All of the following are eligible to purchase a group life insurance policy EXCEPT:
the Wonderful Widget Company, which employs more than 200 people
the State Electrical Workers Union
the Retailers Multiple Employer Trust, formed by two retailers to purchase insurance for
their employees
Stan and his neighbors, who form their own group to buy group coverage at a lower
cost than their individual coverages – answer Stan and his neighbors are not eligible
to purchase group life insurance because a group cannot be formed solely to obtain life
insurance
With respect to the difference between variable life insurance (VLI) and variable
universal life insurance (VUL), which of the following statements is correct?
Variable life policies require a fixed premium payable for the life of the policy while
variable universal life permits premium flexibility.
Only variable life policies allow the policyowner to put funds in investment subaccounts.
Only variable universal life policies offer a minimum death benefit.
Only variable universal life is a securities product. – answer Variable life policies
require a fixed premium payable for the life of the policy while variable universal life
permits premium flexibility
Jessica, age 25, buys a $100,00 life insurance policy. The initial premium is lower than
straight whole life rates and increases each year for the first ten years of the policy
period. After that, the premium levels off and remains at that amount for the life of the
policy. What type of policy does Jessica own?
indeterminate premium whole life
single premium life
graded premium whole life
20-pay life – answer graded premium whole life
Which statement about modified premium whole life insurance is NOT correct?
It does not build cash value.
It charges lower premiums in the early policy years.
At the end of the initial period, the premium increases and stays at the new level for the
life of the policy.
It is good for people who want the guarantees of whole life insurance and lower early
premiums. – answer It does not build a cash value
A life insurance policy matures or endows when its guaranteed cash value equals its
face amount. With an endowment contract, when does the policy endow?
when the insured dies
at age 120
after age 120
well before age 120, usually at age 65 – answer well before age 120, usually at age
65
A type of permanent life insurance that lets the policyowner increase, reduce or even
skip premium payments at will without the policy lapsing best describes:
variable life insurance
universal life insurance
adjustable life insurance
modified premium whole life insurance – answer universal life insurance
Variable universal life combines features of variable life and universal life. Variable
universal life and universal life are alike in all the following ways EXCEPT:
The premium payments for both are flexible.
Both types of policies let the policyowner choose a death benefit from two (or
sometimes three) options.
For both policies, the insurer deducts insurance and expenses monthly from the cash
value.
Both are considered securities products as well as life insurance. – answer both are
considered securities products as well ass life insurance
All the following statements about term life insurance are correct EXCEPT:
It offers protection for a specified, limited period.
A small cash value gradually accumulates while the policy is in force.
Upon issue, it is generally less expensive than permanent insurance of comparable face
amount.
It pays a benefit only if the insured dies during the specified period. – answer a small
cash value gradually accumulates while the policy is in force
A type of life insurance that covers two people and pays the death benefit only upon the
second insured’s death is called
survivorship life
family life
spousal life
joint life – answer survivorship life
Under a joint life insurance policy, when does the insurer pay the death benefit?
when the first insured dies
only when the surviving insured dies
only when the older insured dies
only when the younger insured dies – answer when the first insured dies
Which of the following types of whole life insurance is paid with one premium at the time
the policy is bought?
modified premium whole life
limited pay life
graded premium whole life
single-premium life – answer single-premium life
Which of the following life insurance products is best suited for insuring a mortgage or
other long-term loan with the least premium possible?
increasing term life insurance
level term life insurance
decreasing term life insurance
whole life insurance – answer decreasing term life insurance
A married couple is insured under a joint life policy. The first spouse dies. What can the
surviving spouse do with the policy?
The surviving spouse can renew the policy.
The surviving spouse can convert the policy if he or she proves insurability.
The surviving spouse may convert the policy without proving insurability.
The surviving spouse cannot convert the policy. – answer the surviving spouse can
convert the policy if he or she proves insurability
Alan and his wife are expecting their first child. Alan wants the most death protection
that he can get for the smallest amount of premium, at least while he’s starting his
family. Ideally, he would like to be able to upgrade his coverage to a whole life policy at
some point. Which of the following products would you recommend?
whole life insurance policy
variable life insurance policy
universal life policy
ten-year convertible term life policy – answer ten-tear convertible term life policy
Michael and his friends and family, who are tired of paying high premiums for their
individual policies, decide to get together and buy a group life insurance policy. Why will
their approach not work?
Group policies are only available to employers.
Family members cannot be covered under the same group policy.
A group cannot be formed just for the purpose of obtaining insurance.
None of the members in the group is a licensed agent. – answer a group cannot be
formed just for the purpose of obtaining insurance
While completing an application for a life insurance policy, Dan discloses his partial
blindness. The insurer will treat this blindness as a:
peril
moral hazard
morale hazard
physical hazard – answer physical hazard
Peril vs Hazard – answer Peril is the CAUSE of loss
Hazard is a characteristic that increases the chance of a peril occurring
Which of the following best illustrates risk transfer?
Anita buys health insurance to protect herself in case of serious illness.
Abigail continues to rent her home because she thinks homeowners insurance is too
expensive. Refusing to buy a home and insure it is an example of risk avoidance.
Anne does not venture out after dark because she is afraid of being assaulted.
Arlene decides not to purchase life insurance because she has no dependents and
plenty of cash in her savings accounts to cover any final expenses. – answer Anita
buys health insurance to protect herself in case of a serious illness
When classifying insurance risks, insurance underwriters most often use the:
numerical rating system
judgment method
adverse selection system
risk assessment scale – answer numerical rating system
Which is not an example of a hazard?
Ron forgets to wear his seat belt when he drives.
Sue smokes a pack of cigarettes every day.
John takes medication to control high blood pressure.
Jane neglects to fix a broken sidewalk in front of her shop. – answer John takes
medication to control high blood pressure
Robin falls while snow skiing and breaks a leg. She decides to never again attempt this
activity. What method is she using to manage this risk of falling?
risk retention<\/p>\n\n\n\n