LLQP Insurance Product Types 3 — Questions and Answers
Question 1: Which disability income policy provision ensures that benefits are paid only if the insured cannot perform the duties of their own occupation?
- Any-occupation definition
- Own-occupation definition (Correct answer)
- Residual disability definition
- Presumptive disability definition
Correct answer: Own-occupation definition
The own-occupation definition pays benefits if the insured cannot perform the specific duties of their regular occupation, even if they can work in another field.
Question 2: A critical illness insurance policy typically pays benefits:
- As a monthly income throughout the illness
- As a lump sum upon diagnosis of a covered condition (Correct answer)
- Only after the insured is hospitalized for 30 days
- Only upon the insured's death from the illness
Correct answer: As a lump sum upon diagnosis of a covered condition
Critical illness insurance pays a tax-free lump sum upon diagnosis of a specified covered condition, giving the insured financial flexibility.
Question 3: Which long-term care insurance benefit trigger typically requires the insured to be unable to perform a specified number of Activities of Daily Living (ADLs)?
- Hospital confinement trigger
- ADL benefit trigger (Correct answer)
- Elimination period trigger
- Inflation protection trigger
Correct answer: ADL benefit trigger
The ADL benefit trigger releases LTC benefits when the insured cannot independently perform a specified number (usually 2 of 6) of Activities of Daily Living.
Question 4: A participating life insurance policy differs from a non-participating policy because it:
- Provides coverage for a specified term only
- Pays dividends to policyholders based on company experience (Correct answer)
- Requires no medical underwriting
- Does not accumulate cash value
Correct answer: Pays dividends to policyholders based on company experience
Participating policies allow policyholders to share in the insurer's favorable experience through dividends, which are considered a return of excess premium.
Question 5: An equity-indexed annuity (EIA) credits interest based on:
- A fixed rate set at contract issue
- The performance of a specific stock market index, subject to a cap and floor (Correct answer)
- The policyholder's choice of investment sub-accounts
- The insurer's general account returns only
Correct answer: The performance of a specific stock market index, subject to a cap and floor
An equity-indexed annuity ties interest credits to a market index like the S&P 500, but limits gains with a cap and protects against loss with a floor.
Question 6: Which type of life insurance policy is most commonly used to fund a buy-sell agreement between business partners?
- Group term life insurance
- Individual term or permanent life insurance (Correct answer)
- Credit life insurance
- Mortgage protection insurance
Correct answer: Individual term or permanent life insurance
Individual term or permanent life insurance policies are the standard funding mechanism for buy-sell agreements, providing the liquidity needed to purchase a deceased partner's share.
Question 7: A return of premium term life insurance policy is best described as:
- A policy that returns the death benefit if the insured outlives the term
- A policy that refunds all premiums paid if the insured survives the term (Correct answer)
- A permanent policy that builds cash value equal to premiums paid
- A policy that waives premiums upon disability
Correct answer: A policy that refunds all premiums paid if the insured survives the term
Return of premium term insurance refunds all premiums paid if the insured survives the full policy term, acting as a form of forced savings.
LLQP Insurance Product Types 3
Which disability income policy provision ensures that benefits are paid only if the insured cannot perform the duties of their own occupation?