1) Which of the following types of families is likely to have the least need for a large amount of life insurance?
A) a blended family
B) a traditional family
C) a single person family
D) a sandwiched family
C
1) Which of the following statements about the ownership of a life insurance policy is (are) true?
I. Under the ownership clause, the policyowner and beneficiary equally share all contractual rights in the policy while the insured is living.
II. The polic
B
A factor that can be ignored when determining the cost of life insurance is
A) time value of money.
B) premiums paid.
C) settlement options.
D) dividends.
C
2) The human life value is defined as the
A) present value of a deceased breadwinner's future gross income.
B) future value of a deceased breadwinner's past earnings.
C) present value of the family's share of a deceased breadwinner's future earnings.
D) f
C
2) Which of the following statements about the entire contract clause is true?
A) It allows the insurer to change the policy terms without the insured s consent.
B) It specifies that all statements in the application are considered warranties.
C) It speci
C
Under the traditional net cost method, the net cost of life insurance for a given period (e.g., 20 years) is determined by which of the following formulas?
A) the total premiums for the period less the policy reserve at the end of the period
B) the total
B
3) All of the following information is needed to calculate a person's human life value EXCEPT
A) the person's average annual earnings over his or her productive lifetime.
B) the person's estimated annual Social Security benefits after retirement.
C) the p
B
3) All of the following are reasons an insurer can contest a policy after the contestable period has ended EXCEPT
A) The beneficiary purchased the policy with the intent of murdering the insured.
B) An insurable interest did not exist at the inception of
D
Which of the following statements about the traditional net cost method of measuring the cost of life insurance is (are) true?
The traditional net cost method does not consider the time value of money.
The traditional net cost method can show that life in
C
Which of the following statements about the surrender cost index for measuring the cost of life insurance is true?
A) It is based on the assumption that the policy will be in force indefinitely.
B) It takes into account the settlement options available in
D
4) Amy purchased a life insurance policy with the intent of committing suicide to pay all the debts that were burdening her family. If she commits suicide 9 months after the policy is purchased, and the insurer is able to prove that her death was a suicid
B
4) To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include
A) funeral costs.
B) income taxes.
C) investment income.
D) pension benefits after retirement.
B
5) All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT
A) The effects of inflation are ignored.
B) Other sources of income for survivors are ig
D
5) Which of the following statements about the grace period in a life insurance contract is (are) true?
I. It is usually between 90 and 180 days in duration.
II. If the insured dies during the grace period, the death benefit is reduced by 50 percent.
A) I
D
Which of the following statements describes how the net payment cost index differs from the surrender cost index?
A) Dividends are ignored.
B) The cash value is ignored.
C) Premiums are not accumulated at a specified interest rate.
D) Dividends are not ac
B
6) Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true?
I. It involves an analysis of various family needs which must be met if a family breadwinner dies.
II. Its use is appropri
A
6) All of the following statements about the requirements to reinstate a lapsed life insurance policy are true EXCEPT
A) Evidence of insurability is required.
B) The lapse must have resulted from other than the surrender of the policy for its cash value.
D
David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent interest for 20 yea
B
David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent interest for 20 yea
A
7) The purpose of an estate clearance fund is to pay all of the following EXCEPT
A) burial expenses.
B) estate administration expenses.
C) education costs.
D) installment debts.
C
7) Bert purchased a life insurance policy 4 years ago. He inadvertently stated that he was 1 year younger than his actual age. If Bert dies today, how much will the insurance company pay?
A) nothing
B) less than the policy face value
C) the policy face va
B
8) What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own?
A) 3 to 6 months
B) 1 to 2 years
C) until the youngest child reaches age 18
D) until the surviving spous
B
8) Which of the following statements about beneficiary designations is true?
A) A primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured.
B) If a revocable beneficiary de
C
David purchased a $100,000 participating whole life policy. The annual premium is $2,280. Projected dividends for the first 20 years are $15,624. The cash value after 20 years will be $35,260. If the premiums were invested at 5 percent interest for 20 yea
C
9) Under the needs approach, when is the dependency period of a surviving spouse assumed to end?
