Insurance MCQ

Which of the following best describes how the cash value in a universal life policy grows? a. At a variable rate b. At a fixed rate c. At a guaranteed minimum rate d. At a guaranteed minimum rate, but may earn a higher current rate Answer: d. At a guaranteed minimum rate, but may earn a higher current rate

Which of the following permanent life insurance policies is interest-sensitive? a. Modified whole life insurance b. Universal life insurance c. Straight life d. ART Answer: b. Universal life insurance

Compared to ordinary whole life policies, universal life interest rates are: a. Higher b. Lower c. Equivalent d. Not guaranteed Answer: a. Higher

Marci's universal life policy is currently crediting its cash value with 5% interest. The interest rate on policy loans is currently 6%. Based on these figures, at what interest rate is Marci's cash value accumulating? a. 5% on the entire cash value b. 6% on the entire cash value c. 1% of the cash value equal to the loan amounts and 5% on non-loaned amounts d. None of the above Answer: a. 5% on the entire cash value

All of the following are ways that an adjustable life insurance policy can be altered when an extra premium payment is made, EXCEPT: a. Increase the coverage period b. Decrease the premium-paying period c. Decrease the premium d. Decrease the policy's nonforfeiture values Answer: d. Decrease the policy's nonforfeiture values

What happens when the cash value in a universal life insurance policy reaches zero and the grace period has lapsed? a. The policy endows (pays out). b. The policy renews. c. The policy expires. d. The policy must be reinstated. Answer: c. The policy expires.

What are the two premiums in a universal life insurance policy? a. Target premium; minimum premium b. Increasing premium; decreasing premium c. Adjustable premium; universal premium d. Fast premium; slow premium Answer: a. Target premium; minimum premium

All of the following statements are correct regarding adjustable life policies, EXCEPT: a. The policyowner may take out policy loans. b. Policies have nonforfeiture and settlement options. c. Cash value always accrues in the policy. d. Adjustable life policies are suitable for people with varying incomes. Answer: c. Cash value always accrues in the policy.

If Jaime has an adjustable life policy, he can: a. Convert term to lessen the amount of the whole life b. Convert whole life to lessen or increase the term c. Convert term to equal whole life d. All of the above Answer: d. All of the above

Mr. Barnes purchased a universal life policy with a death benefit of $200,000 several years ago. With a current cash value of $50,000, he selected benefit option B. What is his current death benefit? a. $50,000 b. $100,000 c. $200,000 d. $250,000 Answer: d. $250,000

Whole life and universal life policies have some similarities and differences. Which of the following is NOT a characteristic of a universal life policy? a. Policy owner may increase or decrease the death benefit b. Cash value is fixed and guaranteed c. Interest earned by the cash account cannot vary d. Flexible premiums schedule is available Answer: c. Interest earned by the cash account cannot vary

Which of the following changes may the policyowner of an adjustable life policy NOT make? a. Lengthen the coverage period b. Decrease the premium c. Increase the premium d. Invest premiums in the insurer's separate account Answer: d. Invest premiums in the insurer's separate account

Which of the following best describes a circumstance in which the insurer would increase the death benefit of a universal life insurance policy? a. To lower premiums b. To decrease the death benefit c. To prevent the cash value from growing too quickly d. To decrease the policy loan interest rate Answer: c. To prevent the cash value from growing too quickly

Which of the following best describes option B/option 2 under a universal life policy? a. The death benefit is the policy face amount or policy cash value, but not both. b. The death benefit is the policy face amount and the cash value. c. The death benefit is only the face amount. d. The death benefit is only the cash value. Answer: b. The death benefit is the policy face amount and the cash value.

If Sandra chooses an adjustable life policy, all of the following are flexible, EXCEPT: a. Face amount of the policy b. Type of protection c. No requirement for proof of insurability d. Length of protection Answer: c. No requirement for proof of insurability

The primary difference between universal life and adjustable life is: a. Premium payments are flexible. b. Premium payments can be skipped. c. Face amount can be increased or decreased. d. None of the above Answer: b. Premium payments can be skipped.

All of the following statements are false regarding universal life insurance, EXCEPT: a. Proof of insurability is required to increase the policy face amount. b. Premium payments cannot be skipped. c. The face amount is level. d. Premiums are fixed. Answer: a. Proof of insurability is required to increase the policy face amount.

What happens when a universal life policyholder pays the minimum premium? a. The face amount will automatically increase. b. The face amount will automatically decrease. c. The policy will resemble term life insurance. d. The policy will resemble whole life insurance. Answer: c. The policy will resemble term life insurance.

A person who has a universal life policy and needs cash from the policy, but does not want to have an outstanding policy loan should: a. Take a partial surrender of the policy's cash value b. Take a full surrender of the policy's cash value c. Get a loan from the bank d. Take out a policy loan Answer: a. Take a partial surrender of the policy's cash value

All of the following are true regarding adjustable life policies, EXCEPT: a. An adjustable life policy can be entirely whole or term, or a mix of both. b. If the policyowner decreases the premium, the policy could be adjusted to have more term coverage. c. When the premium is decreased, the insured is not required to provide evidence of insurability. d. When the face amount is increased, the insured is required to provide evidence of insurability. Answer: c. When the premium is decreased, the insured is not required to provide evidence of insurability.