Question 1

Which statement is false?

Accepted Answer

This statement is false. Your insurability is not guaranteed, and switching policies does not necessarily ensure that you will be approved for coverage. Your health history and current health status will be considered by the insurance company before they approve your application for coverage.

Question 2

Renee Warning has a life insurance policy where the payments to beneficiaries get smaller as time passes.What type of term life insurance does Renee likely have?

Accepted Answer

Renee likely has a decreasing term life insurance policy. In this type of policy, the death benefit decreases over time, usually at a set rate, while the premium payments remain the same. This type of policy can be helpful for people who expect their financial obligations to decrease over time, such as paying off a mortgage or other debts.

Question 3

The grace period normally allows ____________ days to elapse,during which time the premium may be paid on an insurance policy without penalty.

Accepted Answer

The grace period typically lasts for 28 to 31 days, allowing policyholders to pay their premium without facing any penalty.

Question 4

A suicide clause means that the insurance company:

Accepted Answer

A suicide clause is a provision in a life insurance policy that determines the payout if the insured person dies by suicide. The clause usually states that if the insured person dies by suicide during the first two years of the policy, the insurance company will pay a death benefit equal to the amount of the premium paid. However, if the suicide occurs after this period, the full death benefit will be paid out.

Question 5

Jim Brown has a life insurance policy that allows him to change his policy to fit his changing needs.He can change either the premium he pays or the period of coverage.What type of insurance does Jim likely have?

Accepted Answer

Adjustable life insurance allows policyholders to adjust both the premium and the coverage period, making it the best choice for Jim's situation. Option A, ordinary whole life, does not allow for such adjustments. Option B, limited payment life, has a fixed premium payment period. Option C, variable life, allows for investment options but does not necessarily allow for adjustments to premiums or coverage periods. Option E, universal life, allows for flexibility in premium payments but may not allow for adjustments to the coverage period.

Question 6

John Camey has a life insurance policy that is tied to a separate stock fund.The cash value of his insurance policy depends on the yields earned in this fund and is not guaranteed.What type of life insurance does John likely have?

Accepted Answer

The fact that the cash value of John's insurance policy depends on the yields earned in a separate stock fund indicates that he likely has variable life insurance. This type of policy allows policyholders to invest their premiums in various investment options, including stock funds, and the cash value of the policy fluctuates based on the performance of those investments. This is different from other types of life insurance, like whole life or universal life, which typically offer guaranteed returns.

Question 7

Jane Curtain has a participating life insurance policy that returns part of her premiums at the end of the year.What is another name for this policy?

Accepted Answer

A participating life insurance policy is also known as a "par" policy, which means it can pay dividends to the policyholder.

Question 8

Russell Lowe has a life insurance policy that allows him to change his premium without changing his coverage.He can also access his cash value with a policy loan or a withdrawal.What type of insurance does Russell likely have?

Accepted Answer

Russell is most likely to have a universal life insurance policy since it allows the policyholder to change the premium and access the cash value with a loan or a withdrawal without changing the coverage. Universal life insurance provides the flexibility to adjust the premium and death benefit, allowing the policyholder to modify the coverage according to their changing needs.

Question 9

If a provision for an accidental death benefit is attached to a whole life insurance policy,then this provision is referred to as a:

Accepted Answer

A provision for an accidental death benefit attached to a whole life insurance policy is referred to as a rider. A rider is an additional provision or attachment to an insurance policy that modifies its terms or becomes part of the policy itself.

Question 10

Lisa Smith has her age listed on her driver's license as being three years younger than it actually is.This is also how old she tells her insurance company she is.Her insurance company has discovered she lied about her age.What provision of her life insurance contract states that her benefits will be what her premium would have bought if she had been truthful about her age?

Accepted Answer

The provision that stipulates benefits will be based on the premium that would have been paid had the insured accurately reported their age is the "misstatement of age" provision.

