LLQP - Life License Qualification Program Life Insurance Product Types 1 — Questions and Answers
Question 1: A married couple purchases a policy that pays the death benefit only upon the death of the second spouse. What type of policy is this?
- Joint first-to-die life insurance
- Joint last-to-die life insurance (Correct answer)
- Survivorship annuity
- Spousal term rider
Correct answer: Joint last-to-die life insurance
Joint last-to-die (also called second-to-die or survivorship life) pays the benefit only after both insured individuals have died. It is commonly used for estate planning, particularly to cover estate taxes that become due on the death of the surviving spouse.
Question 2: Which of the following best describes an endowment life insurance policy?
- A policy that pays a death benefit only if the insured dies before a specified age
- A policy with no cash value but permanent coverage to age 100
- A policy that pays the face amount either upon the insured's death or when the policy matures at a set date, whichever comes first (Correct answer)
- A policy where premiums decrease over time as cash value accumulates
Correct answer: A policy that pays the face amount either upon the insured's death or when the policy matures at a set date, whichever comes first
An endowment policy guarantees payment of the face amount on whichever occurs first: the insured's death or the policy's maturity date (e.g., age 65 or after 20 years). It combines life insurance protection with a forced savings component.
Question 3: What is the primary characteristic that distinguishes 'Term to 100' insurance from traditional whole life insurance?
- Term to 100 provides coverage for only 10 or 20 years
- Term to 100 accumulates significant cash value over time
- Term to 100 provides lifetime coverage but typically has no cash surrender value (Correct answer)
- Term to 100 allows the policyholder to vary their premium payments
Correct answer: Term to 100 provides lifetime coverage but typically has no cash surrender value
Term to 100 offers permanent coverage lasting to age 100 with level premiums, but unlike whole life it does not build cash value. This makes it a lower-cost permanent insurance option compared to whole life, while still guaranteeing lifelong protection.
Question 4: Under a variable life insurance policy, who bears the investment risk associated with the policy's cash value?
- The insurance company's general fund
- A government guarantee corporation
- The reinsurer
- The policyholder (Correct answer)
Correct answer: The policyholder
In a variable life policy, the cash value is invested in separate accounts (such as equity or bond funds) chosen by the policyholder. Because the cash value fluctuates with market performance, the investment risk is borne entirely by the policyholder, not the insurer.
Question 5: A 'return of premium' term life insurance policy differs from standard term insurance in that it:
- Pays double the face amount if death is accidental
- Converts automatically to whole life at the end of the term
- Refunds all or most premiums paid if the insured outlives the policy term (Correct answer)
- Waives premiums if the insured becomes totally disabled
Correct answer: Refunds all or most premiums paid if the insured outlives the policy term
A return of premium (ROP) term policy refunds the premiums paid if the insured survives to the end of the term. This feature makes the policy more expensive than standard term insurance but provides a financial benefit for policyholders who do not make a claim.
Question 6: Which life insurance product is specifically designed so that the policyholder pays a single lump-sum premium rather than ongoing periodic payments?
- Limited-pay whole life
- Single premium life insurance (Correct answer)
- Universal life insurance
- Adjustable life insurance
Correct answer: Single premium life insurance
Single premium life insurance is funded entirely by one lump-sum payment at policy inception. The policy then remains in force for the insured's lifetime with no further premiums due, and the full face amount is payable upon death.
LLQP - Life License Qualification Program Life Insurance Product Types 1
A married couple purchases a policy that pays the death benefit only upon the death of the second spouse.
What type of policy is this?