life and Health Insurance - FIN-3660fe and Health Insurance - FIN-3660

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Question 1 (4 points)

Question 1 Unsaved

Edgar Whitefeather is the policyowner-insured of a five-year term life insurance policy for which the face amount remains the same throughout the term of the insurance coverage. One feature of Mr. Whitefeather’s policy gives him the right to change the term policy to a cash value life insurance policy without providing evidence that he continues to be an insurable risk. This information indicates that Mr. Whitefeather’s insurance policy can be characterized as

Question 1 options:

1)	a renewable term insurance policy

2)	an increasing term insurance policy

3)	a decreasing term insurance policy

4)	a convertible term insurance policy

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Question 2 (4 points)

Misnamed vanishing premium approaches were commonly associated with the high premium designs of current assumption whole life policies.

Question 2 options:

	1) True
	2) False

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Question 3 (4 points)

Each of the situations below describes a misrepresentation made in the application for an individual life insurance policy. The insurer discovered the misrepresentations after receiving death claims on the policies. In each case, the insurance policy contains a typical two-year incontestability provision: Claire Bodin stated on her application for insurance that she had broken her right wrist in a jogging accident, when in fact, she had broken her left wrist. Ms. Bodin died during her policy’s contestable period. Miriam Kauffman stated on her application for insurance that she had been treated for a chest cold when, in fact, she had been treated for cancer. Ms. Kauffman died of cancer three years after the policy was issued. Clayton Stuckey stated on his application for insurance that he had received a routine medical check-up on February 26, when in fact, the visit was a post-operative visit following heart bypass surgery. Mr. Stuckey died 18 months after the policy was issued. With regard to these situations, it most likely is correct to say that the insurer has the right to avoid the contract on the ground of a material misrepresentation in the application(s) submitted by

Question 3 options:

1)	Ms. Bodin, Ms. Kauffman, and Mr. Stuckey

2)	Ms. Bodin only

3)	Ms. Kauffman only

4)	Mr. Stuckey only

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Question 4 (4 points)

Antonio Castellano was the policyowner-insured of a traditional whole life insurance policy that lapsed two years ago. Mr. Castellano now wishes to reinstate the lapsed policy. There were no outstanding policy loans at the time his policy lapsed. If the reinstatement provision in his policy is typical, then the conditions Mr. Castellano must meet in order to reinstate his policy include

Question 4 options:

1)	completing a reinstatement application within the time frame stated in the reinstatement provision and presenting satisfactory evidence of his continued insurability only

2)	completing a reinstatement application within the time frame stated in the reinstatement provision and paying all back premiums plus interest on those premiums only

3)	presenting satisfactory evidence of his continued insurability and paying all back premiums plus interest on those premiums only

4)	completing a reinstatement application within the time frame stated in the reinstatement provision, providing satisfactory evidence of his continued insurability, and paying all back premiums plus interest on those premiums

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Question 5 (4 points)

The following statements are about family income coverage and credit life insurance. Select the answer choice containing the correct statement.

Question 5 options:

1)	Family income coverage is a plan of increasing term life insurance.

2)	Family income coverage provides a stated monthly income benefit amount to the beneficiary—typically the insured’s surviving spouse—if the insured dies during the term of coverage.

3)	The amount of benefit payable under a credit life insurance policy usually remains level over the duration of the loan.

4)	The policy benefit of a credit life insurance policy may be paid to a beneficiary other than the lender, or creditor, if the insured borrower dies during the policy’s term.

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Question 6 (4 points)

Tom Espeland applied to the Mosaic Insurance Company for an insurance policy on the life of his mother, Joanna. He incorrectly stated on the application that Joanna was age 50, when in fact, she was 53 years old. The policy contained a typical misstatement of age provision. Mosaic discovered the misstatement of age when processing a claim for the policy’s death benefits. In this situation, Mosaic most likely will

Question 6 options:

1)	pay the policy’s face amount based on the age stated in the insurance application

2)	reduce the policy’s face amount to the amount that the premiums paid would have purchased had Joanna’s age been stated correctly on the insurance application

3)	give the policy beneficiary the option to receive as a refund any premium amount difference caused by the misstatement rather than adjust the policy’s face amount

4)	declare the policy void because Joanna’s age was misrepresented on the insurance application

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Question 7 (4 points)

A participating life insurance policy is a type of policy under which the policyowner shares in the insurer’s divisible surplus through the receipt of policy dividends. The following statements are about these policy dividends. Select the answer choice containing the correct statement.

Question 7 options:

1)	The amount payable as an annual policy dividend is determined during the risk assessment process in an insurer’s underwriting department.

2)	Generally, dividend amounts paid on participating life insurance policies decrease substantially with the age of the policy.

3)	The terms of some life insurance policies state that the policy must be in force for two years before any policy dividends are payable.

4)	An applicant for a participating policy usually selects a dividend option during the application process and once selected, the dividend option cannot be changed over the life of the policy.

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Question 8 (4 points)

One serious disadvantage of variable universal life is that switching investment funds triggers taxable investment gains.

Question 8 options:

	1) True
	2) False

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Question 9 (4 points)

One of the difficulties of needs analysis is that the client’s desires cannot be translated into estimated costs.

