Chapter 3 (Part 1), Chapter 3 (Part 2)

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N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?

30 Pay Life

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?

Whole Life

Which of these is an element of a Variable Life policy?

A fixed, level premium

Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?


A Limited-Pay Life policy has

premium payments limited to a specified number of years

Which statement about a whole life policy is correct?

Cash value may be borrowed against

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term life

What type of insurance offers permanent life coverage with premiums that are payable for life?

Whole Life

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Decreasing term

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds

Which of these life products is NOT considered interest-sensitive?

Modified Whole Life

G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G’s family receive an income?

10 years

Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?

Whole life policy with other insured rider

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment

Which provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?


Which type of policy is considered to be overfunded, as stated by IRS guidelines?

Modified Endowment Contract

Which of these statements describe a Modified Endowment Contract (MEC)?

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

Which of these would be considered a Limited-Pay Life policy?

Life Paid-Up at Age 70

Which statement is correct regarding the premium payment schedule for whole life policies?

Premiums are payable throughout the insured’s lifetime/ coverage lasts until death of the insured

What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?

Family Maintenance Policy

All of these insurance products require a producer to have proper FINRA securities registration in order to sell them EXCEPT for

Modified Whole Life

K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

Modified Whole Life

All of these are characteristics of an Adjustable Life policy EXCEPT

face amount can be adjusted using policy dividends

When is the face amount paid under a Joint Life and Survivor policy?

upon death of the last insured

Which of these characteristics is consistent with a Straight Life policy?

Premiums are payable for as long as there is insurance coverage in force

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Decreasing term policy

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

at future dates specified in the contract with no evidence of insurability required

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

beneficiary’s age

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)


What provision in a life insurance policy states that the application is considered part of the contract?

Entire Contract provision

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor clause

Which of these is NOT considered to be a right given to a policyowner?

Modify a provision in the insurance contract

How do life insurance companies handle cases where the insured commits suicide within the contract’s stated Contestable period?

Claims are denied under the Suicide clause of the policy

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

In a Life insurance contract, an insurance company’s promise to pay stated benefits is called the

Insuring clause

What does the ownership clause in a life insurance policy state?

Who the policyowner is and what rights the policyowner is entitled to

The automatic premium loan provision is designed to

avoid a policy lapse

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?


An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

Full face amount minus any past due premiums

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

Policy Loan provision

The Consideration clause in a life insurance contract contains what pertinent information?

Amount of premium payments and when they are due

The incontestable clause allows an insurer to

contest a claim during the contestable period

All of these statements about the Waiver of Premium provision are correct EXCEPT

Insured must be eligible for Social Security disability for claim to be accepted

Which of the following statements is CORRECT about accelerated death benefits?

Must have a terminal illness to qualify

Which statement regarding the Misstatement of Age provision is considered to be true?

Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

Which of these life insurance riders allows the applicant to have excess coverage?

Term rider

P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P’s beneficiary?

$50,000 minus any outstanding policy loans

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

Evidence of insurability is required when the option is exercised

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D’s wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?


Which of these are NOT an example of a Nonforfeiture option?

Life Income

P is the insured on a participating life policy. Which statement is true if P’s premiums are waived due to a disability?

P will still receive declared dividends

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

Claim will be denied

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

What action will an insurer take if an interest payment on a policy loan is not made on time?

automatically add the amount of interest due to the loan balance

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called


T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

50, 000 (The suicide occurred after the Suicide Provision which is typically 1-2 years)

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer’s obligation in the event N was killed while flying as a student pilot?


How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)

An Accidental Death and Dismemberment (AD&D) rider

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the Death Benefit

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing term

Which statement is TRUE regarding Variable Whole Life Insurance policy

A minimum guaranteed death benefit is provided

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