Question 1

At what point does whole life insurance pay the death benefit?

Accepted Answer

Whole life insurance pays the death benefit upon due proof of death of the insured at any age, when the insured turns 100 years old (or the maximum stated age in some policies), effectively making options A, B, and C all correct circumstances under which the death benefit would be paid.

Question 2

Suppose that your husband was killed in a bank robbery.Which of the following is not one of the typical settlement options that would be available?

Accepted Answer

Conversion of spousal insurance is not a typical settlement option for a payout from a policy or account due to death. Settlement options usually include installment payments, interest-only payments, lump-sum payments, and life annuities, which are ways the beneficiary can choose to receive the death benefit. Conversion of spousal insurance refers to changing a spousal policy into individual coverage, not a method of payout.

Question 3

Let's assume you are the beneficiary of your great Aunt's life insurance policy.Sadly she passed away yesterday.You elect to receive annual payments from this policy for the next 20 years.The settlement amount is $500,000 and the interest accruing on the policy is an annual 8%.What will be your annual life insurance annuity payments?

Accepted Answer

The answer of Let's assume you are the beneficiary of...

Question 4

Which of the following term plans is intended to cover an individual's outstanding debt?

Accepted Answer

Credit life insurance is specifically designed to pay off a borrower's debts if the borrower dies, while mortgage life insurance is intended to pay off the remaining mortgage debt. Both types of insurance are thus aimed at covering an individual's outstanding debt.

Question 5

Choose the option(s)available in the nonforfeiture clause of a cash-value life policy.

Accepted Answer

The nonforfeiture clause of a cash-value life policy typically offers three options: exchange the policy for a paid-up term policy of equal face value, receive the policy's cash value, or exchange the policy's cash value for a paid-up policy with a reduced face value. Option E includes all three of these choices and allows the policyholder to retain some value from the policy regardless of whether they continue making premium payments.

Question 6

What is the name of the insurance policy that pays your beneficiary a specific amount of money if you die while covered by the policy,and this coverage is for a set number of years and must be renewed when it expires?

Accepted Answer

The description provided matches the features of a term life insurance policy. This policy provides coverage for a set number of years, and if the policyholder dies during this term, their beneficiary receives a set amount of money. The policy needs to be renewed at the end of each term to continue coverage.

Question 7

The policy feature that allows you to pay the premium late but still retain coverage is known as the

Accepted Answer

The grace period is a feature that allows the policyholder to pay the premium late without losing coverage. During this period, the policy remains in force, and the insurer cannot cancel the policy or refuse to pay claims. The length of the grace period varies depending on the policy and the insurer, but it typically lasts between 30 and 60 days. The other options are not related to paying premiums late.

Question 8

The ________ rider increases your death benefits at the same rate as inflation without forcing you to complete a new medical exam.

Accepted Answer

The cost-of-living adjustment (COLA) rider is the best choice as it increases the death benefits at the same rate as inflation without requiring a new medical exam. This protects the value of the policy against inflation over time.

Question 9

The alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured are called

Accepted Answer

Settlement options are the alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured. These options include lump-sum payments, installment payments, annuities, and various other types of arrangements. Of these options, the best choice will depend on the specific circumstances of the beneficiary and their financial needs. It is important for the beneficiary to carefully consider their options and seek the advice of a financial professional before making a decision.

Question 10

Special provisions that may be added to your policy which either provide extra benefits to the beneficiary or limit the company's liability under certain conditions are known as

Accepted Answer

Special provisions added to an insurance policy are known as riders. Riders provide additional benefits to the beneficiary or limit the company's liability under certain conditions. Riders are sometimes also referred to as endorsements or attachments.

Question 11

You are considering the need for insurance.You desire a policy that provides permanent protection,has a fixed premium,and provides a fixed death benefit.What type of policy would you purchase?

