Life Insurance Concepts Quiz

Questions and Answers

Which of these types of Term insurance may be renewable?

Whole Life

Level (correct)

Modified Whole Life

Adjustable Life

What is considered to be a characteristic of an immediate annuity?

Benefit payments start within one payment period of purchase

The Consideration clause in a life insurance policy indicates that a policy owner's consideration consists of a completed application and what?

The initial premium

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

Modified Whole Life Signup and view all the answers

Which of the following consists of an offer, acceptance, and consideration?

Contract Signup and view all the answers

What kind of rider did S include on the Whole Life policy?

Return of premium rider Signup and view all the answers

Under a Renewable Term policy, how is the renewal premium calculated?

On the basis of the insured's attained age Signup and view all the answers

What can be added to a Whole Life policy to provide additional coverage?

Decreasing term rider Signup and view all the answers

Dividends paid from a life insurance policy are issued by whom?

The insurer Signup and view all the answers

What action requires a policy owner to provide proof of insurability in an Adjustable Life policy?

Increase face amount Signup and view all the answers

Credit Life insurance is issued in an amount not to exceed what?

The amount of the loan Signup and view all the answers

When does the free-look provision begin?

Upon receipt of the policy by the policy owner Signup and view all the answers

A Universal Life policy is sometimes referred to as an unbundled Life Policy because it allows the owner to see what?

The interest earned, expense charges, and the cost of insurance Signup and view all the answers

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years?

Family Maintenance Policy Signup and view all the answers

When is it appropriate for a producer's spouse to be the primary beneficiary on an applicant's life insurance policy?

When insurable interest exists Signup and view all the answers

Rollover contributions in an individual retirement account (IRA) are limited by dollar amount.

False Signup and view all the answers

The entire cash surrender value of a life insurance policy is taxable.

True Signup and view all the answers

What type of annuity guarantees income payments for the rest of T's life?

Life Annuity with Period Certain Signup and view all the answers

At what point does an informal agreement become a binding contract?

When consideration is provided by one of the parties to the contract Signup and view all the answers

Which type of term life policy most likely contains a Renewability feature?

10 Year Convertible Term Signup and view all the answers

When does a life insurance contract become effective if the initial premium is not collected?

When the producer delivers the policy and collects the initial premium Signup and view all the answers

Which Nonforfeiture option offers the highest death benefit?

Extended Term Signup and view all the answers

What is TRUE if the owner of an IRA names their spouse as a beneficiary, but dies before any distributions are made?

The account can be rolled into the surviving spouse's IRA Signup and view all the answers

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

Whole Life Signup and view all the answers

Variable Life products require a producer to hold what licenses?

Life Insurance license and a Securities license Signup and view all the answers

What is the advantage of reinstating an original life policy?

The premiums are based on the younger age Signup and view all the answers

Face amount can be adjusted using policy dividends in an Adjustable Life policy.

False Signup and view all the answers

Which type of plan allows an employer to give money to an employee for buying a life insurance policy?

Split-dollar plan Signup and view all the answers

A(n) _____ Life policy offers the owner investment in products such as money-market funds.

Variable Signup and view all the answers

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security Signup and view all the answers

If a producer completes an insurance application and collects the initial premium, what is true?

Coverage will be contingent upon the insurer's underwriting policies Signup and view all the answers

What kind of life insurance product covers children under their parents' policy?

Term rider Signup and view all the answers

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

Deducted when the policy is discontinued Signup and view all the answers

Which provision requires proof of insurability after a policy has lapsed?

Reinstatement Signup and view all the answers

What kind of receipt did K receive from the agent?

Conditional Signup and view all the answers

What type of life insurance are credit policies issued as?

Term Signup and view all the answers

Which of these is NOT an element of life insurance premiums?

Morbidity rate Signup and view all the answers

What determines the full amount of Social Security retirement benefits?

Primary Insurance Amount (PIA) Signup and view all the answers

What is the result of T purchasing a Straight Life Annuity?

Income that cannot be outlived by the owner Signup and view all the answers

What does a Cost of Living rider provide to the insured?

Additional death benefits Signup and view all the answers

What kind of policy has a premium that stays fixed for the first 5 years and then increases?

Modified Whole Life Signup and view all the answers

An agent who violates a cease and desist order may be fined up to what amount?

$500 Signup and view all the answers

How are Roth IRA distributions normally taxed?

Distributions are received tax-free Signup and view all the answers

Which settlement option pays a stated amount to an annuitant but no residual value to a beneficiary?

Life Income Signup and view all the answers

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

Decreasing term Signup and view all the answers

Who is not eligible to receive commissions from the sale of an insurance product?

Corporate executive Signup and view all the answers

Which policy requires an agent to register with the National Association of Securities Dealers (NASD)?

Variable Life Signup and view all the answers

A life insurance policy is considered a wagering contract without insurable interest.

True Signup and view all the answers

A Universal Life policy is sometimes called unbundled because it displays what components?

The interest earned, cost of insurance, and expense charges Signup and view all the answers

What happens if P's premiums are waived due to a disability?

P will still receive declared dividends Signup and view all the answers

At what time must a policy owner have insurable interest on the insured?

