the rate will be tied to the Consumer Price Index A maximum of 10% for fixed or adjustable rates There are no maximums by law 19. Where is the insuring clause of a life insurance policy found? On the cover of the policy With all riders and endorsements On file in the company's home office All of the above 20. If an insured purchases a 20-year family maintenance policy at age 25, and then dies at age 35, how long would benefits be paid to his beneficiaries? 5 years 10 years 20 years 30 years 21. Signing over ALL rights of ownership in a policy by the owner is: policy owner privilege. an absolute assignment. a policyowner amendment. a transfer of rights. 22. Which of the following statements about the reinstatement provision is true? It provides for reinstatement of a policy regardless of the insured's health. It guarantees the reinstatement of a policy that has been surrendered for cash. There is no new suicide exclusion with a reinstated policy It permits reinstatement within 10 years after a policy has lapsed. 23. The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the: Misstatement of Age Clause Incontestability Clause Reinstatement Clause Insuring Clause 24. In what respect do LIMITED PAY Life policies differ from STRAIGHT WHOLE Life policies? Limited pay life policies do not give Insurance protection to age 100. Limited pay life policies endow before age 100. Limited pay life policies have a shorter premium paying period. Limited pay life policies can provide protection for a limited time, typically to age 65. 25. A policy that is sold in proportioned units to cover the insured, spouse and children is called a: Family income policy Family plan Family maintenance policy Multi-faceted policy 26. All of the following statements regarding Modified Endowment Contracts are true except? It is the responsibility of the insurance company to make sure the policy does not become a M.E.C. Loans will first be taxed as ordinary income, then a return of premium A 10% penalty may be imposed on any money borrowed before age 59 1/2 It is the responsibility of the insured to make sure the policy does not become a M.E.C. 27. Which is true concerning a VARIABLE LIFE insurance policy? It provides a minimum guaranteed death benefit. Benefits vary and are linked to the Dow-Jones stock averages. It has a guaranteed minimum cash value. Premiums and benefits are both variable. 28. Sue lost her job. Times were hard. She could not afford to pay the premiums on her life insurance policy. Which of the following non-forfeiture options should she elect to maximize her death benefits? reduced paid-up 1 year term cash surrender extended term 29. All the below are true about GUARANTEED RENEWABLE TERM insurance EXCEPT: No medical evidence of insurability is required at renewal. The incontestability clause is not renewed. The premium cost cannot be increased at renewal. The face value of the policy normally remains the same. 30. Gullible, age 27, is advised by his agent to purchase life insurance to cover a 20-year, $50,000 amortized business-improvement loan. Which of the following plans would adequately protect Gullible at the minimum premium outlay? $50,000 Whole Life policy $50,000 20-Year Endowment policy $50,000 Level Term policy for 20 years $50,000 Decreasing Term policy for 20 years 31. Which of the following is not true concerning the waiver of premium rider? It may contain one of two different definitions of disability The waiting period is usually 90 days to six months The benefit usually drops off at age 65 The definition of disability may change from any occupation to own occupation after two years of the disability 32. The following statements about UNIVERSAL LIFE are true, except: It is a contract containing a cash reserve account, from which current mortality costs are drawn monthly by the insurer. The miximum mortality charges against the reserve permitted by the insurer are disclosed in the policy and are based upon industry tables. The policy reserves may be invested in long term junk bonds. The interest rate credited to the reserve is variable, and responds to the fluctuating market rates, but usually is guaranteed for an initial period. 33. Ibey Broke, age 62, has been paying premiums for many years on his Whole Life policy, which now has a cash value of $9,850. If Ibey decided to drop the policy, which of the following would apply? Ibey would forfeit a major part of the $9,850 to pay for the cost of protection under the policy. Ibey could elect to surrender his policy for a lump-sum cash payment of $9,850, less any policy indebtedness. Ibey would forfeit the entire $9,850, if the plicy is surrendered. Ibey will have to take a reduced paid up policy. 