Accepted Answer

Whole life insurance is the only option that meets all the criteria - it provides permanent protection, has a fixed premium, and provides a fixed death benefit. Term insurance has a fixed premium and fixed death benefit, but it only provides coverage for a specific term (such as 10, 20, or 30 years). Fixed premium insurance is not a specific type of insurance but could refer to any policy that has a fixed premium, which could be either term or permanent. Universal life insurance provides permanent protection, but the premium and death benefit can vary based on investment performance. Therefore, C is the best choice.

Question 12

Luke is 30 years old and earns an annual salary of $55,000.His wife wants to take out a life insurance policy on him until he turns 67.Using the earnings multiple approach,how large should the face value of his insurance policy be-assuming his wife can earn an annual rate of return of 8.5% on his life insurance pay off?

Accepted Answer

According to the earnings multiple approach, the face value of Luke's insurance policy should be calculated based on his annual salary. The typical range is anywhere from 5-10 times his annual salary, with 7 being a common number.

Using this approach, we can calculate Luke's policy as follows:

Face value = (7 x annual salary) x (1 + rate of return) ^ (years until retirement)

Face value = (7 x $55,000) x (1 + 0.085) ^ (67-30)

Face value = $430,803

Therefore, the best choice is C.

Question 13

Javier Jimenez was pleasantly surprised to find out that within three to five years after expiration of a previous life insurance policy,he can

Accepted Answer

According to the question, Javier Jimenez can reinstate the policy subject to current qualifications within three to five years after expiration of a previous life insurance policy. Therefore, option C is the correct choice. Option A is incorrect because changing beneficiaries is a standard feature of most life insurance policies and is not exclusive to expired policies. Option B is incorrect because voiding the grace period would defeat the purpose of having a grace period in the first place. Option D is incorrect because changing the incontestability clause is not usually allowed in a policy.

Question 14

Brenda's husband Bob died last week.Her agent told her she could receive the death proceeds tax-free and a monthly check until her death.He is talking about the ________ settlement option.

Accepted Answer

The agent is referring to the "life annuity" settlement option, which provides a monthly check to the beneficiary (in this case, Brenda) for the rest of her life.

Question 15

All of the following are types of life insurance annuity settlements except

Accepted Answer

All of the other options listed are types of life insurance annuity settlements, while E - variable annuity - is also a type of annuity but not specific to life insurance.

Question 16

Which of these life insurance plans holds the annual premium constant but decreases the face value of the policy each year?

Accepted Answer

Decreasing term life insurance plans hold the annual premium constant but decrease the face value of the policy each year. This type of plan is usually designed to provide coverage for a specific period of time, such as a mortgage or a loan, and the face value decreases as the outstanding balance decreases. Credit life and mortgage life insurance are both types of decreasing term life insurance plans. Universal life insurance, on the other hand, is a type of permanent life insurance that offers flexibility in premiums and death benefits. Therefore, the correct answer is A) Decreasing term.

Question 17

The ________ is the right of the policyholder to choose to receive the policy's cash value in exchange for the policyholder giving up his or her right to a death benefit.

Accepted Answer

The nonforfeiture right allows a policyholder to receive the policy's cash value, surrendering the death benefit. This ensures that the policyholder does not lose the value of premiums paid if the policy is no longer needed or affordable.

Question 18

Nancy and Leonard are married.They have two children who will be financially dependent for the next 20 years.They are taking out life insurance on Leonard,the bread winner and earns an annual salary of $80,000.Nancy is sure she is able to get a 9.5% rate of return on the policy settlement.Using the earnings multiple approach calculate how much life insurance they should take out on Leonard.

Accepted Answer

The answer of Nancy and Leonard are married.They have two...

Question 19

Which of the following factors is connected with convertible term life insurance?

Accepted Answer

All of the factors listed are connected with convertible term life insurance.

Question 20

Sally Heath has the option of obtaining life insurance through her place of employment.She will not need to take a physical exam.This type of policy would be a/an ________ policy.

Accepted Answer

The policy described in the scenario is a type of group term life insurance where Sally can obtain coverage through her employer without needing a physical exam. This type of policy is typically offered as part of a benefits package to employees. Options A, B, C, and E do not accurately describe the type of policy being offered in this scenario.

Quiz 9: Life and Health Insurance