A) 1 or 2 years after the breadwinner's death
B) when the youngest child reaches age 18
C) when the surviving spouse reaches age 65
D) when the surviving spou
B
9) A contingent beneficiary in a life insurance policy has the right to
A) receive the policy proceeds if the primary beneficiary dies before the insured.
B) share the policy proceeds with the primary beneficiary.
C) change the beneficiary designation und
A
Which of the following statements about the use of interest-adjusted cost data for comparing life insurance policies is (are) true?
Using interest-adjusted cost data provides a more accurate measure of the cost of life insurance than is provided if the ti
A
Which of the following statements about the Linton yield is (are) true?
It is based on the assumption that a cash-value policy can be viewed as a combination of insurance protection and a savings fund.
It is the average compound annual rate of return requ
C
10) Which of the following statements about the change of plan provision in a life insurance contract is (are) true?
I. A change to a lower premium policy results in a refund of the difference in the cash values of the two policies.
II. A change to a high
A
10) The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the
A) emergency period.
B) readjustment period.
C) dependency period.
D) blackout period.
D
11) Which of the following statements about the capital retention approach for determining life insurance needs is (are) true?
I. It assumes that life insurance proceeds will be liquidated to provide income to survivors.
II. It requires the preparation of
B
11) Which of the following statements about the assignment of a life insurance policy is true?
A) The insurer must be notified of any assignment or the death proceeds will be paid to the
named beneficiary.
B) Under an absolute assignment, the only right t
A
Which of the following statements about the yearly-rate-of-return method (also known as the Belth method) of calculating the yearly rate of return for a life insurance policy is (are) true?
The formula requires the use of benchmark prices per $1,000 of pr
A
12) When the capital retention approach is used to determine how much life insurance to purchase, all of the following are subtracted from total assets to calculate the capital available to produce income EXCEPT
A) investments in stocks and bonds.
B) non-
A
12) Which of the following statements about assignments of life insurance policies is (are) true?
I. Under a collateral assignment, the policyowner assigns a life insurance policy to secure a loan.
II. Under an absolute assignment, only limited ownership
A
Consumer experts typically recommend all of the following rules when buying life insurance EXCEPT
A) Consider the financial strength of the insurer.
B) Deal with a competent agent.
C) Ignore all factors other than cost.
D) Shop around for a low-cost polic
C
Consumer experts typically recommend which of the following rules when purchasing life insurance?
Avoid policies which pay dividends.
Purchase life insurance equal to ten times your annual salary.
A) I only
B) II only
C) both I and II
D) neither I nor II
D
13) The transfer of all ownership rights in a life insurance policy can be accomplished through a(n)
A) absolute assignment.
B) irrevocable beneficiary designation.
C) incontestable clause.
D) participating-policy provision.
A
13) Disadvantages of the capital retention approach include which of the following?
I. Assets are often liquidated too quickly.
II. It underestimates the amount of life insurance needed.
A) I only
B) II only
C) both I and II
D) neither I nor II
D
14) Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a
A) blended family.
B) single-parent family.
C) two-
D
14) Which of the following statements about life insurance policy loans is true?
A) Loans are only permitted for specific reasons listed in the policy.
B) They are forgiven if the insured dies before the loans are repaid.
C) The policyowner must pay inter
C
Why might the use of "grades" assigned by a life insurance company rating organization not be a reliable guide for consumers?
There may be variations in grades given by different rating organizations.
They ignore factors such as profitability and quality
A
15) Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the suppo
B
15) All of the following statements about the automatic premium loan provision in a life insurance policy are true EXCEPT
A) Its purpose is to prevent a policy from lapsing because of nonpayment of premium.
B) The premium loan requires interest to be paid
C
Marshall is interested in determining the cost per thousand of his life insurance policy. Which of the following will provide Marshall the most meaningful measure of the cost per thousand dollars per year of his life insurance?
A) the needs approach
B) th
D
16) Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was interested in purchasing life insurance. Jessica explained the various uses of life insurance, including income for Brad's wife during the 1- or 2-year period following Bra
D
16) What major feature distinguishes a participating policy from a nonparticipating policy?
