Question 1

____ is a common provision in many term policies.

Accepted Answer

A renewable clause allows the policyholder to renew their policy at the end of the term without having to go through the underwriting process again. This is a common provision in many term policies as it provides the policyholder with the option to extend their coverage without having to worry about their insurability.

Question 2

Which of the following policy features allow the insured to increase coverage periodically without showing proof of insurability?

Accepted Answer

Guaranteed purchase options allow the insured to increase coverage periodically without showing proof of insurability.

Question 3

Whole life insurance is designed to provide

Accepted Answer

Whole life insurance is designed to provide both protection and savings. The policyholder pays premiums that provide coverage for the duration of their life, and a portion of those premiums goes into an investment account that builds cash value over time. This cash value can be accessed through loans or withdrawals, providing a source of savings.

Question 4

Henry must make set premium payments on his insurance policy until he dies,and if he cancels the policy he will receive the cash value.His plan is a ____ life policy.

Accepted Answer

A whole life policy requires the insured to make set premium payments until they die, at which point the death benefit is paid out to the beneficiary. Canceling the policy before death may result in receiving the cash value, but it will likely be less than the total amount of premiums paid. Term life policies are for a specific term and do not accumulate cash value. Limited payment policies a limited period of premium payments while providing benefits until the policyholder dies. Universal life policies offer the policyholder flexibility in the amount and frequency of premium payments. None of the above policies fit the description of Henry's policy as well as whole life.

Question 5

Life insurance policies with small face amounts where the premium may be collected weekly by agents is

Accepted Answer

Industrial life insurance is also known as home service life insurance or burial insurance. It is designed for individuals who want to purchase small face amount policies that can be paid in weekly or monthly premiums collected by agents who come to their homes. These policies usually have face amounts of $1,000 to $5,000 and are usually issued on a non-medical basis, meaning that there are no medical exams required to qualify for coverage. The premiums are relatively low because the face amounts are small, and the policies are designed to cover final expenses such as funeral costs.

Question 6

The insurance portion of a universal life policy is most analogous to

Accepted Answer

The insurance portion of a universal life policy is most analogous to term insurance because it provides coverage for a specified period of time and does not have a cash value component. Like term insurance, the cost of the insurance portion of a universal life policy is typically lower than the cost of whole life insurance.

Question 7

If life insurance is convertible,the policy can be

Accepted Answer

If a life insurance policy is convertible, it means that the policyholder has the option to convert the policy into another type of life insurance policy. For example, a term life insurance policy can be converted to a permanent life insurance policy without undergoing a medical exam or proving insurability. This can be helpful for policyholders who may want to extend their coverage but are no longer eligible for a new policy due to age, health, or other reasons.

Question 8

Universal life insurance is

Accepted Answer

Universal life insurance is a type of insurance policy that combines an investment plan and an insurance policy. It is designed to provide flexible premiums and death benefit options, making it a popular choice for those who want both protection and investment potential. Deferred premium payment policy, primarily sold to college students, and provision for a secondary beneficiary are not accurate descriptions of universal life insurance.

Question 9

Rodney and Toni are a young couple with two small children.They are doing well financially but their life insurance needs are high and their budget is tight.What type of life insurance will give them the most protection for their money?

Accepted Answer

Term life insurance is the best choice for Rodney and Toni as it provides the most protection for their money. It offers coverage for a specific period of time, usually ranging from 1 to 30 years, and pays a death benefit to the beneficiaries if the insured person dies during the term of the policy. Term life insurance premiums are typically lower than other types of life insurance, making it a more affordable option for young families with tight budgets. However, it does not build up cash value like other types of life insurance.

Question 10

____ and ____ are both relatively expensive types of decreasing-term life insurance.

Accepted Answer

Credit life insurance and mortgage life insurance both tend to be relatively expensive types of decreasing-term life insurance. Credit life insurance is designed to pay off a borrower's debt in the event of their death, while mortgage life insurance is meant to pay off a borrower's mortgage. Both policies can be expensive due to the high level of risk for the insurer, as the benefits paid out would be substantial.

Question 11

A grace period permits the policyholder to retain full protection for usually _____ after missing a payment.

Accepted Answer

A grace period typically lasts for 31 days after a missed payment, during which the policyholder can still maintain full coverage without any penalty or lapse in coverage. However, it's important to note that the specifics of the grace period may vary depending on the insurance company and policy terms.

Question 12

____ can be both an advantage and a disadvantage of universal life insurance.

Accepted Answer

Flexible premiums can be an advantage because it allows policyholders to adjust their premiums and death benefits according to their changing financial circumstances. However, it can also be a disadvantage as missed or lower payments can lead to a reduction in coverage and an increase in fees.

Question 13

Marilyn Simms died with a $200,000 life insurance policy.Her husband,Jack,was the primary beneficiary and their children,Mimi (age 24)and Ann (age 30),were the contingent beneficiaries.All three survived Marilyn.How would the policy proceeds be distributed?

Accepted Answer

Jack is the primary beneficiary, so he receives the entire $200,000.

Question 14

Which of the following is not characteristic of universal life insurance?

Accepted Answer

Universal life insurance typically does not allow policyholders to choose how the accumulation account is invested; this is more characteristic of variable life insurance.

Question 15

If the objective of your life insurance program is to get the greatest death protection now for your insurance dollars,you should choose ____ insurance.

Accepted Answer

Term insurance provides the greatest death protection for the lowest cost. Its premiums are typically lower than other types of insurance like universal life or whole life because it only covers the insured for a specific period of time. This means that if the insured dies during the term, the death benefit will be paid out to the beneficiaries, but if the insured outlives the term, there is no payout. However, if the goal is purely to maximize death protection for the budget, term insurance is the best choice.

Question 16

The death benefit of ____ life insurance may go down due to poor investment returns.

Accepted Answer

Universal and variable life insurance policies can have death benefits that fluctuate based on investment performance.

Question 17

An insured usually chooses variable life insurance in order to

Accepted Answer

Variable life insurance allows the insured to invest in sub-accounts, which are similar to mutual funds, and potentially increase the savings portion of the policy. This emphasis on savings is paired with death protection, making it a popular choice for those who want both benefits.

Question 18

The least expensive form of whole life insurance protection is

Accepted Answer

Straight life insurance, also known as whole life insurance, is generally the least expensive form of whole life insurance because it provides coverage for the insured's entire life with fixed premiums.

Question 19

You want to pay premiums for 20 years and have your insurance premium obligations finished at that time,but you feel you will need life insurance for the rest of your life.You should choose ____ insurance.

Accepted Answer

With limited pay insurance, you pay premiums for a set number of years (in this case, 20 years), after which your premium obligations are finished, but your coverage continues for the rest of your life. This option allows you to have life insurance coverage for your entire life, while also having a set period of time for premium payments.

Question 20

Decreasing term insurance usually has a decreasing face value and

Accepted Answer

Decreasing term insurance typically has a level premium, meaning the premium stays the same throughout the coverage period. However, the face value of the policy decreases over time, often in line with the insured's declining mortgage balance or other outstanding debts that the policy is intended to cover.

Quiz 8: Insuring Your Life