Question 9 options:

	1) True
	2) False

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Question 10 (4 points)

Initially the SEC permitted insurance companies to use only established mutual funds as the investment vehicles from which policyowners could choose their variable life insurance investments.

Question 10 options:

	1) True
	2) False

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Question 11 (4 points)

Under the nonliquidating approach to funding income needs, the capital fund will eventually be totally dissipated.

Question 11 options:

	1) True
	2) False

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Question 12 (4 points)

According to laws in many countries, if the beneficiary of a life insurance policy wrongfully and intentionally kills the insured, the beneficiary (is / is not) disqualified from receiving policy proceeds. If it is proven that the policy was purchased with the intention to profit from the insured’s death, then the life insurance contract is considered (void / valid).

Question 12 options:

is / void

2)	is / valid

3)	is not / void

4)	is not / valid

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Question 13 (4 points)

Companies use select mortality tables in developing gross premiums, testing dividends and surrender values, and making profit projections for new blocks of nonparticipating business.

Question 13 options:

	1) True
	2) False

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Question 14 (4 points)

Sang-jin Kwon, age 42, pays level premiums for a type of whole life insurance policy. The policy specifies that the face amount will decrease from $300,000 to $200,000 when Mr. Kwon reaches age 60, and then decrease again from $200,000 to $100,000 when he reaches age 70. From the answer choices below, select the response that correctly identifies the type of policy Mr. Kwon purchased, and whether the annual premium Mr. Kwon pays for this policy is higher or lower than the annual premium he would pay for a continuous-premium whole life insurance policy that provided $300,000 of coverage throughout his lifetime. Type of policy Annual premium rate

Question 14 options:

1)	modified-premium policy lower than for a continuous-premium policy

2)	modified-premium policy higher than for a continuous-premium policy

3)	modified coverage policy lower than for a continuous-premium policy

4)	modified coverage policy higher than for a continuous-premium policy

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Question 15 (4 points)

Lump-sum needs for funds at death include outstanding debt that becomes due and payable at death.

Question 15 options:

	1) True
	2) False

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Question 16 (4 points)

In addition to lump-sum settlements of policy proceeds, insurers also make available to the policyowner and to the beneficiary alternative settlement options for receiving life insurance policy proceeds. With regard to these settlement options, it is correct to say

Question 16 options:

1)	that the life income option typically results in larger installment payments than would be available under the fixed amount or fixed period options

2)	that a policyowner who selects the interest option cannot place restrictions on the payee’s right to withdraw the policy proceeds

3)	that, under the fixed period option, the payee usually has the right to withdraw only a part of the policy proceeds during the payment period

4)	that, under the fixed amount option, the insurer pays equal installments of a stated amount to the payee until the policy proceeds, plus the interest earned, are exhausted

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Question 17 (4 points)

One benefit that may be added to an individual life insurance policy is the disability income benefit. One true statement about a supplemental disability income benefit is that

Question 17 options:

1)	the insured must be totally disabled to receive the benefit

2)	the insurer begins paying benefits at the start of the disability

3)	life insurance policies that include a disability income benefit rarely include a waiver of premium for disability (WP) benefit as well

4)	the amount of the monthly disability income benefit is a percentage of the insured’s current earnings

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Question 18 (4 points)

Life insurance benefits payable directly to the beneficiary will not be subject to delays in settling the estate.

Question 18 options:

	1) True
	2) False

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Question 19 (4 points)

Scott Herbermann is the policyowner-insured of a $200,000 whole life insurance policy. The policy includes a supplemental benefit rider that gives Mr. Herbermann the right to purchase $25,000 of additional whole life insurance at age 34, age 37, and age 40, without submitting evidence of insurability. This information indicates that Mr. Herbermann’s policy includes the type of supplemental benefit known as

Question 19 options:

1)	an additional insured rider

2)	a paid-up additions option benefit

3)	a guaranteed insurability (GI) benefit

4)	credit life insurance

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Question 20 (4 points)

Adjustable life policies permit policyowners to change premium payment amounts without the insurer’s prior agreement.

Question 20 options:

	1) True
	2) False

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Question 21 (4 points)

Indeterminate premium whole life is a variation of current assumption whole life.

Question 21 options:

	1) True
	2) False

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Question 22 (4 points)

Kaitlin Miller, age 35, purchased a $250,000 30-year return of premium (ROP) term insurance policy from the Kumquat Insurance Company. Ms. Miller paid annual premiums of $700. Ms. Miller paid all required premiums and was alive at the end of the 30-year term when the policy expired. This information indicates that

Question 22 options:

1)	Ms. Miller’s policy expired without Kumquat making any payment to anyone

2)	Kumquat paid $21,000 to Ms. Miller

3)	Kumquat paid $250,000 to the beneficiary of Ms. Miller’s policy

4)	Kumquat paid $250,000 to Ms. Miller

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Question 23 (4 points)

The mortality rate for a given age is a measure of the average future lifetime for a representative group of persons at that age.

Question 23 options:

	1) True
	2) False

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Question 24 (4 points)

Policies that contain a contingent deferred sales charge do not have surrender charges.

Question 24 options:

	1) True
	2) False

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Question 25 (4 points)

Surrendering a life insurance policy for its cash value generally terminates any reinstatement rights.

Question 25 options:

	1) True
	2) False

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