Deck 13: Life Insurance Policies

Question 1

Which of the following best describes what life insurance is designed to protect against?

A) dying before financial obligations have been met
B)outliving your income
C)probability of dying increasing as you grow older
D)loss of income due to retirement

Answer 1

A

Question 2

Which of the following policies would have the highest premium for a standard risk male age 27?

A)level term
B)whole life continuous premium
C)whole life paid up at 65
D)10 pay whole life

Answer 2

D

Question 3

Choose the item below that is not a characteristic of group life insurance.

A) benefit amounts are usually increased by the employer at 5 year intervals
B)there usually are no medical exams required
C)benefits are determined by a predetermined formula
D)the group must not be formed solely to purchase insurance

Answer 3

A

Question 4

Which of the following is not correct with respect to universal life insurance?

A)is interest sensitive
B)has flexible premiums and benefits
C)usually involves more guarantees than ordinary whole life
D)the pattern of face amount may be selected

Question 5

Which of the following life insurance policies would have the lowest premium for a male age 40?

A)level term
B)whole life continuous premium
C)whole life paid up at 45
D)variable life

Question 6

Which of the following is not a characteristic of universal life insurance?

A)mortality costs and minimum investment returns are known
B)face amounts are fixed and premium payments are fixed
C)pattern of death benefit is selectable
D)ability to earn competitive returns

Question 7

Which of these is the least appropriate use for whole life insurance?

A)mortgage retirement fund
B)dependent spouse income fund
C)retirement need
D)emergency fund

Question 8

Regarding variable life insurance,all of the following are true except:

A)provides no mortality or investment guarantees
B)has flexible benefits based on investment returns
C)allows the insured to choose how the cash value is invested
D)is transparent with respect to costs and returns

Question 9

The "difference" in the buy?term?and?invest?the?difference strategy is the difference in ______________ between term life insurance and whole life insurance.

A)average insured's life expectancy
B)expense loads
C)premiums
D)dividends

Question 10

The primary reason life insurance policies have a savings element is to allow the:

A)insured to have money for old age or for other purposes
B)insurer to reduce the cost of insurance by investing money at high interest rates
C)insured to accumulate funds to aid in the long term financing of private business enterprises
D)insured to obtain lifetime protection at a level premium

Question 11

A term insurance policy that includes a conversion privilege gives the insured the right to:

A)renew the policy for another time period of the same length
B)exchange the term policy for a permanent plan of insurance
C)increase or decrease the death benefit
D)include the nonforfeiture provision in the policy

Question 12

Which statement about industrial life insurance is false?

A)relatively small premiums are collected on a frequent basis
B)can also be called debit or home service life insurance
C)cost of the coverage is relatively high
D)individual policies are large since it is purchased for employees by their unions

Question 13

The accumulation of a reserve consisting of excess payments above the mortality cost in the early years of a policy is necessary for the:

A)deferred annuity plan
B)minimum reserve standard
C)level premium plan
D)yearly renewable term plan

Question 14

All of the following statements about an ordinary (whole)life insurance policy are true,except:

A)Premiums can be level throughout the policy period
B)The face amount is paid if the insured lives to age 65
C)There is a buildup of cash value that can be borrowed by the policyholder
D)It can fulfill the insured's death protection AND saving needs

Question 15

All of the following are true of level premium ordinary whole life insurance except:

A)furnished permanent protection over all of one's life
B)small initial outlay compared to single premium, whole life
C)combines savings with insurance
D)premiums end at age 65

Question 16

Jens is a newly-married man who wants $100,000 of life insurance,but he cannot afford the ordinary level whole life premium until he gets out of graduate school. He would like to pay less for the first few years of coverage until he graduates. He can still obtain the desired amount of insurance for the whole of his life by purchasing:

A)limited payment whole life
B)single premium whole life
C)deferred premium annuity life
D)convertible term

Question 17

Assume that all of the life insurance policies listed below have a $50,000 face value,are sold by the same insurer,and have identical expense and mortality rates. Which of these,sold to a 27 year old female,should be the least expensive?