Question 11

An authoritative rating guide to the financial stability of the nation's insurers is published by all of the following except:

Accepted Answer

Dow Jones & Company does not publish an authoritative rating guide to the financial stability of insurers.

Question 12

Richard Beck has a life insurance policy which he has altered to include an accidental death benefit payable to his son and daughter.This alteration has most likely been done by attaching a ____ to the policy.

Accepted Answer

The accidental death benefit is typically included in a life insurance policy through a double indemnity provision. This provision pays out an additional sum (usually equal to the face amount of the policy) if the policyholder dies as a result of an accident. By attaching this provision to the policy, Richard Beck has ensured that his children will receive an additional benefit if he dies accidentally.

Question 13

If your insurance agent does not give you an interest-adjusted index upon request,then your best bet is to:

Accepted Answer

If your insurance agent is not providing you with the necessary information upon request, it is a clear indication of unprofessionalism, and you should look for another agent who will be more transparent and forthcoming. It is essential to have all the necessary information to make an informed decision about your insurance policy.

Question 14

A beneficiary can be a spouse or child who:

Accepted Answer

A beneficiary is someone who is designated to receive your life insurance proceeds after your death. Option A, B, C, and E refer to different roles that someone can play in relation to your insurance policy but not necessarily as a beneficiary.

Question 15

A method of evaluating the cost of life insurance by taking into account the time value of money combines all of the following except:

Accepted Answer

Supply and demand is not a factor that is typically considered when evaluating the cost of life insurance based on the time value of money. Instead, the other factors listed (premium payments, dividends, cash-value buildup, and present value analysis) are typically used to determine the actual cost of life insurance over time.

Question 16

Tim Bridges has a life insurance policy where he makes payments of $265 per year until he reaches the age of 65.His policy is then 'paid up' for life.His beneficiaries will receive the face value upon his death.What type of life insurance policy does Tim likely have?

Accepted Answer

Tim Bridges likely has a limited payment life insurance policy, which is a type of whole life insurance. With this type of policy, the insured pays premiums only for a certain period of time, such as until age 65, and the policy then becomes paid up for life. This means that the insured no longer has to make premium payments, but the policy remains in force and the beneficiaries will receive the face value upon the insured's death.

Question 17

Which of the following does not refer to permanent insurance?

Accepted Answer

Term life insurance refers to temporary insurance that only covers a specific period of time, typically 10, 20, or 30 years, and does not accumulate cash value. Whole life, straight life, ordinary life, and cash-value life are all types of permanent insurance that provide coverage for the entire life of the insured and accumulate cash value over time.

Question 18

What percent of all applicants who apply for life insurance are found to be insurable?

Accepted Answer

The vast majority of applicants for life insurance are found to be insurable, with the percentage typically very high. The correct answer is 98%, indicating that nearly all applicants are deemed insurable by insurance companies. This high percentage reflects the broad criteria used by insurers to determine insurability, aiming to cover as many individuals as possible.

Question 19

Your life insurance policy is valuable only if it:

Accepted Answer

The value of a life insurance policy lies in its ability to meet your objectives, such as providing financial security for your loved ones in the event of your unexpected death or covering final expenses. Making you or your beneficiaries rich or serving as collateral for a loan may not necessarily be the primary objective or value of a life insurance policy. And paying a certain interest rate is not a factor in determining the value of a life insurance policy.

Question 20

Taylor Jones has a life insurance policy that returns every cent she pays in premiums if she outlives the term of the policy.She knows this policy costs 30 to 50 percent more than a traditional policy but thinks it is worth it.What type of term life insurance does Taylor have?

Accepted Answer

Taylor Jones has a return-of-premium term life insurance policy, which means she will receive all her premiums back if she outlives the term of the policy. This type of policy costs more than a traditional policy but may be worth it for those who want the peace of mind of being able to recoup their premiums if they never need to use the policy for its intended purpose.

Quiz 12: Life Insurance