A) the availability of a waiver-of-premium provision
B) the existence of settlement options
C) the payment of dividends
D) the method by which beneficiaries can be
C
Lynn calculated the future value of the first twenty premiums she will pay under her nonparticipating whole life insurance policy. Then she subtracted the cash value after 20 years. Next, she divided this value by the future value annuity due factor for 2
C
17) Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement p
B
17) Sources of life insurance dividends include which of the following?
I. Excess interest earned on the assets necessary to maintain legal reserves
II. Favorable mortality experience
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer
C
Which method of analyzing the cost of life insurance does not consider the cash value of the policy in the analysis?
A) traditional net cost method
B) net payment cost index
C) the Linton Yield
D) the surrender cost index
B
18) Richard is using the capital retention approach to determine how much life insurance to purchase. Richard would like to provide $35,000 per year to his family, forever, if he dies. The assets that he has today will provide $25,000 in annual income wit
D
18) All of the following are common dividend options found in participating whole life insurance policies EXCEPT
A) reduction of premiums.
B) dividend accumulations.
C) purchase of paid-up insurance.
D) purchase of insurance company stock.
D
Mary is interested in comparing life insurance policies. Rather than looking at the cost per thousand, she would like to compare the rate of return earned on the savings portion of the policy. Which of the following would be of the most interest to Mary?
A
Which of the following statements is (are) true regarding taxation of life insurance?
Life insurance proceeds paid in a lump-sum to a designated beneficiary are received free of federal income taxes.
The policyowner must pay taxes annually on the amount b
A
19) Which of the following statements about dividend options is (are) true?
I. The interest on dividends left to accumulate with the insurer is not considered to be taxable income.
II. Paid-up additions are additional units of whole life insurance.
A) I o
B
19) Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance pl
A
20) When using the needs approach, several "special needs" should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n)
A) estate clea
B
20) Advantages of selecting the paid-up additions dividend option in a life insurance policy include which of the following?
I. Evidence of insurability is not required to purchase additional insurance.
II. The additions are purchased at net rates without
C
The first step in "shopping for life insurance" is to
A) estimate the amount of life insurance to purchase.
B) decide whether you want a policy which pays dividends.
C) determine if you need life insurance.
D) decide on the best type of life insurance for
C
21) Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs. What an insured person gives up when he or sh
D
21) A dividend option that allows the policyowner to purchase 1-year term insurance is referred to as the
A) fifth dividend option.
B) policy loan dividend option.
C) paid-up additions dividend option.
D) family protection dividend option.
A
Lisa does not want her life insurance policy included in her gross estate when she dies. Lisa can remove the life insurance policy from her estate if she does which of the following more than 3 years before she dies?
A) borrow the cash value of the policy
B
Brad owns a cash value life insurance policy. Last year, the cash value increased by $300. Brad received $100 in policyowner dividends on the policy last year. Brad was the beneficiary named in his grandmother's $50,000 life insurance policy. When she die
A
22) All of the following are nonforfeiture options found in cash value life insurance policies EXCEPT
A) cash value.
B) reduction of premiums.
C) reduced paid-up insurance.
D) extended term insurance.
B
22) Which of the following statements about yearly renewable term insurance is (are) true?
I. It requires evidence of insurability for renewal.
II. It is most appropriate when an insured needs lifetime protection.
A) I only
B) II only
C) both I and II
D)
D
23) What happens to the premiums for yearly renewable term insurance as an insured gets older?
A) They increase at an increasing rate.
B) They increase at a decreasing rate.
C) They decrease at a constant rate.
D) They remain level.
A
23) Which of the following statements about nonforfeiture options found in life insurance policies is true?
A) Under the reduced paid-up option, the paid-up policy is term insurance.
B) Under the extended term option, the amount of term insurance is less
C
Carl and Carol Williams, a married couple, are doing some estate planning. Upon his death, Carl plans to leave $1,000,000 in property to his wife. This amount will reduce the value of Carl's gross estate and will be taxed later when Carol dies. This reduc
D
24) All of the following statements about term insurance are true EXCEPT
A) The insurance provides protection for a specified period of time.