A)term life
B)whole life
C)universal life
D)cannot be determined from the given information

Question 18

A disadvantage of using a whole life policy for saving is:

A)earnings outside the policy can be greater
B)federal income tax must be paid on the yearly cash value increases
C)creditor protection is available if bankruptcy occurs
D)since premiums must be paid to keep the policy in force, there is the semi compulsory nature of saving

Question 19

All the following are advantages of level premium whole life insurance except:

A)furnishes permanent protection
B)small initial outlay v. single premium whole life
C)combines savings with insurance
D)provides inflation protection

Question 20

A universal life insurance policy (ULI)is considered to be:

A)term insurance only
B)a form of fixed face, fixed premium whole life insurance
C)a whole life policy where the face amount may be changed at any time
D)a version of the buy term and invest the difference strategy

Question 21

Term insurance is normally purchased by people between the ages of…?

A)25 and 65
B)45 and 65
C)20 and 60
D)25 and 75

Question 22

The excess interest provision in life insurance means that the cash value will increase:

A)faster than the guaranteed rate if the insurer actually earns a greater return than the guaranteed rate
B)faster than the guaranteed rate even if the insurer does not earns a greater return than the guaranteed rate
C)faster than it would with a universal or variable life policy
D)slower than the guaranteed rate

Question 23

Which of the following is a permanent need for purchasing life insurance?

A)Funding a child's college education
B)Paying off a mortgage loan
C)Providing for funeral expenses
D)Funding the readjustment period for a spouse

Question 24

When an ordinary life insurance policy becomes payable as a death claim,the beneficiary is entitled to the:

A)cash surrender value
B)face amount plus the reserve value
C)face amount
D)face amount plus the cash value

Question 25

If a term life policy is convertible,the insured has the option to convert it to:

A)cash
B)an annuity
C)a decreasing term policy
D) a permanent form of coverage

Question 26

Which of the following is true?

A)Term life insurance is most suitable when the need for protection is permanent
B)Decreasing term insurance is useful when the insured's debt is increasing at a steady, predictable rate
C)Whole life insurance is best when the insured desires temporary coverage, because its cash values will refund nearly all premiums paid
D)Whole life insurance can provide funds whether the insured dies or survives the policy period

Question 27

A convertible term policy allows the insured to convert a term policy into any other type of policy including a different type of term policy.

Question 28

Industrial life insurance is:

A)a group life program designed specifically for employees who work in manufacturing
B)commercial insurance sold in large amounts for key man life insurance
C) generally more costly than ordinary life insurance
D)sold to employees who work in high-risk industrial manufacturing jobs

Question 29

All of the following statements about term insurance policies are true except:

A)Provide protection only for a temporary period of time
B)Often can be renewed for additional periods without evidence of insurability
C)Often can be converted to a permanent life insurance policy
D)Have a cash value that can be taken by the policy owner if she wishes to terminate coverage early

Question 30

After taking an introductory course in insurance,your parents ask you what type of life insurance policy they should purchase to get permanent death protection with the option to pay more premiums some years,and less in other years. They also want a minimum guaranteed rate of return on their cash value. Which type of life insurance will you recommend?

A)Term life
B)Whole life
C)Universal life
D)Variable life

Question 31

Whole life insurance policy sales have declined in recent years. Which of the following is NOT a reason for this decline?

