Deck 16: Loss of Life

Question 1

Industrial life is a type of insurance that is sold in small amounts and is typically intended to help meet burial costs.

Answer 1

True

Question 2

Term insurance contacts have no cash value buildup.

Answer 2

True

Question 3

Most term policies are not convertible into a different form of insurance.

Answer 3

False

Question 4

Whole life is often referred to as a permanent form of life insurance.

Question 5

Type A universal policies pay the cash value in addition to the face amount at the death of the insured.

Question 6

Modified life generally is a type of whole life insurance with premiums that are higher than usual for an initial period of time in order to provide funds to pay the sales commissions.

Question 7

Endowment insurance is currently far less popular than it used to be among U.S. consumers.

Question 8

When the premium declines gradually each year, a term policy is referred to as decreasing term.

Question 9

Universal life contracts provide for more flexible premium payment options than do most other forms of life insurance.

Question 10

Renewable term policies are initially written for a stated number of years and are subsequently renewable, regardless of the insured's health.

Question 11

If a contingent beneficiary is not named and the primary beneficiary predeceases the insured, the insurance company will generally divide the benefits among the insured's spouse and children in the manner specified within most insurance policies.

Question 12

Insurers generally reject applications for coverage if the beneficiary does not have an insurable interest, out of concern for moral hazard.

Question 13

The suicide clause assures that benefits are not paid under any circumstances if the death was the result of a suicide.

Question 14

A participating policy allows the policyholders the same rights to dividends as they would receive if they were corporate stockholders.

Question 15

Credit life is a form of decreasing term insurance that is designed to pay the unpaid balance of an installment loan at the death of the insured.

Question 16

Match the descriptions with their terms:

-_________________ is a form of life insurance that is designed to provide protection if an insured dies within a stated period of time.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 17

Match the descriptions with their terms:

-_________________ is a savings element contained in some forms of life insurance contracts.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 18

Match the descriptions with their terms:

-A/An _________________ may only be changed with the consent of the beneficiary.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 19

Match the descriptions with their terms:

-A/An _________________ gives the insured an extra 30 days of coverage in which to pay a premium that is due before a lapse occurs.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 20

Match the descriptions with their terms:

-A/An _________________ specifies that the policy proceeds will be paid to the primary beneficiary after the elapse of a period of time if still living; otherwise, the benefits are paid to the contingent beneficiary.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 21

Match the descriptions with their terms:

-_________________ is designed to be kept in force throughout the life of the insured and includes a cash value element.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 22

Match the descriptions with their terms:

-_________________ term insurance may be changed at the policyholder's option into a permanent form of insurance.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 23

Match the descriptions with their terms:

-A person may be able to use a/an _________________ if the insured decides that provisions of the lapsed policy are more favorable than those available in a new policy.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 24

Match the descriptions with their terms:

-_________________ is designed to be kept in force throughout the life of the insured, includes a cash value element, and is flexible with respect to the amount of premiums paid.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 25

Match the descriptions with their terms:

-The _________________ may exclude coverage for a death resulting from suicide if the suicide occurs within the stated period of time.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 26

Match the descriptions with their terms:

-The _________________ results in the payment of a specified amount over a period of time determined by the size and frequency of the payments as well as the interest rate paid by the insurer.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 27

Match the descriptions with their terms:

-The _________________ results in the insurer paying the entire amount of the death benefits all at once.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 28

Match the descriptions with their terms:

-A/An _________________ will only receive the death benefits if the primary beneficiary is not alive at the death of the insured.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 29

Match the descriptions with their terms:

-_________________ is a type of term insurance that guarantees renewability without regard to the health of the insured.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 30

Match the descriptions with their terms:

-The _________________ is the amount that the insurer agrees to pay at the death of the insured.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 31

Match the descriptions with their terms:

-_________________ is well suited to use to repay an installment debt in case the debtor dies prior to complete repayment.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 32

Match the descriptions with their terms:

-A policy is _________________ if the policyholder is eligible to receive policy dividends.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 33

Match the descriptions with their terms:

-A/An _________________ might enable an insured to collect a percentage of the policy's face amount prior to the insured's death.

