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2-15 Florida Prep Review - Life and Health Insurance Exam Terms in this set (42)Which of the following terms best describes a life insurance policy that provides a straight $100,000 of coverage for a period of five years? A) Permanent level. C) Level term. Level term insurance provides a level amount of coverage for a specified period of time. All of the following statements regarding term life insurance are correct EXCEPT? A) both the option to renew and the option to convert relieve the insured from furnishing evidence of insurability. D) a 3-year renewable policy allows a term policyowner to increase coverage for the next 3 years. A 3-year renewable policy would actually allow the policyowner to renew the SAME coverage amount for another 3 years. When level premium insurance is renewed, the premium amount rises to reflect the increased mortality risk of the insured's older age. What phrase best describes this approach to increasing premiums? A) Seniority rate. D) Step-rate. Premiums for renewable term coverage are often called 'step-rate' premiums because at each subsequent renewal the premium is likely to be higher. Which of the following statements describing whole life insurance is CORRECT? A) Whole life insurance is designed to mature at age 100. A) Whole life insurance is designed to mature at age 100. The cash values of life insurance policies belong to which of the following? A) Beneficiary. D) Policyowner. The policyowner owns and controls the cash value in an insurance policy. All of the following statements regarding basic forms of whole life insurance are correct EXCEPT? A) the owner of a 30-pay life policy will owe no more premiums after the 30th year the policy is in force. C) limited payment life provides protection only for the years during which premiums are paid. This is an incorrect statement. Whole life policies provide coverage for life. Which of the following statements regarding modified endowment contracts (MECs) is CORRECT? A) a 1988 revenue act, commonly known as TAMRA, greatly increased the popularity of MECs. B) to avoid being classified as an MEC, a life insurance policy must satisfy the "7-pay test." The "7-pay test" basically limits the amount that you can pay into your policy within the first seven years. Which of the following types of insurance attempts to make premiums more manageable by offering lower premiums during the first few years following issue? A) Variable premium whole life. B) Modified whole life. The purpose of this kind of coverage is to make the initial purchase of whole life more affordable and more attractive. What type of policy would be best used when the need for protection declines from year to year? A) Level term. C) Decreasing term. Decreasing term policies are characterized by benefit amounts that decrease gradually over the term of protection. A common example would be decreasing term mortgage insurance. The benefit amount decreases as the amount of the mortgage decreases from year to year. All of the following statements about term insurance are correct EXCEPT? A) builds cash value during the specified period. A) builds cash value during the specified period. Term policies do not build cash value. Only whole life and variable life policies provide cash values. Carl purchases a $100,000 5-year level term policy. All of the following statements about Carl's coverage are correct EXCEPT? A) the policy provides a straight, level $100,000 of
coverage for 5 years. B) if the insured dies beyond the specified 5 years, only the policy's cash value will be paid. It will not have any cash value because term policies do not build cash value. Mrs. Williamson purchases a 5-year $50,000 level term policy with an option to renew. At the end of the 5-year term, she renews the policy. Which of the following statements is CORRECT? A) The premium for the renewal period will be the same as the initial period. C) The premium for the renewal period will be higher than the initial period. The new premium will be higher, because the new premium will be based on the applicants attained age at the time of the renewal. All of the following statements about variable insurance policies are correct EXCEPT? A) state laws protect consumers and promote meaningful communication. D) materials used in selling variable policies must be approved by the State Office of Insurance Regulation. This is inaccurate. The transfer of investment risk in variable insurance products is shifted from the insurer to the policyowners. They are considered securities contracts as well as insurance contracts. Therefore, they fall under the regulatory arm of both State Offices of Insurance Regulation as well as the Securities and Exchange Commission (SEC). In contrast to traditional whole life insurance policies, which statement regarding variable life insurance products is correct? A) Cash values are not guaranteed. A) Cash values are not guaranteed. Variable life insurance cash values are invested in riskier, but potentially higher-yielding assets. This makes variable life insurance cash values non-guaranteed. What feature best describes universal life insurance? A) Guaranteed. C) Flexible. Universal life allows it's policyowners to determine the