B) Most policies can be renewed for additional periods without evidence of insurability.
C) Most policies can be
D
24) All of the following statements about the interest settlement option are true EXCEPT
A) The minimum guaranteed interest rate is usually equal to the prime rate.
B) The interest can be paid monthly, quarterly, semiannually, or annually.
C) The benefici
A
Paul is shopping for a life insurance policy. An agent asked Paul if he would like to purchase a participating policy. What is a "participating" policy?
A) a policy which has a cash value
B) a policy which pays dividends
C) a policy which invests in commo
B
25) All of the following statements about the conversion of a term policy are true EXCEPT
A) Under an attained age conversion, the premium is based on the insured's attained age at the time of conversion.
B) Under an original age conversion, the policyown
D
25) Which of the following statements about life insurance settlement options is true?
A) Under the fixed period option, the beneficiary normally has the right to make partial
withdrawals in case of emergency.
B) Under the fixed period option, any remaini
C
Each of the following helps to reduce federal estate taxes EXCEPT
A) the marital deduction.
B) the applicable unified tax credit amount.
C) life insurance policies in which the deceased had an incidents of ownership at the time of death.
D) expenses such
C
Which of the following statements is (are) true with regard to using interest-adjusted cost data when shopping for life insurance?
Cost indexes apply to new policies and should not be used to determine whether to replace a policy.
Cost indexes should only
C
26) Which of the following statements about life income settlement options is (are) true?
I. Under a joint-and-survivor life income option, payments cease at the death of the first annuitant.
II. Under a life income with period certain, a contingent benef
D
26) Which of the following statements about a decreasing term insurance policy is true?
A) The face amount of the policy decreases during the policy period, and the premium increases.
B) The face amount of the policy decreases during the policy period, bu
B
27) The purchase of term insurance is justified by which of the following circumstances?
I. The insured wants to save money through the policy for a specific need.
II. The insured has a temporary need for life insurance protection.
A) I only
B) II only
C)
B
27) Disadvantages of life insurance settlement options include which of the following?
I. Higher yields can often be obtained elsewhere.
II. Life income options have limited usefulness at younger ages.
A) I only
B) II only
C) both I and II
D) neither I no
C
All of the following statements about the income tax treatment of individually-purchased life insurance are true EXCEPT
A) policyowner dividends are received tax-free.
B) the annual increase in cash value is not taxable while the policy remains in force.
C
28) A legal reserve in life insurance is a result of
A) premium taxes payable by life insurance companies being postponed during the early policy years.
B) dividends being paid to policyowners.
C) inadequate premiums in the early policy years being subsid
D
28) Which of the following statements about the waiver-of-premium provision is true?
A) Because the probability of becoming disabled exceeds the probability of premature death,
the cost to include this provision is usually prohibitive at younger ages.
B)
D
Which of the following statements is (are) true about the federal estate tax?
The gross estate can be reduced by a number of deductions.
If the person who died had any ownership interest in a life insurance policy at the time of death, the proceeds are in
C
Life insurance policy reserves
A) are always equal to the policy's cash surrender value.
B) are a major asset of life insurance companies.
C) are paid to the beneficiary when the insured dies.
D) are a major liability of life insurance companies.
D
29) The net amount at risk for an ordinary life insurance policy is the difference between the
A) present value of future benefits and the present value of future premiums.
B) face amount of the policy and the total premiums that have been paid.
C) face a
C
29) All of the following are requirements that must be satisfied before premiums are waived under a waiver-of-premium provision EXCEPT
A) The insured must furnish proof of disability to the insurer.
B) The insured must be disabled before some specified ag
D
30) Which of the following statements about life insurance cash values is (are) true?
I. Cash values are a result of the level premium method of purchasing life insurance.
II. The cash value of a policy must always exceed the policy's legal reserve.
A) I
A
30) Which of the following statements about the guaranteed purchase option is true?
A) An insured usually has 24 months to exercise an option.