A) Cash value
B) common disaster clause
C) contingent beneficiary
D) Convertible
E) Decreasing term
F) face amount
G) fixed-amount option
H) grace period clause
I) irrevocable beneficiary
J) living benefit option
K) lump-sum option
L) participating
M) reinstatement clause
N) Renewable term
O) suicide clause
P) Term insurance
Q) Universal life
R) Whole life insurance

Question 34

The life insurance contract that generally offers the greatest amount of death protection per premium dollar is

A) whole life,
B) term,
C) universal life,
D) variable life.

Question 35

Death benefits are likely to fluctuate over time for

A) Type A universal life, Type B universal life, and whole life,
B) Type A universal life, Type B universal life, whole life, and variable life,
C) Type B universal life and variable life,
D) whole life and variable life.

Question 36

Which of the following is not a commonly available settlement option?

A) lump-sum option,
B) convertibility option,
C) fixed-period option,
D) fixed-amount option.

Question 37

Which of the following statements is true about the paid-up additions options?

A) Policy dividends are used to purchase as much one-year term life as possible,
B) The paid-up additions option is sometimes called the "fifth dividend option,"
C) Earnings on the cash value that are higher than the guaranteed rate are used to purchase as much single premium whole life as possible,
D) Policy dividends are used to purchase as much single premium whole life as possible.

Question 38

If a policy loan on the cash value is not repaid,

A) the policy may be canceled by the insurer,
B) a judgment may be awarded the insurer in the amount of the unpaid balance,
C) the unpaid balance of the loan will be deducted from the death benefit paid to the beneficiary,
D) a much higher interest rate is charged until the loan is repaid.

Question 39

An interest settlement option

A) keeps a policy in force until the insured is no longer interested in maintaining the coverage,
B) has death benefits paid out in equal installments over a specified time period, based on a projected interest rate,
C) relates to the expected level of policy dividends,
D) involves the insurer holding the death benefits and paying the beneficiary an income consisting only of interest on those benefits.

Question 40

The cash value option allows the insured

A) to receive in cash the present value of the face amount of the policy based on the life expectancy of the insured,
B) to surrender the policy for the accumulated cash value,
C) to collect the death benefits in a lump sum,
D) to be assured that the lump-sum option will be selected by the policy beneficiary.

Question 41

The waiver of premium benefit does not a. provide benefits if

A) disability occurs after a stated age,
B) involve physical disabilities,
C) excuse the payment of premiums during a period of disability,
D) typically require an additional premium.

Question 42

Which of the following is a true statement concerning the taxation of premium payments made by a life insurance policyholder?

A) In most cases, premium payments are not deductible,
B) In most cases, premium payments are deductible,
C) In all cases, premium payments are deductible,
D) In all cases, premium payments are not deductible.

Question 43

Which of the following statements is true about the federal income taxation of death benefits received by the policy beneficiary?

A) As a general rule, the benefits are taxable,
B) The benefits are not taxable under any circumstances,
C) As a general rule, the benefits are not taxable,
D) The benefits are always taxable.

Question 44

Which of the following will generally be deducted from the cash value to determine the amount that a policyholder would receive?

A) the current balance of unpaid loans,
B) interest credited to the cash value in excess of the guaranteed minimum,
C) a forfeiture penalty,
D) unrecovered administrative expenses.

Question 45

Term insurance contracts generally do not have

A) a clearly defined termination date,
B) lower premiums than other forms of insurance,
C) the option to convert the policy to another form of insurance,
D) cash values.

Question 46

A spendthrift trust provision involves

A) an agreement to keep future premiums at a minimal level,
B) complicated legal planning on the part of the insured,
C) the establishment of a trust for the benefit of minor beneficiaries,
D) protection from creditor's claims.

Question 47

An automatic premium loan provision is designed

A) to pay premiums that are not paid when due to prevent lapse,
B) to reduce the amount of administrative time used to approve a policy loan,
C) to negate the necessity of loan approval by the insurer's loan committee,
D) to allow loans to automatically qualify if supported by superior collateral.