EXAMFX Life Insurance Policy Types 3 — Questions and Answers
Question 1: Which of the following best describes a joint life (first-to-die) insurance policy?
- Covers two insureds and pays upon the first death (Correct answer)
- Pays only after both insureds have died
- Provides coverage for a group of employees
- Offers decreasing coverage over the policy term
Correct answer: Covers two insureds and pays upon the first death
A joint life (first-to-die) policy covers two insureds and pays the death benefit upon the death of the first to die, leaving the survivor without coverage.
Question 2: An endowment policy matures when the insured:
- Reaches a specified age or dies, whichever comes first (Correct answer)
- Dies before the end of the term only
- Stops paying premiums
- Converts the policy to term
Correct answer: Reaches a specified age or dies, whichever comes first
An endowment policy pays the face amount either at the end of the endowment period or upon the insured's death, whichever occurs first.
Question 3: Modified premium whole life policies are characterized by:
- Premiums that increase every year indefinitely
- Lower initial premiums that increase after a specified period (Correct answer)
- Premiums that decrease as cash value grows
- A premium-free period for the first five years
Correct answer: Lower initial premiums that increase after a specified period
Modified premium whole life features reduced premiums during the initial period (often 3–5 years) that then increase to a higher level for the remainder of the policy.
Question 4: Graded premium whole life is different from modified premium whole life in that graded premium policies have:
- A single step-up in premium after the initial period
- Premiums that gradually increase over several years before leveling off (Correct answer)
- Premiums that decrease over time
- No cash value accumulation
Correct answer: Premiums that gradually increase over several years before leveling off
Graded premium whole life features premiums that increase gradually over multiple years (not in a single jump) before leveling off at a permanent amount.
Question 5: Which life insurance policy type is most commonly used to fund buy-sell agreements between business partners?
- Group term
- Decreasing term
- Whole life or universal life (Correct answer)
- Credit life
Correct answer: Whole life or universal life
Permanent policies like whole life or universal life are commonly used to fund buy-sell agreements because they provide both a death benefit and cash value accumulation.
Question 6: A return of premium (ROP) term policy pays the beneficiary the death benefit and also:
- Converts to whole life at no cost upon policy expiration
- Returns all premiums paid if the insured outlives the term (Correct answer)
- Waives future premiums after a claim is filed
- Doubles the death benefit in accidental death cases
Correct answer: Returns all premiums paid if the insured outlives the term
A return of premium term policy refunds all premiums paid to the policyowner if the insured is still alive at the end of the policy term.
Question 7: Family income policies combine a whole life base with which type of rider to provide income after the insured's death?
- Accidental death rider
- Decreasing term rider (Correct answer)
- Waiver of premium rider
- Cost of living rider
Correct answer: Decreasing term rider
A family income policy combines a whole life base with a decreasing term rider that provides monthly income to the family for the remainder of a specified period following the insured's death.
EXAMFX Life Insurance Policy Types 3
Which of the following best describes a joint life (first-to-die) insurance policy?