B) The option cannot be exercised until the insured reaches age 40.
C) The amount of life insurance that can be
D
Purposes of life insurance policy reserves include which of the following?
Legal test of the insurer's solvency
Formal recognition of the obligation to pay future claims
A) I only
B) II only
C) both I and II
D) neither I nor II
C
31) All of the following statements about ordinary life insurance are true EXCEPT
A) Premiums are level throughout the policy period.
B) The face amount of the policy is paid if the insured lives to age 65.
C) There is a build-up of cash value that can be
B
31) Which of the following statements about the guaranteed purchase option is true?
A) It is usually available with term insurance policies.
B) The premium when an option is exercised is based on the insured s age at the time the original policy was issue
C
The difference between the present value of future benefits payable under a life insurance policy and the present value of net premiums for the policy is the policy's
A) retrospective reserve.
B) policyholders surplus.
C) prospective reserve.
D) admitted
C
The policy reserve at the end of any given policy year is called the
A) terminal reserve.
B) unearned premium reserve.
C) mean reserve.
D) initial reserve.
A
32) Which of the following statements about a typical accidental death benefit rider is (are) true?
I. Death must occur within 14 days of the covered accident.
II. The accidental death must occur prior to some specified age.
A) I only
B) II only
C) both I
B
32) Which of the following statements about limited-payment life insurance is true?
A) It is a form of term insurance.
B) It matures at the end of the premium-payment period.
C) The premium decreases each year during the premium-payment period.
D) Its use
D
33) Which of the following statements about endowment insurance policies is (are) true?
I. The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive.
II. The use of endowment insu
A
33) Reasons for NOT purchasing an accidental death benefit rider include which of the following?
I. Most people die as a result of a disease rather than from an accident.
II. The economic value of a human life is not increased if death occurs because of a
C
To level a net single premium (NSP), the NSP is divided by
A) the maximum number of years the premium could be paid.
B) the ordinary life annuity factor for the premium payment period.
C) the present value of a life annuity due of $1 for the premium payme
C
34) All of the following statements about variable life insurance are true EXCEPT
A) The premium is level and guaranteed not to increase.
B) The death benefit varies according to investment experience.
C) The policyowner has the option of investing the ca
D
34) The cost-of-living rider typically bases increases in the policy face value on changes in the
A) gross national product.
B) interest rate for short-term U.S. government securities.
C) consumer price index.
D) national wage level.
C
The gross premium is defined as
A) the net premium plus the loading allowance.
B) the terminal reserve plus the commission.
C) the net premium minus expenses.
D) the sum of all acquisition expenses.
A
The National Association of Insurance Commissioners (NAIC) has drafted a "Life Insurance Policy Illustration" model law that most states have adopted. Which of the following statements concerning this model law is (are) true?
The policy illustration must
C
35) Which of the following statements about accelerated death benefits riders is (are) true?
I. Under a terminal illness rider, after a partial payment is made to the insured, there is a reduction in the face amount of insurance, cash value, and premiums.
A
35) All of the following statements about universal life insurance are true EXCEPT
A) Interest is credited to the policy's cash value each month.
B) Any withdrawal of a policy's cash value reduces the amount of the death benefit.
C) Interest credited to a
C
36) Which of the following statements about universal life insurance is (are) true?
I. The interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy.
II. A monthly deduction is made from the policy'
B
36) The practice of buying the life insurance policy of a terminally ill insured at a discount is referred to as a
A) collateral assignment.
B) viatical settlement.
C) catastrophic illness conversion.
D) grace period transaction.
B
Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent i
C
37) All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT
A) Policy loans are permitted on an interest-free basis.
B) The frequency of premium payments can be varied.
C) The death benef
A
37) Al was named the beneficiary in his mother s life insurance policy. His mother died during the contestable period. The insurer denied payment, citing a material misrepresentation on the application. Al believes the insurer should pay the claim because
B
Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent i
B
38) Which of the following statements about a variable universal life insurance policy is (are) true?