A)term life insurance is typically a better choice for most consumers
B)term life insurance policies offer very competitive rates and attractive prices
C)variable life policies have gained popularity
D)inflation in the late 1970's and early 1980's

Question 32

MaryJo owns a whole?life insurance policy on her own life. She has accumulated $49,000 of cash value in the policy. Which of the following statements is/are true regarding this policy and the options MaryJo has?
I)She can withdraw the entire $40,000 at any time and forfeit her death protection
II)She can borrow the $40,000,but will lose all her death protection until the loan is paid back
III)If MaryJo dies tomorrow with no policy loan outstanding,her beneficiary will receive the face value of the insurance policy,while the $40,000 in cash value becomes a survivorship benefit for other insureds

A)I, II, and III
B)I and II
C)II and III
D)I and III

Question 33

After taking an introductory course in insurance,your parents ask you what type of life insurance policy they should purchase if they want permanent death protection and the potential for earning a relatively high rate of return on their cash value. Which type of life insurance would you suggest?

A)Term life
B)Whole life
C)Universal life
D)Variable life

Question 34

Term life insurance has significantly increased in popularity. Why?

A)lower rates and greater tax deductions offered to the wealthy
B)lower rates and tax credit incentives offered to the poor
C)stable rates with increased benefits for everyone
D)lower rates and availability of tax-advantaged savings plans

Question 35

Your best friend discovers you just took an introductory insurance course. He asks you what type of life insurance policy he should buy,given that he is 28 years old. Which type of life insurance should you recommend?

A)Term life
B)Whole life
C)Universal life
D)Cannot be determined from the given information

Question 36

Which of the following is true with regard to term life insurance contracts?

A)policies of less than 10 year length are illegal in 13 states.
B)one form of term life increases the amount of insurance as the balance due on a mortgage declines over time
C)renewable term life insurance guarantees the insured that upon renewal, his premiums will not increase
D)term insurance provides temporary protection

Question 37

Universal life was created in response to which of the following?

A)declining popularity of term life insurance in the mid-1980's
B)declining inflation and investment yields in the late 1970's
C)less-sophisticated consumers demanding easier-to-read policies
D)high-yield, low risk investment opportunities that made whole life insurance unattractive

Question 38

After taking an introductory course in insurance,your parents ask you what type of life insurance policy they should purchase to get permanent death protection with a fixed premium amount,a guaranteed rate of return on their cash value,and a level death benefit. Which type of life insurance will you recommend?

A)Term life
B)Whole life
C)Universal life
D)Variable life

Question 39

Which of the following is false with respect to universal life insurance (ULI)?

A)is interest sensitive
B)has flexible premiums and benefits
C) is cheaper than ordinary whole life
D)has the tax benefits of ordinary life insurance

Question 40

Why have term life insurance rates decreased in recent years?

A)they have not decreased; this is a trick question
B)improved human longevity
C)decrease in percentage of the population infected with HIV/AIDS
D)regulatory intervention

Question 41

Universal life insurance is an interest sensitive product.

Question 42

Explain why there is a savings element to a whole life insurance contract.

Question 43

When life insurance is provided on a level premium basis,the premium payments increase at an increasing rate as the insured ages.

Question 44

Mortality tables assume that all people die at age 95.

Question 45

What are the features that distinguish universal life from traditional forms of life insurance?

Question 46

Credit life insurance is life insurance sold on credit;the premium payments are borrowed.

Question 47

In a limited payment policy only a portion of the face amount is paid if death occurs in the early years.

Question 48

In group life insurance an insurer might accept an exposure who could not meet the insurer's standards for individual life insurance.

Question 49

When it is unclear who the beneficiary of a life insurance policy is,the insurer uses the process of interpleader so the court can settle any dispute.

Question 50

In group insurance,the conversion privilege allows an insured to convert from a whole life to a term policy.

Question 51

Under a group life insurance plan,in general,individuals do not have to pass an insurer's medical examination.

Question 52

In general,what are the uses for term life insurance? Provide examples.

Question 53

Why does the death benefit increase under certain conditions in the universal life Plan A (fixed face amount)?

Question 54

What are the advantages of saving with cash value whole life insurance?

Question 55

Premiums for industrial insurance are collected at the insured's home,often on a weekly basis.