Life & Health Insurance Exam Life & Health Insurance Types of Life Policies 4 — Questions and Answers
Question 1: Which of the following statements about a straight life (ordinary whole life) policy is CORRECT?
- Premiums are paid until age 65 only
- The policy matures when the cash value equals the face amount at age 100 (or 121 under newer tables) (Correct answer)
- The death benefit decreases as the insured ages
- The policy has no loan provision
Correct answer: The policy matures when the cash value equals the face amount at age 100 (or 121 under newer tables)
Under traditional whole life policies, the cash value grows until it equals the face amount at the policy's maturity age (historically 100, now often 121 under the 2001 CSO table).
Question 2: An agent explains that a policy's death benefit will equal the face amount plus the accumulated cash value at death. This describes a:
- Straight whole life policy
- Return of premium term policy
- Universal life policy with increasing death benefit option (Correct answer)
- Variable annuity contract
Correct answer: Universal life policy with increasing death benefit option
Universal life Option B (increasing death benefit) pays the face amount plus the policy's accumulated cash value, so the total death benefit grows over time.
Question 3: Family income policy combines which two types of coverage?
- Whole life and universal life
- Whole life and decreasing term (Correct answer)
- Term and variable life
- Endowment and whole life
Correct answer: Whole life and decreasing term
A family income policy combines a whole life base policy with decreasing term insurance to provide monthly income for a specified period if the insured dies early.
Question 4: What distinguishes a family maintenance policy from a family income policy?
- The family maintenance policy pays a lump sum at death instead of monthly income
- The family maintenance policy uses level term insurance, providing income for a full fixed period from the date of death (Correct answer)
- The family maintenance policy has no whole life component
- The family maintenance policy covers all family members under one certificate
Correct answer: The family maintenance policy uses level term insurance, providing income for a full fixed period from the date of death
A family maintenance policy uses level (not decreasing) term, so if the insured dies at any point during the term, the full income period (e.g., 20 years) begins from the date of death.
Question 5: Juvenile life insurance written with a 'payor benefit' rider ensures that:
- Premiums are waived if the child becomes disabled
- Premiums are waived if the adult payor dies or becomes totally disabled before the child reaches a specified age (Correct answer)
- The child's death benefit doubles when they turn 18
- Coverage continues after the child reaches age 25 at no additional cost
Correct answer: Premiums are waived if the adult payor dies or becomes totally disabled before the child reaches a specified age
The payor benefit rider waives future premiums on a juvenile policy if the adult payor (usually a parent) dies or becomes totally disabled before the insured child reaches the policy's specified age.
Question 6: A single premium whole life policy is best described as a policy that is:
- Paid for with one lump-sum premium and immediately paid-up for life (Correct answer)
- Paid for over a single year in monthly installments
- Issued without a medical exam for a single flat premium
- Purchased to cover only a single named beneficiary
Correct answer: Paid for with one lump-sum premium and immediately paid-up for life
A single premium whole life policy requires only one premium payment at issue, after which the policy is fully paid-up and remains in force for the insured's lifetime.
Question 7: A level term policy differs from a decreasing term policy primarily because:
- Level term builds cash value while decreasing term does not
- The face amount stays constant throughout the policy period in a level term policy (Correct answer)
- Level term coverage is renewable while decreasing term is not
- Premiums decrease over time with a level term policy
Correct answer: The face amount stays constant throughout the policy period in a level term policy
In a level term policy both the face amount and the premium remain constant for the entire term, whereas decreasing term reduces the death benefit while premiums stay level.
Life & Health Insurance Exam Life & Health Insurance Types of Life Policies 4
Which of the following statements about a straight life (ordinary whole life) policy is CORRECT?