I. There is a minimum guaranteed interest rate for the cash value.
II. The policyowner has a variety of investment options for the investment of premiums
B
38) Cal purchased a whole life policy 6 years ago. The policy requires annual premium payments. Cal forgot to pay the premium that was due 2 weeks ago. He wonders if his life insurance is still in force. Which life insurance policy provision is designed t
B
Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent i
D
Actuaries at Term Life Insurance Company calculated the net single premium per thousand for a five-year term policy for a man age 32 to be $5.04. To calculate the net level premium for this policy, the net single premium should be
A) divided by 5.
B) divi
C
39) Bruce lied about his health history when he purchased a life insurance policy. He died 3 years after the policy was issued. Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the applic
A
39) All of the following statements about current assumption whole life insurance are true EXCEPT
A) It is a form of participating whole life insurance that pays annual dividends.
B) An accumulation account is credited with an interest rate based on prese
A
Which statement is true regarding using interest-adjusted cost data and purchasing life insurance?
A) Cost indices can help to determine whether a policy should be replaced.
B) The type of policy you purchase should he based solely on a cost index.
C) Sma
C
40) Which of the following statements about an indeterminate-premium whole life insurance policy is (are) true?
I. It permits the insurer to adjust premiums based on anticipated future experience.
II. It allows policyholder dividends to be used to lower p
A
40) Which life insurance policy provision specifies that it is the policyowner, and not the insured or beneficiary, who possesses all contractual rights while the policy is in force?
A) nonforfeiture options
B) entire contract clause
C) incontestable clau
D
41) A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 years) and are higher thereafter is an example of a
A) level-term policy.
B) modified life policy.
C) limited-payment whole life policy.
D) variable life policy.
B
41) Becky is considering the purchase of a whole life policy on her own life. She is concerned that if she becomes disabled, paying premiums will become a burden. Which provision can Becky attach to her life insurance policy to address this concern?
A) gu
B
The net single premium for a life insurance policy is
A) the premium the insurer charges to cover the death benefit and the insurer's expenses.
B) the future value of the future death benefit.
C) the present value of the future death benefit.
D) the face
C
42) Which of the following statements about policies sold to preferred risks is (are) true?
I. Preferred risks are people whose mortality experience (deaths per thousand at a given age) is expected to be more favorable than average.
II. Insurers require p
C
42) Tim purchased a 10-payment whole life insurance policy 15 years ago. Tim would like to donate this paid-up policy to a charity. Under which policy provision can Tim transfer all ownership rights in the policy to the charity?
A) absolute assignment
B)
A
According the 2001 CSO mortality table, the yearly probability of dying for a 40 year-old man is .00165. The present value of $1 one year from today, assuming a 5.5 percent interest rate, is .9479. What is the net single premium per $1,000 for a one-year
A
ABC Life Insurance Company is offering a new product. The product is a two-year term insurance policy funded by a single premium at the start of the first year. Death claims are paid at the end of the year in which death occurs. A portion of the appropria
B
43) Beth purchased a participating life insurance policy 6 years ago. Her life insurance needs have increased, but she has developed a medical condition that makes it impossible for her to purchase more life insurance at affordable premiums. Which dividen
D
43) Which of the following statements about second-to-die life insurance is (are) true?
I. The insurance is a form of endowment coverage.
II. The premium is lower than the combined cost of purchasing a life insurance policy on each insured.
A) I only
B) I
B
44) Which of the following statements about savings bank life insurance is true?
A) The maximum amount that a depositor can purchase is $50,000.
B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit
D
44) Lionel purchased a $200,000 ordinary life insurance policy when he was 25 years old and had significant life insurance needs. Now Lionel is 50. His mortgage is almost paid -off and his children have left home and are financially independent. Lionel no
B
Charles, age 65, owns a paid-up $250,000 whole life policy on his own life. Charles is doing some estate planning and would not like this policy to be included in his gross estate for federal estate tax purposes. Which of the following statements is (are)
B
45) Which of the following statements about industrial life insurance (also called home service life insurance) policies is true?
A) Most policies have a face value exceeding $100,000.
B) Most industrial life insurance policies are cash value coverage.
