Question 1

Which of the following statements about universal life insurance is (are)true?
I.The interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy.
II.A monthly deduction is made from the policy's cash value for the cost of insurance protection.

Accepted Answer

Statement I is false because the interest rate credited to the cash value may fluctuate over the life of the policy. Statement II is true because a monthly deduction is made from the policy's cash value for the cost of insurance protection.

Question 2

Which of the following statements about an indeterminate-premium whole life insurance policy is (are)true?
I.It permits the insurer to adjust premiums based on anticipated future experience.
II.It allows policyholder dividends to be used to lower premiums.

Accepted Answer

Indeterminate-premium whole life insurance allows the insurer to adjust premiums based on anticipated future experience, but it does not involve policyholder dividends to lower premiums.

Question 3

The purchase of term insurance is justified by which of the following circumstances?
I.The insured wants to save money through the policy for a specific need.
II.The insured has a temporary need for life insurance protection.

Accepted Answer

Term insurance is designed to provide temporary coverage for a specific period, such as during a mortgage or a child's education. It is not intended for saving money or long-term protection, so choice I is not justified. However, choice II is a valid reason for purchasing term insurance.

Question 4

Which of the following statements about life insurance cash values is (are)true?
I.Cash values are a result of the level premium method of purchasing life insurance.
II.The cash value of a policy must always exceed the policy's legal reserve.

Accepted Answer

Statement I is true. The level premium method of purchasing life insurance involves paying the same premium every year, with a portion of the premium going towards the cost of insurance and another portion going towards the policy's cash value accumulation.

Statement II is false. The cash value of a policy may or may not exceed the policy's legal reserve, which is the minimum amount of assets an insurer is required by law to maintain to ensure it can meet its obligations to policyholders. The cash value depends on various factors, such as the policy's type, premium, and investment performance.

Question 5

All of the following statements about current assumption whole life insurance are true EXCEPT

Accepted Answer

Current assumption whole life insurance is non-participating and does not pay annual dividends.

Question 6

All of the following statements about ordinary life insurance are true EXCEPT

Accepted Answer

The face amount of the policy is not necessarily paid if the insured lives to age 65. The face amount is paid upon the death of the insured, regardless of age.

Question 7

All of the following statements about the conversion of a term policy are true EXCEPT

Accepted Answer

Evidence of insurability is typically not required for the conversion of a term policy to a permanent policy. This is one of the key benefits of conversion options, allowing the policyholder to convert without having to prove they are in good health.

Question 8

Which of the following statements about a variable universal life insurance policy is (are)true?
I.There is a minimum guaranteed interest rate for the cash value.
II.The policyowner has a variety of investment options for the investment of premiums.

Accepted Answer

The answer of Which of the following statements about a...

Question 9

Which of the following statements about limited-payment life insurance is true?

Accepted Answer

Limited-payment life insurance is a form of whole life insurance where premiums are paid for a limited amount of time, typically 10, 20, or 30 years. After the premium-payment period ends, the policy remains in force for the insured's lifetime. This makes it a good choice for individuals who want to have paid-up life insurance during retirement years.

Question 10

A legal reserve in life insurance is a result of

Accepted Answer

A legal reserve in life insurance is created because the premiums collected in the early years of a policy are higher than necessary to cover the immediate costs. These excess premiums are invested at compound interest to ensure that sufficient funds are available to pay future claims.

Question 11

All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT

Accepted Answer

Policy loans are permitted on an interest-bearing basis, not interest-free.

Question 12

What happens to the premiums for yearly renewable term insurance as an insured gets older?

Accepted Answer

The premiums for yearly renewable term insurance increase at an increasing rate as the insured gets older because the risk of mortality increases with age. This means that the cost of insuring the individual becomes higher as they age, resulting in higher premiums.

Question 13

All of the following statements about variable life insurance are true EXCEPT

Accepted Answer

Cash surrender values in variable life insurance are not guaranteed and fluctuate based on the performance of the investment accounts selected by the policyowner.

Question 14

Most family heads need substantial amounts of life insurance.However,with limited income,money spent on life insurance reduces the amount of discretionary income available for other high-priority needs.What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the

Accepted Answer

The opportunity cost of buying life insurance refers to the benefits that are lost when premium dollars are spent on insurance rather than on other high-priority needs. As a result, it is the best choice among the given options.

Question 15

All of the following statements about universal life insurance are true EXCEPT

Accepted Answer

Interest credited to a policy's cash value is not taxable for the policyowner in the year credited. Instead, it is only taxed when it is withdrawn as income or surrendered.

Question 16

The net amount at risk for an ordinary life insurance policy is the difference between the

Accepted Answer

The net amount at risk for an ordinary life insurance policy is the face amount of the policy minus the legal reserve, which represents the present value of future death benefits that the insurer is obligated to pay. The other choices are not correct because they either do not involve the legal reserve, or they do not accurately represent the net amount at risk.

Question 17

Which of the following statements about endowment insurance policies is (are)true?
I.The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive.
II.The use of endowment insurance has increased in recent years because of its favorable tax treatment.

Accepted Answer

Endowment insurance policies pay the face amount if the insured dies during the policy period or at the end of the policy period if the insured is still alive. The use of endowment insurance has not necessarily increased in recent years because of its favorable tax treatment.

Question 18

Which of the following statements about a decreasing term insurance policy is true?

Accepted Answer

A decreasing term insurance policy is designed so that the face amount decreases over the policy period while the premium remains the same throughout the duration of the policy. This type of policy is often used for mortgage protection, where the coverage amount decreases as the balance of the mortgage decreases.

Question 19

All of the following statements about term insurance are true EXCEPT

Accepted Answer

Term insurance policies do not have a cash value component or savings component, so there is no refund of cash value when the coverage ceases.

Question 20

Which of the following statements about yearly renewable term insurance is (are)true?
I.It requires evidence of insurability for renewal.
II.It is most appropriate when an insured needs lifetime protection.

Accepted Answer

The answer of Which of the following statements about yearly...

Quiz 11: Life Insurance

Which of the following statements about universal life insurance is (are) true? I.The interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy. II.A monthly deduction is made from the policy's cash value for the cost of insurance protection.

Which of the following statements about an indeterminate-premium whole life insurance policy is (are) true? I.It permits the insurer to adjust premiums based on anticipated future experience. II.It allows policyholder dividends to be used to lower premiums.

The purchase of term insurance is justified by which of the following circumstances? I.The insured wants to save money through the policy for a specific need. II.The insured has a temporary need for life insurance protection.

Which of the following statements about life insurance cash values is (are) true? I.Cash values are a result of the level premium method of purchasing life insurance. II.The cash value of a policy must always exceed the policy's legal reserve.