amount and frequency of premium payments and adjust the face amount up and down. This allows universal life policies to be "flexible" as opposed to whole life policies that have fixed premiums and fixed face amounts. Bo's bank approves him for a 100K loan to start a new business. What type of insurance will his bank require him to have? A) Universal life insurance B) Credit life insurance Credit life insurance is designed to cover the debt of an individual or group. It will pay the amount due on a loan if the debtor dies before the loan is repaid. Adjustable life policies combine the following into a single plan? A) term and permanent insurance. A) term and permanent insurance. Adjustable life policies combine term insurance and permanent insurance into a single plan. This makes them flexible in both premium cost and face amount. What type of life insurance is known for small face values with premiums collected weekly or monthly by an agent at the policyowners home? A) Group life insurance. B) Industrial life insurance. Industrial life insurance is known for small issue amounts, usually $1,000 to $2,000, and premiums are collected by agents at the policyowners home. It is usually marketed and sold as burial insurance. Note: Industrial life policies with a single insurance company that total $3,000 or more in face value can be converted into an ordinary life insurance policy without evidence of insurability. How is a family plan life insurance policy normally structured? A) Whole life insurance on the husband or wife.
Term insurance on the spouse. Term insurance on all of the children. A) Whole life insurance on the husband or wife. Term insurance on the spouse. Term insurance on all of the children. Family plan insurance provides whole life insurance on the husband or wife, term insurance on the spouse, and term insurance on the children. The spouse and children normally appear as term riders on the policy. When a child under a family plan policy reaches a certain age, usually 18 or 21, they have the following option? A) convert their term
policy to a whole life policy without evidence of insurability. A) convert their term policy to a whole life policy without evidence of insurability. Once a child reaches a certain age, usually 18 or 21, they can convert their policy to a whole life policy without evidence of insurability. What type of term insurance has a benefit amount that can be tied in to a cost of living index? A) Decreasing term. C) Increasing term. Increasing term provides a death benefit that increases at periodic intervals over the policy's term. The amount of increase is usually stated as specific amounts or as a percentage of the original amount. It may be tied to a cost-of-living index, such as the Consumer Price Index. Due to its design and flexibility, which of these are more expensive than conventional term or whole life policies? A) Modified whole life. C) Adjustable life. Adjustable life policies are distinguished by their flexibility that comes from combining term and permanent insurance into a single plan. Due to its design and flexibility, adjustable life is usually more expensive than conventional term or whole life policies. Bryce purchased a $100,000 Joint Life policy that covered his life as well as his wife's. He died 3 years later in an airplane accident. How much of a death benefit will his wife receive? A) $200,000. D) $100,000. In joint life policies, the death benefit is paid upon the first death only. What are the licensing requirements for someone who sells variable universal life insurance? A) Life and Health license. C) Life and securities. An individual must be licensed to sell both life insurance products and securites in order to sell variable universal life. Which is true concerning a variable life insurance policy? A) Benefits vary and are linked to the Dow-Jones stock averages. B) It provides a guaranteed minimum death benefit. Variable life insurance is permanent life insurance with many of the same characteristics of traditional whole life insurance. With variable life insurance policies, the policy values are invested in the insurer's separate accounts which house common stock, bond, money market, and other securities investment options. An universal life insurance policy has all the following EXCEPT? A) Contributions (premiums) may be increased or decreased by the policy payor. C) Without its adjustable features it resembles an endowment policy. This is an incorrect statement. Universal life is a variation of whole life insurance characterized by considerable flexibility. Unlike whole life, with its fixed premiums, fixed face amounts, and fixed cash value accumulations, universal life allows its policyowners to determine the amount and frequency of premium payments and to adjust the policy face amount up or down to reflect changes in needs. In a universal life policy, all of the following are tax-free EXCEPT? A) Cash withdrawal. D) Cash surrendered. When a universal life policy's cash value is surrendered, or "cashed-in", the gains are subject to taxes. Credit life insurance would provide coverage for a loss caused by? A) disability. B) death. Credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. The beneficiary of such a policy is usually the lender. For