34. Which of the following policies allow for withdrawals: Universal Life and Variable Life Universal Life and Variable Universal Life Whole Life, Universal Life and Variable Universal Life All polices allow for withdrawals 35. The applicant chooses the length of the premium-paying period when selecting the type of policy that should best meet his/her objectives. Which type of policy has the highest initial premium and shortest pay period? Single premium life policy 10 pay life policy Variable life policy Endowment policy 36. The form of insurance designed to cover the liability of a borrower with an amortized loan is a/an: Increasing Term Level Term Decreasing Term Covertible Term 37. What is the purpose of policy exclusions? To protect the insurance company from adverse selection To protect the company from frivolous claims To keep the premiums lower To exclude as much as possible 38. A $10,000 life insurance policy with a Triple Indemnity clause has been in force for 3 years. Black Cloud, the insured, is injured in a train wreck and dies in a hospital 5 months later. The death proceeds payable under the policy would be: $30,000 $20,000 $10,000 $0 39. All of the below are true features of VARIABLE LIFE Insurance EXCEPT: Variable life is regulated by the state & the S.E.C. The owner may balance the risk of loss with the desire for gain. Variable Life compensates for inflation by having the face value indexed to the CONSUMER PRICE INDEX The face and reserve values are determined by the value of underlying Mutual Funds selected by the owner. 40. The fifth dividend option will purchase: Term insurance equal to the face amount Paid-up insurance not to exceed the face amount Term insurance not to exceed the cash value Paid-up insurance not exceed the cash value 41. A life insurance policy provides a straight coverage of $100,000 for a period of five years. Which of the following terms correctly apply to this policy? 1. Permanent 2. Term 3. Level 4. Variable 1 and 3 1 and 4 2 and 3 2 and 4 42. At age 30, OohJay wishes to purchase a Whole Life policy. His agent explains that he can pay for the policy in several ways. One method is called 20-Pay Life, and another Straight Life. OohJay wishes to know which plan will accumulate cash value at a faster rate in the early years of the policy. Which of the following would be the agent's most appropriate response? Straight Life will accumulate cash value faster. 20-Pay Life will accumulate cash value faster. Both plans will accumulate cash value at the same rate. The rate of cash value accumulation depends on the profitability of the insurance company. 43. The Waiver of Premium: has a normal waiting period of 30 days. is removed at age 70. covers accidental disability on the first day. is an option that may be rated or denied. 44. Which of the following statements is true about a policy assignment? It permits the beneficiary to designate the person or persons to receive the benefits. It is valid during the insured's lifetime only, because the death benefit is payable to the named beneficiary. It transfers the owner's rights under the policy to the extent expressed in the assignment form. It is the same as a beneficiary designation. 45. An insured commits suicide with-in the first two years of the life insurance policy, which course of action will the insurance take? Pay full benefits Pay the death benefit but subtract the premium Deny the claim Deny the claim and return the premium 46. Justin purchases a plan that will pay his beneficiary a lump sum and then payments for 10 years after he dies. Which type of plan did Justin purchase? Family Plan Family Maintenance plan Family Income plan Modified Whole Life policy 47. Rusty buys a 20 pay whole life policy on his ten year old daughter with a payor provision. Rusty dies in year 10. What happens to the policy? The policy is paid up for life. The premiums are paid up until the daughter is 25. The premiums are paid until the daughter is 25, then she must pay the next ten years. The policy would endow immediatley. 48. Which fo the following policies would have a higher premium? Participating Policies Non-Participating Policies Mixed Plan Policies Should be the same 49. All of the following are true about an ENDOWMENT policy EXCEPT: It is a form of Whole Life insurance. It has a high premium cost per dollar of face value. It is an Insured Savings Plan. The cash value and the face value are equal at the endowment date. 50. The party to whom the life insurance policy cash values belongs is: the policyowner. the insured. the insurer. the beneficiary. 51. Mr. Ramon purchased a $10,000 10 year limited pay life insurance policy on his ten year old son Luis. A payor rider was added for an additional premium. Should Mr. Ramon die when Luis is 15 when would Luis begin making premium payments? Age 25 Age 21 age 15 Never 52. Which Policy below, if issued at age 40, has premiums payable for 60 years, insurance protection for 60 years, and endows at age 100? Endowment at age 60 policy 20-pay endowment at age 65 policy 20-pay life policy straight whole life policy 53. Ordinary Life policies must include all of the following provisions EXCEPT: Entire Contract Clause (application included) Consideration Clause Suicide Clause Accidental Death Rider 54. The delayed payment provision permits an insurer to postpone payments of cash surrender values after policyowners request payment for a period of: 30 days 60 days 90 days 6 months 55. Which of the following statements about a Renewable Term policy is true? It is renewable at the option of the insurance company. It is renewable at the option of the insured. It is renewable at the option of the insurance company, with proof of insurability. It is renewable at the option of the insured, with proof of insurability. 