C)
B
45) Jane purchased a life insurance policy on her own life and named her daughter, Cheryl, the beneficiary. Cheryl has a history of not managing money well. Jane wants the death benefit paid to Cheryl in monthly installments over 20 years. Which settlemen
C
The gross premium for life insurance is equal to
A) the present value of the future death claim plus an expense loading.
B) the present value of the future death claim less the sum of the premiums paid when death occurs.
C) the present value of the future
A
The average annual rate of return on a cash-value policy if it is held a specified number of years is called the policy's
A) net present value.
B) interest-adjusted cost.
C) benchmark cost.
D) Linton yield.
D
46) Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balanc
B
46) Malcolm would like to purchase life insurance. He is concerned that he might need additional life insurance in the future and that he might be uninsurable at that time. What provision can Malcolm add to his life insurance policy that will permit him t
B
47) Carl would like to purchase life insurance. He would also like to invest in a mutual fund. An agent told Carl about a form of life insurance in which Carl could select where the saving component is invested. This form of life insurance has fixed premi
C
47) Which of the following statements is (are) true concerning settlement options?
I. A straight life annuity provides the lowest periodic income of all the life income options.
II. Fixed-period and fixed-amount are life income options.
A) I only
B) II on
D
All of the following statements about the tax treatment of life insurance purchased by an individual are true EXCEPT
A) The annual increase in the cash value is currently taxable.
B) Premium payments are not tax deductible.
C) Death benefits received in a
A
48) Tamara purchased a term insurance policy when she had high life insurance needs and limited income. Now Tamara can afford whole life insurance. What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance
C
48) Which of the following statements is (are) true concerning the automatic premium loan provision?
I. Unlike other policy loans, interest is not charged on automatic premium loans.
II. The basic purpose of an automatic premium loan is to prevent a life
B
The net premiums collected by a life insurer for a particular block of policies, plus interest income at an assumed rate, less assumed death benefits paid is called the
A) cash value.
B) retrospective reserve.
C) net amount at risk.
D) prospective reserve
B
49) Life insurance policy proceeds can be paid to a trustee upon the death of the insured. All of the following statements about having the proceeds paid to a trustee are true EXCEPT
A) Use of a trustee provides flexibility with regard to the timing and a
C
49) Alex, age 26, purchased a 20-payment whole life insurance policy. After Alex has made 20 premium payments, his life insurance policy is considered
A) matured.
B) reduced.
C) expired.
D) paid-up.
d
50) Ann is considering the purchase of a life insurance policy with these characteristics: flexible premium payments, the insurance and savings components are separate, the interest rate credited to the savings is tied to a market interest rate but a mini
C
50) Which of the following statements is/are true regarding exclusions in life insurance contracts?
I. Life insurance policies are remarkably restrictive, including numerous exclusions.
II. A life insurer may exclude death attributable to certain activiti
B
51) Dave purchased a life insurance policy. The policy is nonparticipating and the cash values are based on the insurer's present mortality, investment, and expense experience. After 2 years, the insurer will recalculate the premium based on the mortality
A
51) A life insurance policyowner may no longer need life insurance. Such a policyowner may sell the policy to a third party for more than its cash value. The purchaser becomes the new beneficiary and is responsible for subsequent premium payments. Such a
D
52) Which of the following $100,000 whole life insurance policies, issued by the same company to a man age 32, would require the highest first-year premium?
A) continuous premium (ordinary) life
B) whole life paid-up at 65
C) 10-payment whole life
D) 20-p
C
53) Which of the following statements about variable universal life insurance is (are) true?
I Variable universal life insurance has fixed premium payments.
II. Variable universal life insurance allows the policyowner to decide where the premiums are inve
B
54) Which statement is true concerning the economic problem of premature death in the United States?
I. The economic impact of premature death of the breadwinner varies for different types of families.
II. Increased life expectancy has increased the econo
A
55) Which of the following statements is true regarding the results of studies by LIMRA and New York Life Insurance Company on the adequacy of life insurance owned by households in the United States?
I. The average household is adequately insured against
B