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Under a Modified Endowment Contract, what are the likely tax consequences? |
Pre-death distributions will become taxable |
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The statement which best describes the relationship between the premiums of a whole life policy and the premium payment period is |
The shorter the payment period, the higher the premium |
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Which of these riders will pay a death benefit if the insured’s spouse dies? |
Family term insurance rider |
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All of these are characteristics of a universal life insurance policy EXCEPT |
Fixed surrender value |
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Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance? |
Policyowner has the right to select the investment which will provide the greatest return |
|
Level premium permanent insurance accumulates a reserve that will eventually |
equal the face amount of the policy |
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Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive? |
Endowment policy |
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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. What kind of policy is this? |
Equity index whole life |
|
A Renewable Term Life insurance policy can be renewed |
at a predetermined date or age, regardless of the insured’s health |
|
A renewable Term Life insurance policy allows the policyowner the right to renew the policy |
without producing proof of insurability |
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Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test? |
Pre-death distributions are typically taxable |
|
What is the automatic continuance of insurance coverage referred to as? |
renewal |
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Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)? |
Death benefit |
|
A Modified Endowment Contract (MEC) is best described as |
A life insurance contract which accumulates cash values higher than the IRS will allow |
|
A spouse and child can be added to the primary insured’s coverage as what kind of rider? |
Family term |
|
The premium for a Modified whole life policy is |
lower than the typical whole life policy during the first few years and then higher than typical for the remainder |
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Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true? |
The face amount and premium will remain constant over the 10-year period |
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A policyowner may change two policy features on what type of life insurance? |
Adjustable Life |
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Which of the following are the premium payments for a Universal life policy NOT used for? |
Separate account investments |
|
A securities license is required for a life insurance producer to sell |
variable life insurance |
|
A life insurance policy written on one contract for two people in which it is payable upon the first death is called |
Joint |
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All of these statements concerning whole life insurance are false EXCEPT |
When a whole life policy is surrendered, income taxes may be owed |
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Which type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested? |
Variable universal policy |
|
Joe has a life insurance policy that has a face amount of $300,000. After a number of years, the policy’s cash value accumulates to $50,000 and the face amount becomes $350,000. What kind of policy is this? |
Universal Life policy |
|
A life insurance policy that has premiums fully paid up within a stated time period is called |
limited payment insurance (Limited payment insurance is characterized by premiums that are fully paid up within a stated period, after which no further premiums are required.) |
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Which type of life insurance is normally associated with a Payor Benefit rider? |
Juvenile insurance |
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What happens to the coverage under a children’s term rider when that child reaches a certain specified age? |
Coverage is eliminated |
|
Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds |
will no longer provide insurance protection |
|
A life insurance policy which contains cash values that vary according to its investment performance of stocks is called |
Variable Whole Life |
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All of these are valid options for an Adjustable Life Policy EXCEPT |
A nonforfeiture option can be used to increase the death benefit |
|
The least expensive option to pay off a 30-year mortgage balance would be |
decreasing term life |
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How are survivorship life insurance policies helpful in estate planning? |
Provide funds to help pay taxes |
|
Index whole life insurance contains a securities component that acts as a(n) |
hedge against inflation |
|
Term insurance is appropriate for someone who |
seeks temporary protection and lower premiums |
|
The type of multiple protection coverage that pays on the death of the last person is called a(n) |
survivorship life policy |
|
A life insurance policy that is subject to a contract interest rate is referred to as |
universal life |
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Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period? |
Decreasing term insurance |
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A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called |
universal life |
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Which type of policy combines the flexibility of a universal life policy with investment choices? |
Variable universal life policy |
|
When a decreasing term policy is purchased, it contains a decreasing death benefit and |
level premiums |
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Which of the following policies does NOT build cash value? |
Term |
|
A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n) |
limited pay policy |
|
Decreasing term life insurance is often used to |
provide coverage for a home mortgage |
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Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. His insurance agent told him the policy would be paid up if he reached age 100. The present cash value of the policy equals $250,000. Rob recently died at age 60. The death benefit would be |
$500,000 |
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The type of policy which pays on the death of the last person is called |
survivorship life |
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Which policy feature makes a universal life policy different from a whole life policy? |
A flexible premium schedule |
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What does the word "level" in Level Term describe? |
The face amount |
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A business will typically use which type of life insurance to cover their employees? |
Group policy |
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What types of life insurance are normally used for key employee indemnification? |
term, whole, and universal life insurance |
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Donald is the primary insured of a life insurance policy and adds a children’s term rider. What is the advantage of adding this rider? |
Can be converted to permanent coverage without evidence of insurability |
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Which of these would be the best example of a limited pay life insurance policy? |
Whole life policy with premiums paid up after 20 years |
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What kind of life insurance policy covers two or more people with the death benefit payable upon the last person’s death? |
Last Survivor Life insurance |
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