56. Cash values must be present in life policies: 1) Ordinary 3 year 2) Industrial 3 year 3) Ordinary 5 year 4) Industrial 5 year 1 and 2 3 and 4 1 and 4 2 and 4 57. Industrial life insurance is known as all the following types of insurance except: Debit Insurance Burial Insurance Home Service Insurance Ordinary Insurance 58. Which of the following policies was used to accumulate funds for education? Endowment Term Life Paid-Up at Age 65 20-Pay Life 59. Which of the following must exist before a non-forfeiture option can be elected? Dividends Cash Value Interest Expenses 60. Which of the following is a non-forfeiture option that provides continuing cash value buildup? Extended Term Cash Surrender Reduced Paid-Up Fixed Period Option 61. A person who desires protection permanently but does not want to pay premiums indefinitely would purchase which of the following? indeterminate whole life modified whole life whole life limited pay life 62. All of the following apply to PARTICIPATING policy dividends EXCEPT: Taxable as current income like any other dividend Considered by the I.R.S. as a return of excess premium May be the result of actual expense experience being less than anticipated expense Could be increased by the extended longevity of current policyholders 63. Which of the following individual policy conversions is usually permitted without any evidence of insurability? Conversion from a Term policy to a Whole Life policy Conversion from a Whole Life policy to a Term policy Conversion to a larger amount of insurance Conversion to a lower premium plan 64. Which of the following is an example of a Limited-Pay Life policy? Whole Life Life Paid-Up at Age 65 Renewable Term to Age 70 Endowment maturing at age 65 65. When does the time period covered by the Ten Day Free Look provision of a life insurance contract start? When the contract is issued and mailed to the agency office from the home office of the insurance company. When the contract is received in the agency office and given to the agent. When the insured receives the contract and makes the first premium payment, if needed. When the insured receives the contract and a right to look receipt. 66. If a stock company sells both participating and non-participating policies it is said to be operating on the: Conservative Plan Mixed Plan Specialized Plan They can't sell both 67. Max has a $100,000 life insurance policy with cash value totaling $20,000. The loan rate is a fixed 8%. The agent suggests that Max strip his policy of the cash value and invest this money in a high yielding single premium annuity. This could be called: Leveraging Replacement A good business move Rebating 68. The NON-FORFEITURE OPTIONS include all of the following EXCEPT: Cash surrender payment Reduced paid-up insurance Extended term insurance Purchasing one year term equal to the cash value 69. The insuring clause is typically undersigned by: The president of the insurance agency and the agent The general agent and the career agent The president and the secretary of the company The president of the company and the general agent 70. When someone other than the insured is the owner of a life insurance policy, the owner may do all of the following without the insured's consent EXCEPT: Surrender the policy for its cash value Increase the amount of insurance Make a policy loan Change the beneficiary 71. Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which the insured will have limited financial resources? Term Whole Life Annuity Endowment 72. Rights of policy ownership include all the following except: Legally changing provisions in the policy Assignment of rights to another party Ability to take out loans Ability to designate the beneficiary 73. How is a policy loan repaid if the policy pays a death claim? Because the policyowner, not the beneficiary, made the loan, it does not have to be repaid at the insured's death. The loan, plus any interest due, is deducted from the death benefit. The beneficiary takes over the loan, plus any interest due. The loan, plus any interest due, is paid through the insured's estate, just as with any other debts. 74. Which of the following statements are true about exercising a Guaranteed Insurability option? 1. The new insurance is available at the original issue age rate. 2. Evidence of insurability is not required. 3. The insured can exercise the option at any time after the age of 21. 4. The maximum purchase is specified in the contract. 1 and 2 only 2 and 4 only 3 and 4 only 1, 2, and 3 only 75. An applicant for reinstatement may have to do all of the following EXCEPT: pay all back premiums provide evidence of insurability agree to a new suicide provision agree to a new incontestable provision 76. Each of the following statements about the incontestable clause in a life insurance policy is correct except: the clause gives people assurance that when their policies become claims, they will be paid without delays or protests the incontestable clause means that after a certain period , an insurer cannot refuse to pay the proceeds of a policy or void the contract incontestable clauses usually become effective two years from the issue date of the policy insurers can void a contract even after the specified period, provided they can prove the policy was purchased fraudulently 77. An applicant with heart problems denied this material fact and died within the 2 year incontestable period. However, the death was the result of a traffic accident. The insurance company will take which course of action? It will pay the full death benefit as the death was unrelated to the fraudulent statement. It will deny the death benefit and return all premiums. It will pay whatever the premium would have purchased at the time of death. It will subrogate against the driver of the automobile. 