Life Insurance Quiz: Term Policies & Riders Insights

Questions and Answers

Which of the following are the premium payments for a Universal Life policy NOT used for?

Interest accumulation

Separate account investments (correct)

Administrative costs

Death benefits

What does the word 'level' in Level Term describe?

The face amount

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

What is the automatic continuance of insurance referred to as?

Renewal Signup and view all the answers

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called?

Variable whole life Signup and view all the answers

The type of multiple protection coverage that pays on the death of the last person is called a(n)?

Survivorship life policy Signup and view all the answers

What happens to the coverage under a children's term rider when that child reaches a certain specified age?

Coverage is eliminated Signup and view all the answers

An interest-sensitive life insurance policy owner may be able to withdraw the policy's cash value interest-free. The provision that allows this is called?

Partial surrender Signup and view all the answers

All of these are valid options for an Adjustable Life Policy EXCEPT?

A nonforfeiture option can be used to increase the death benefit Signup and view all the answers

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes Signup and view all the answers

When a decreasing term policy is purchased, it contains a decreasing death benefit and?

Level premiums Signup and view all the answers

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 Signup and view all the answers

Rob purchased a standard whole life policy with a $500,000 death benefit when he was age 30. If he died at age 60, the death benefit would be?

$500,000 Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

A spouse and child can be added to the primary insured's coverage as what kind of rider?

Family term Signup and view all the answers

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?

Nothing Signup and view all the answers

A business will typically use which type of life insurance to cover their employees?

Group policy Signup and view all the answers

Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)?

Death benefit Signup and view all the answers

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable universal life policy Signup and view all the answers

All of these statements concerning whole life insurance are false EXCEPT?

When a whole life policy is surrendered, income taxes may be owed Signup and view all the answers

A limited payment whole life policy provides?

Lifetime protection Signup and view all the answers

All of these are characteristics of a universal life insurance policy EXCEPT?

Fixed surrender value Signup and view all the answers

A securities license is required for a life insurance producer to sell?

Variable life insurance Signup and view all the answers

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 Signup and view all the answers

What 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 Signup and view all the answers

A life insurance policy that has premiums fully paid up within a stated time period is called?

Limited payment insurance Signup and view all the answers

What types of life insurance are normally used for key employee indemnification?

Term, whole, and universal life insurance Signup and view all the answers

Jonas is a whole life insurance policy owner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this?

Child term rider Signup and view all the answers

A Modified Endowment Contract (MEC) is best described as?

A life insurance contract which accumulates cash values higher than the IRS will allow Signup and view all the answers

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 Signup and view all the answers

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

Universal life Signup and view all the answers

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 Signup and view all the answers

A Renewable Term Life insurance policy can be renewed at a predetermined date or age, regardless of the insured's health.

True Signup and view all the answers

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 Signup and view all the answers

A Renewable Term Life insurance policy allows the policy owner the right to renew the policy without producing proof of insurability.

True Signup and view all the answers

Under a Modified Endowment Contract (MEC), what are the likely tax consequences?

Pre-death distributions will become taxable Signup and view all the answers

A single premium cash value policy can be described as?

A policy that is paid up after only one payment Signup and view all the answers

Which of these riders will pay a death benefit if the insured's spouse dies?

Family term insurance rider Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

Study Notes

Life Insurance Policies Overview

Universal life policies use premiums primarily for death benefits and administrative costs rather than direct investments.
The term "level" in Level Term insurance refers to a consistent face amount throughout the policy's term.
Last Survivor Life insurance provides benefits after the death of the last insured individual, covering multiple people.

Policy Terminology

Renewal signifies the automatic continuance of coverage under an insurance policy.
Variable whole life policies have cash values that fluctuate based on investment performance.
Survivorship life policies ensure payment upon the death of the last insured person, commonly used for estate planning.

Coverage Features

Children's term riders terminate coverage when children reach a specified age.
Partial surrender allows policy owners to withdraw cash value from interest-sensitive policies without incurring immediate tax liabilities.
Adjustable Life Policies do not utilize nonforfeiture options to enhance death benefits.

Death Benefits and Premiums

Decreasing term policies feature declining death benefits but maintain level premiums.
In Universal Life policies, the cash value can exceed the initial face amount over time.
The death benefit of a whole life policy remains constant irrespective of cash value accumulation, as demonstrated in discussions about Rob's policy.

Premium Variations

Modified whole life policies have lower initial premiums that increase over time, unlike typical whole life policies.
The relationship between premiums and payment periods indicates that shorter payment terms result in higher premiums.
Family term riders facilitate the addition of dependents to primary insured coverage.

Insurance Types and Riders

Non-renewable level term policies do not provide benefits if the insured dies after the coverage period.
Group policies are commonly utilized by businesses for employee coverage.
Modified Endowment Contracts (MECs) exclude death benefits from taxation, while pre-death distributions can incur tax liabilities.

Policy Benefits and Flexibility

Variable universal life policies allow for flexible death benefits and investment choices, catering to changing financial needs.
Limited payment policies guarantee lifetime coverage while ensuring premiums are fully paid within a set timeframe.
Child term riders enable whole life policyholders to extend coverage to their children easily.

Investment and Taxation Aspects

MECs accumulate cash values that surpass IRS limits, leading to potential taxable distributions.
Universal life insurance features a guaranteed interest rate, with opportunities for higher earnings based on performance.
The comparison of cash value growth and death benefits in universal life policies shows significant variations, as seen with Reggie's policy.

Additional Policy Insights

Endowment policies pay out the face amount at the end of a specified term if the insured is alive.
Renewable Term Life insurance can be renewed without requiring evidence of insurability, ensuring continuous coverage.
Decreasing term insurance is ideal for covering obligations like mortgages by aligning coverage with outstanding loan balances.

Special Considerations

Single premium cash value policies require only one payment to achieve full coverage.
Family term insurance riders provide death benefits in the event of a spouse's death, adding a layer of financial security to the primary insured.
Whole life policies with limited pay structures offer significant savings on premiums after a defined period while still providing ample coverage.

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Description

Test your knowledge on various life insurance policies, including universal, term, and last survivor policies. This quiz covers essential terminology and coverage features, offering insights into the nuances of life insurance. Perfect for anyone looking to deepen their understanding of insurance concepts!

Life Insurance Overview Quiz