cash value accumulations to receive favorable tax treatment, a specific percentage of universal life policy premiums must be used to purchase? A) one-year term insurance. B) death benefits. For cash value accumulations to receive favorable tax treatment, a specific percentage of universal life policy premiums must be used to purchase death benefits. Increasing term insurance death benefits increase by? A) random amounts or a percentage of the face amount. B) specific amounts or a percentage of the original face amount. Increasing term death benefits increase at specific amounts or a percentage of the original face amount. Insurers generally offer all of the following forms of term insurance EXCEPT? A) Modified graded term. A) Modified graded term. Insurers normally offer either level, decreasing, or increasing term insurance. They also normally offer modified graded WHOLE life, not modified graded term. The insured purchases a policy in the face amount of $10,000. The agent tells the insured that the insured will have to pay the premium for 20 years and will then receive the entire $10,000. Which plan has the insured purchased? A) 20-year endowment. A) 20-year endowment. This plan describes the characteristics of an endowment policy. Why was variable life insurance created? A) To help offset the effects of inflation on death benefits. A) To help offset the effects of inflation on death benefits. With variable life insurance, each year that the actual return exceeds the assumed rate of return, there is a positive net investment return and the death benefit is increased. Like traditional whole life insurance, variable life insurance requires the payment of set premiums on a scheduled basis. The principal advantage of term policies being converted to permanent life insurance is that? A)
no evidence of insurability is required. A) no evidence of insurability is required. No evidence of insurability is required when converting a term policy to a permanent (whole) life policy. Which type of life coverage does NOT provide both living and death benefits? A) Term. A) Term. Term policies do not gain cash value, therefore they cannot provide a living benefit. Which of the following policies would best suit a prospective insured who desires permanent insurance but does not want to pay premiums indefinitely? A) Graded premium whole life policy. B) Limited pay life policy. A limited pay life policy is designed for the insured who desires permanent insurance but does not want to pay premiums indefinitely- such as a 20-pay life policy or a life paid-up at 65. When does the cash value in a limited pay life policy increase more rapidly? A) With a later endowment date. B) As the premium payment period shortens. The cash value in a limited pay life policy increases as the premium payment period shortens Which form of life insurance would be purchased for a specific period and then expire without value? A) Universal life. D) Term life. Term insurance provides insurance protection for a specified period (or term) and pays a benefit only if the insured dies during that period. There are no cash values in term policies. Which of the following is a characteristic of universal life insurance? A) Premiums are fixed for the life of the policy. B) Flexible premium and adjustable death benefit. Universal life is a variation of whole life insurance, characterized by considerable flexibility. Unlike whole life, with its fixed premiums, fixed face amounts, and fixed cash value accumulations, universal life allows its policyowners to determine the amount and frequency of premium payments and to adjust the policy face amount up or down to reflect changes in needs. Which of the following characteristics does NOT apply to a Variable Life policy? A) A minimum death benefit is guaranteed. B) Nonforfeiture amounts are guaranteed. This is incorrect. Variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values (nonforfeiture amount). A policy in which the ages of the insureds are "averaged" and a single premium is charged is known as? A) credit life. D) joint life. The premium for a joint life policy is less than the premium for separate, multiple policies. The ages of the insureds are "averaged" and a single premium is charged for each life. A universal life policyowner may do all of the following EXCEPT? A) make partial withdrawals from the cash value account. C) increase the amount at stated intervals without evidence of insurability. The policy owner can increase at stated intervals but does have to provide evidence of insurability. Students also viewed
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Which of the following policies does not build cash value quizlet?Which of the following policies does NOT build cash value? Term life insurance does not build cash value. Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index.
Which of the following policies generally does not have a cash value?Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value. You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher.
Which of the following policies does not build cash?Which of the following policies does NOT build cash value? Term. Term life insurance does not build cash value.
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