Permanent Life Insurance

All of the following are correct statements about the tax treatment of life insurance policies except: Page 24

Which of the following best describes the difference between permanent and term life insurance? Page 24

An insurance policy which requires the insured to pay premiums on the policy for his or her entire life is called a: Page 26

Which of the following is a correct statement about the premiums paid into most permanent life insurance policies? Page 26

When an insurance company invests the premiums it receives, what is the ultimate benefit to the consumer? Page 27

Ron will pay the premiums on his life insurance policy until he is 45. Then premiums stop, although coverage remains in place for the rest of his life. What kind of policy does Ron have? Page 27

John’s life insurance policy uses dividends to pay part of his premium. What type of policy does he have? Page 28

Which of the following established that a life insurance policy must endow no earlier than the insured’s 95 birthday, otherwise disqualifying the contract as life insurance and causing the cash value and death benefit to be taxed? Page 28

Robert receives a moderate inheritance. He has six children to support and very limited savings. Which of the following might be Robert’s best option for providing for his family’s financial security? Page 29

Which of the following defined modified endowment contracts? Page 30

An insurance contract that has been overfunded within the first seven years of the policy loses forever its status as life insurance—and its tax advantages—and becomes a(n): Page 30

Money distributed from a modified endowment contract is considered: Page 30

Assuming the policyowner is not disabled, premature distributions from a modified endowment contract and subject to a 10 percent penalty (in addition to regular income tax) are those taken before age: Page 30

Which of the following are advantages of properly structured single premium whole life insurance? Page 30

Anne and Sam have a joint life policy. At Sam’s death, there are no further benefits available to Anne. What type of policy do they own? Page 31

Roxanne and Jeff have a life insurance policy covering both of them. When Roxanne dies, no death benefit is payable. When Jeff dies years later, the death benefit is paid to the named beneficiary. What type of policy do they own? Page 31

Which of the following best describes a universal life policy? Page 33

Which of the following describes one of the ways universal life policies have evolved? Page 33

Which of the following adjustments are made to the cash value accounts of universal life policies? Page 33

In a universal life policy, the difference between the current interest rate and the guaranteed interest rate is called: Page 33

Which of the following best describes the death benefit options under a universal life policy? Page 34

In order for life insurance to maintain its tax advantaged status, which of the following must take place? Page 34

Which of the following is the term for the minimum amount by which a universal life policy’s death benefit must be separated from its cash value? Page 35

A universal life policyowner can be assured that the contract will remain in force as long as: Page 36

All of the following are correct statements about variable life except: Page 36

In today’s variable life policies: Page 37

With a variable universal life policy, the insured has all of the following benefits except: Page 37

Mae has a life insurance policy under which she pays a low premium initially. Later the premium is adjusted to reflect the company’s experience regarding investment return, mortality, and expenses. What type of policy does she own? Page 39