Question 1

Dave purchased a life insurance policy.The policy is nonparticipating and the cash values are based on the insurer's present mortality,investment,and expense experience.After 2 years,the insurer will recalculate the premium based on the mortality,investment,and expense experience at that time.Dave purchased

Accepted Answer

Current assumption whole life insurance policies have premiums that can be adjusted based on the insurer's current experience with mortality rates, investment earnings, and expenses, which matches the description given.

Question 2

Which of the following statements is true regarding the results of studies by LIMRA and New York Life Insurance Company on the adequacy of life insurance owned by households in the United States?
I.The average household is adequately insured against the risk of premature death.
II.The average household is significantly underinsured against the risk of premature death.

Accepted Answer

The statement that is true according to the studies is II only - the average household is significantly underinsured against the risk of premature death. LIMRA and New York Life Insurance Company both found that many households did not have enough life insurance coverage to adequately provide for their loved ones in the event of an untimely death.

Question 3

Which of the following statements about savings bank life insurance is true?

Accepted Answer

Savings bank life insurance is designed to provide low-cost insurance to consumers by holding down expenses. It is a type of life insurance that is typically sold by savings banks to their depositors. The premiums are usually low, and the coverage amount is also limited. The maximum amount that a depositor can purchase varies by bank, but it is typically much lower than the coverage available through traditional life insurance policies.

Question 4

Which of the following $100,000 whole life insurance policies,issued by the same company to a man age 32,would require the highest first-year premium?

Accepted Answer

The 10-payment whole life policy requires the highest first-year premium because it is designed to be paid off in only 10 years, compared to the continuous premium policy which is paid over the entire lifetime of the insured. The whole life paid-up at 65 and 20-payment whole life policies have longer premium payment periods, resulting in lower first-year premiums.

Question 5

Which statement is true concerning the economic problem of premature death in the United States?
I.The economic impact of premature death of the breadwinner varies for different types of families.
II.Increased life expectancy has increased the economic problem of premature death over time.

Accepted Answer

Statement I is true as the economic impact of premature death can differ depending on the type of family affected. Statement II is false as increased life expectancy has actually helped to decrease the economic problem of premature death over time.

Question 6

Ann is considering the purchase of a life insurance policy with these characteristics: flexible premium payments,the insurance and savings components are separate,the interest rate credited to the savings is tied to a market interest rate but a minimum rate is guaranteed,and a monthly administrative fee is charged.Ann is considering buying

Accepted Answer

The characteristics described match those of a universal life insurance policy, which offers flexible premium payments, separates the insurance and savings components, allows interest rates to be tied to a market rate with a minimum rate guaranteed, and typically incurs a monthly administrative fee.

Question 7

Carl would like to purchase life insurance.He would also like to invest in a mutual fund.An agent told Carl about a form of life insurance in which Carl could select where the saving component is invested.This form of life insurance has fixed premiums and the cash value is not guaranteed.This type of life insurance is called

Accepted Answer

The form of life insurance described is variable life insurance, which allows the policyholder to select where their savings component is invested. This type of insurance has fixed premiums but the cash value is not guaranteed, as it is invested in the market. This fits Carl's desire to invest in a mutual fund, allowing him to potentially earn higher returns on his policy's cash value.

Question 8

A whole life insurance policy in which premiums are reduced for an initial period (e.g.3 years)and are higher thereafter is an example of a

Accepted Answer

A modified life policy is a type of whole life insurance where the premiums are lower for an initial period, typically 3-5 years, and then increase to a higher level for the remainder of the policy. This type of policy is designed to make the initial cost of the policy more affordable and to help policyholders who may have lower incomes or greater financial obligations early in their lives. The other options listed (level-term, limited-payment whole life, and variable life) do not match the description provided.

Question 9

Which of the following statements about policies sold to preferred risks is (are)true?
I.Preferred risks are people whose mortality experience (deaths per thousand at a given age)is expected to be more favorable than average.
II.Insurers require preferred risks to purchase at least a minimum amount of life insurance,such as $250,000.

Accepted Answer

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

Question 10

Which of the following statements about industrial life insurance (also called home service life insurance)policies is true?

