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Chapter 4Question 1. The major objective of buying life insurance is:to supplement retirement incometo reduce the financial burden of the insuredto protect the dependents in the case of premature death of the breadwinnerto maximize savingsnone of the aboveQuestion 2. Essentially, there are two broad categories of life insurance. They are:cash value and termterm and family protectionpermanent and cash valueendowment and cash valuenone of the aboveQuestion 3. Which of the following policies has no savings element in it?Whole lifeUniversal lifeVariable universal life10-year renewable term20-year limited payment lifeQuestion 4. Which of the following is characteristic of level-term insurance?Premium and protection level remained unchangedRenewal until age 65It requires a larger premium in its earlier years than the premium of an ordinary term policyIt has a cash accumulation valueNone of the aboveQuestion 5. The dividend option clause in a life insurance policy gives the policyholder the right to do all the following except:apply dividends toward premiums paymentspurchase stock in the company at rates below that of the marketleave the dividend with the company to earn interestpurchase additional paid-up insurancenone of the aboveQuestion 6. A whole life policy differs from a term policy in that:premium on a whole life policy increases each yearno premiums are required when the insured turns age 65the rate on a whole life policy is always lower than that charged on a term policya whole life policy accumulates cash value, whereas a term policy does notnone of the aboveQuestion 7. A whole life insurance policy has an accumulated cash value of $35,000 and a face value of $80,000. Upon death of the insured the beneficiary would receive:$35,000$45,000$80,000$115,000None of the aboveQuestion 8. Which of the following in not true with regard to a whole life policy?The face amount of the policy will never be greater than the cash valueThe savings pattern is actually the opposite of the protection patternWhen the insured dies, the beneficiary will always receive both the face amount of the policy and any accumulated cash valueA whole life policy may be thought of as a forced method of savingAs a policy nears the end of its period, more of the premium is allocated toward cash value accumulation than increasing the protection elementQuestion 9. Universal life insurance:is basically the same as whole-lifepays interest rates lower than passbook savingsis comprised of a renewable term policy and a cash accumulated fundpays only if there is “universal death”provides universal premium rates for all applicantsQuestion 10. Which of the following is true with respect to group life insurance?It is typically term insurance, although whole life may be purchasedIt is generally fixed at one-half to three times an employee’s compensationIt is less expensive than an individual policyIt is only available through an employerBoth A and CQuestion 11. The purchase of a “guaranteed insurability” endorsement:allows purchase of additional insurance without proof of insurabilityallows the purchase of additional insurance at all agesallows the purchase of unlimited supplemental insurancegenerally requires a physical exam before a policyholder is allowed to purchase additional insurancemeans none of the aboveQuestion 12. A “waiver-of-premium” clause:waives the suicide clauseallows the person to purchase additional insurance at no extra costpays premiums in the event of disabilityallows an insurance agent to pay your premiumsmeans the insured will receive the cash value immediatelyQuestion 13. At death, a beneficiary receives $10,000. The federal income taxable portion is:$10,000the total cash valuedetermined by her total incomezero28% of $10,000Question 14. Willy Wonker borrows a portion of his cash value. Which of the following is true?It must be repaid within 5 yearsThe amount borrowed would be deducted from the face amount of the policy before any death benefits are paidHe may borrow up to sixty percent of the cash valueThere is no interest charge because it is his moneyNone of the above is trueQuestion 15. Which of the following is an allowable means of distributing your life insurance benefits upon your death?Fixed period optionFixed income optionLife income optionLump sum paymentAll of the above represent allowable meansQuestion 16. The life income option provides:monthly payments for the life of the beneficiarya fixed payment each month until the policy amount is eliminatedmonthly payments for a specified number of monthsinterest payments each month in addition to a limp sum principal paymentA and DQuestion 17. Life insurance policyholders receive dividends:only if the company earns a specified amount of profitsonly from mutual companiesonly from specific life insurance companiesif they own a participating policyonly from stock companies ................
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