At the time of application Signup and view all the answers

The payments on Q's annuity are no less than $250 quarterly. Which annuity does Q own?

Flexible Installment Deferred Signup and view all the answers

A policyholder is able to choose the frequency of premium payments through what feature?

Premium Mode Signup and view all the answers

An employee with $25,000 group term life coverage may convert it to what upon termination?

$25,000 individual whole life policy Signup and view all the answers

Who makes the legally enforceable promises in a unilateral contract?

Insurance company Signup and view all the answers

How are policyowner dividends treated regarding income tax?

Interest on accumulations is taxed Signup and view all the answers

The agreement in a life insurance contract that states a specific sum will be paid upon death is called a(n):

Insuring agreement Signup and view all the answers

Group life insurance policies are generally written as what type?

Annually renewable term Signup and view all the answers

Statements made on an insurance application believed to be true are called:

Representations Signup and view all the answers

All of these are considered benefits under Social Security, EXCEPT for:

Unemployment Signup and view all the answers

Paying insurance premiums on a more frequent basis will cause the policy to have what?

Higher premiums Signup and view all the answers

Study Notes

Life Insurance & Annuities

Renewable Term insurance options can include Level Term policies.
Immediate annuities start benefit payments within one payment period after purchase.
The Consideration clause involves a completed application and the initial premium.
Modified Whole Life is not classified as interest-sensitive.
A contract consists of an offer, acceptance, and consideration.
A Return of Premium rider pays beneficiaries more than the policy’s face value at the insured's death.
Renewal of a Renewable Term policy is based on the insured's attained age.
Whole Life policies can have additional coverage through a Decreasing Term rider.
Dividends from life insurance policies are issued by the insurer.
Policy owners need to provide proof of insurability when increasing an Adjustable Life policy's face amount.

Types of Insurance Products

Credit Life insurance is limited to the amount of the associated loan.
The free-look provision allows a policy review period that starts upon receipt of the policy.
Universal Life policies allow visibility of interest earned, expense charges, and cost of insurance, hence termed "unbundled."
Family Maintenance policies provide a monthly income for 30 years, followed by a lump sum benefit.
Producers' spouses can be primary beneficiaries if insurable interest exists.
IRA rollover contributions have no dollar limits.

Taxation & Benefits

Incorrect assumptions include the taxation of the entire cash surrender value of life insurance.
A Life Annuity with Period Certain guarantees income for the owner's lifetime and pays remaining amounts to beneficiaries if the owner dies prematurely.
An informal agreement becomes binding when consideration is exchanged.
10 Year Convertible Term policies are the most likely to contain a renewability feature.
Life insurance contracts become effective when the policy is delivered and the initial premium is collected.

Nonforfeiture Options & Retirement Accounts

The Extended Term nonforfeiture option typically provides the highest death benefit.
If the IRA owner dies before distributions are made, the surviving spouse can roll over the account into their own IRA.
Whole Life insurance pays the face value upon the insured's death or upon reaching age 100.
Variable Life products necessitate both a Life Insurance license and a Securities license.

Policy Features & Conditions

The reinstatement of a life policy allows premiums to be calculated based on the insured's younger age.
A face amount adjustment typically does not occur through policy dividends in Adjustable Life policies.
Split-dollar plans enable employer contributions for employee life insurance policies with beneficiary selection.
Variable Life policies allow investments in diverse financial products including equities.
Social Security is commonly known as Old Age and Survivors Health Insurance (OASDHI).

Miscellaneous Insurance Knowledge

Coverage depends on the insurer's underwriting policies after the application is complete and the premium is paid.
Term riders can cover children under a parent's life policy.
Rear-end loaded life policies deduct surrender charges at discontinuation.
Reinstatement requires proof of insurability if a policy has lapsed.
Conditional receipts indicate immediate coverage commencement upon application approval.
Credit life insurance is generally issued as term policies.
Life insurance premiums consist of mortality and expense costs, excluding morbidity rates.
The Primary Insurance Amount (PIA) determines Social Security retirement benefits.
Straight Life Annuities provide lifelong income that cannot be outlived.

Additional Considerations

Cost of Living riders increase death benefits overtime.
Modified Whole Life policies start with fixed premiums for five years before increasing.
Violations of cease and desist orders can lead to fines up to $500.
Roth IRA distributions are typically tax-free.
The Life Income settlement option pays an annuitant a fixed amount with no residual for beneficiaries.
Decreasing term policies have adjusted death benefits based on specified periods.
Corporate executives are not eligible for commissions from insurance sales.
Selling Variable Life requires registration with National Association of Securities Dealers (NASD).
Wagering contracts in life insurance lack validity without insurable interest.
Policy dividends are subject to taxation on accumulated interest.
An insuring agreement promises a specified payment to a beneficiary upon the insured's death.
Group life insurance policies are mostly structured as annually renewable term policies.
Representations on applications are deemed true to the applicant's best knowledge.
Benefits under Social Security exclude unemployment assistance.
Paying premiums more frequently increases overall costs.

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Description

Test your knowledge on key concepts in life insurance. This quiz covers topics like renewable term insurance, immediate annuities, and important clauses in policies. Perfect for those studying for exams in life insurance and financial planning.