Accepted Answer

Industrial life insurance policies are typically small face value policies (usually ranging from a few thousand dollars up to about $25,000) that are sold to individuals through door-to-door sales agents, who collect premiums weekly or monthly. These policies are usually not cash value coverage, meaning they do not accumulate a savings component like other types of life insurance policies. The popularity of industrial life insurance has decreased in recent years, and it now accounts for less than 10 percent of life insurance policies sold.

Question 11

Alex,age 26,purchased a 20-payment whole life insurance policy.After Alex has made 20 premium payments,his life insurance policy is considered

Accepted Answer

When a policyholder has made all of the required premium payments on a whole life insurance policy, the policy becomes "paid-up." This means the policy will remain in force, without any further premium payments necessary, for the rest of the policyholder's life.

Question 12

Tamara purchased a term insurance policy when she had high life insurance needs and limited income.Now Tamara can afford whole life insurance.What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance without having to show that she is still insurable?

Accepted Answer

The conversion provision in a term life insurance policy allows the policyowner to convert their policy to a permanent life insurance policy, such as whole life insurance, without having to demonstrate insurability. This means that even if the insured's health has deteriorated since they initially purchased the term policy, they can still convert it to a permanent policy. A renewal provision permits the policyowner to renew or continue coverage at the end of the policy term, but it does not give the option to convert to a different type of policy. A tax-free exchange provision and a free look provision are not relevant to the situation described in the question.

Question 13

Which of the following statements about variable universal life insurance is (are)true?
I Variable universal life insurance has fixed premium payments.
II.Variable universal life insurance allows the policyowner to decide where the premiums are invested.

Accepted Answer

Variable universal life insurance does not have fixed premium payments. Instead, the premiums can vary over time based on the policyowner's investment choices and the performance of those investments. Option II is true as variable universal life insurance allows the policyowner to decide where the premiums are invested.

Question 14

Which of the following statements about second-to-die life insurance is (are)true?
I.The insurance is a form of endowment coverage.
II.The premium is lower than the combined cost of purchasing a life insurance policy on each insured.

Accepted Answer

Statement I is false. Second-to-die life insurance is not a form of endowment coverage but rather a form of whole life insurance. 
Statement II is true. The premium for a second-to-die life insurance policy is often lower than the combined cost of purchasing individual life insurance policies for each insured, as the policy only pays out upon the second insured's death. This lower premium can make it an affordable option for estate planning purposes.

Question 15

Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies.He purchased a type of life insurance in which the amount of coverage gradually declines,just as his outstanding mortgage balance gradually declines.This type of life insurance is called

Accepted Answer

Decreasing term insurance is designed to pay off a specific debt, such as a mortgage, as the coverage amount gradually decreases over time. This aligns with Michael's goal of having the life insurance proceeds available to pay his outstanding mortgage balance. Modified life insurance typically involves flexible premium payments and can have a variety of features, such as cash value accumulation, and is not specifically designed for mortgage protection. Re-entry term insurance allows the policyholder to renew the policy at a set price, regardless of changes in health, but does not have a decreasing coverage amount. Current assumption whole life insurance involves a cash value component and a level death benefit, which may not align with Michael's specific goal of mortgage protection.

Quiz 11: Life Insurance

Which of the following statements about savings bank life insurance is true?

Which of the following $100,000 whole life insurance policies,issued by the same company to a man age 32,would require the highest first-year premium?

Which statement is true concerning the economic problem of premature death in the United States? I.The economic impact of premature death of the breadwinner varies for different types of families. II.Increased life expectancy has increased the economic problem of premature death over time.

A whole life insurance policy in which premiums are reduced for an initial period (e.g.3 years) and are higher thereafter is an example of a

Which of the following statements about industrial life insurance (also called home service life insurance) policies is true?

Alex,age 26,purchased a 20-payment whole life insurance policy.After Alex has made 20 premium payments,his life insurance policy is considered

Tamara purchased a term insurance policy when she had high life insurance needs and limited income.Now Tamara can afford whole life insurance.What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance without having to show that she is still insurable?

Which of the following statements about variable universal life insurance is (are) true? I Variable universal life insurance has fixed premium payments. II.Variable universal life insurance allows the policyowner to decide where the premiums are invested.

Which of the following statements about second-to-die life insurance is (are) true? I.The insurance is a form of endowment coverage. II.The premium is lower than the combined cost of purchasing a life insurance policy on each insured.