78. Which is the only type of rider added at no additional cost to the policyowner? The waiver of premium rider The automatic premium loan rider The payor rider The cost of living rider 79. The purpose of the grace period is to: protect the insurance company against adverse selection. protect the policyholder against unintentional lapses. permit the beneficiary to establish an insurable interest. permit the insurance company to determine the cause of death. 80. Which of the following is provided by a PAYOR rider on a policy with a minor child as the insured? If the child is disabled 6 months or longer premiums are waived. If the premium payor dies, premiums are waived until the insured child reaches age 21 or 25, as stated in the policy. If the minor child dies the benefit is doubled. If the premium payor is unemployed benefits are waived. 81. If the insured understated his/her age and the error is discovered after the insured's death, the insurance company will: refuse to pay the death claim refund all past premiums paid with any accumulated interest pay the face amount of the policy with a deduction for the amount of the underpayment premium pay an amount equal to that which the premium would have purchased at the correct age 82. Patches owns a 30-Pay Life policy that he purchased at the age of 30. The policy will endow at age: 60 65 70 100 83. The owner of a business is insured under a $100,000 Key Employee Life policy that contains a Double Indemnity clause and a Suicide clause. The business has paid the annual premium of $2,000. Six months after the inception date of the policy, the insured commits suicide. The insurance company's liability for payment is: $200,000 $100,000 $2,000 $0 84. The insured died during the Grace Period of her life insurance policy and had not paid the required annual premium. The insurance company is obligated to pay which of the following to the beneficiary? The cash value of the policy, if any The full face amount of the policy The face amount of the policy less any earned premiums A refund of any premiums paid 85. Which of the following statements concerning an insurance company's separate account is/are true? 1. Separate account funds are free from the claims of the insurance company's creditors 2. In the event of insolvency of the insurance company, the separate account funds are protected for the policyowner. 3. Indexed annuities may be set up with separate accounts. 4. Separate account funds are guaranteed. 1 & 2 1 & 3 1, 2 & 3 2, 3, & 4 86. A UNIVERSAL Life Insurance policy has all the following features EXCEPT: It is considered a form of Permanent Life Insurance. Without its adjustable features it resembles an Endowment policy. Contributions (premiums) may be increased or decreased by the policy payer. The face amount may be increased (subject to evidence of insurability), or decreased (subject to the I.R.S. corridor). 87. An insured misrepresented a material fact on his application. The policy was issued but the application was not attached to the policy. The insured died shortly after the policy was issued. The company must pay the claim because of which provision? Insuring Provision Incontestable Provision Entire Contract Provision Legal Payment Provision 88. Forrest owns a 30-Pay Life policy that he purchased at the age of 30. The cash value will equal the face amount of the policy when he reaches the age of: 60 65 70 100 89. JOINT LIFE insurance policies insure two lives for a single death on one policy. They may be which of the following types: 1. Joint Life pays the face at the first death 2. Joint Life pays the face at the SECOND death. 1 only 2 only 1 & 2 None of the above 90. What type of term insurance is utilized in a Family Maintenance Plan? Increasing Decreasing Level Graded 91. Variable Life insurance is considered: An insurance contract only A securities contract only An insurance and general contract An insurance and securities contract 92. Universal life has 2 optional death benefits. They are: 1. Death benefits include the cash value and the pure amount at risk (level face). 2. Death benefits remain a constant amount at risk plus any cash value (increasing). 3. Death benefits are tied to the market value of the mutual funds. 1 only 2 only 1 & 2 3 93. Ernest has a life insurance policy with a death benefit of $100,000, consisting of $50,000 whole life and a $50,000 level term rider. His agent has informed him that electing the extended term non-forfeiture option would provide him with a death benefit of how much? $100,000 $50,000 $25,000 Nothing 94. Which of the following statements regarding juvenile insurance is not true? They are expressed in units of $1000 The face amount of the policy jumps by five times the original amount at age 21 The premiums jump by five times the original at age 21 States limit the amount that can be purchased on a child

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