Chapter 4 Mod 2 Quiz

The limited payment policy allows the policyholder(s) to pay for the entire policy in a shorter period of time. The correct answer is: Limited payment policies

Limited payment policies are suitable for clients who do not want to pay premiums for their entire lives or people who are nearing retirement with liquid capital who don't already have permanent life insurance. The correct answer is: Josh, a 25-year old successful entrepreneur with extra funds, who doesn't want to pay life insurance premiums when he retires.

The cash value in a whole life policy is a nonforfeiture value, meaning that said funds cannot be forfeited, and the policyowner is entitled to such values. The correct answer is: The cash value in a permanent life insurance policy is not a nonforfeiture benefit.

Unpaid policy loans are deducted from the policy death benefit upon maturation. The correct answer is: It may be used as a policy loan without affecting the death benefit.

Because permanent (whole) life insurance protects the insured for their entire life, premiums are due each year until the insured dies. This may prove to be expensive when the insured is retired, and does not earn an income. The correct answer is: The premium-paying period may extend beyond the income-earning years.

When the cash value in a life insurance policy equals the face amount, the policy endows, or pays out. Life insurance policies may not endow earlier than the insured's 95th birthday. The correct answer is: The policy endows.

The main advantage of a single premium policy is that the premium is less than it would be if it stretched over several or many years. The correct answer is: The total premium is lower.

Because whole life policies include cash values in addition to net insurance, the premiums must cover mortality costs, expenses and the savings amount. The correct answer is: They must cover cash values, net insurance and mortality costs, as well as expenses.

Whole life insurance provides living benefits, including cash values and policy loans. The correct answer is: Whole

Limited payment whole life policies provide life insurance protection for the insured's entire life, but premiums are paid for a limited period of time, such as 20 or 25 years. The correct answer is: 20-pay life

Compared to limited payment and single premium policies, straight life has the lowest premium. The correct answer is: Straight life

Limited pay whole life policies grow cash value faster than ordinary (straight) whole life policies because the premium paying period is restricted to a limited number of years. In this example, the premium paying period is restricted to 25 years. The correct answer is: 25-pay life

Unpaid policy loans are deducted from the policy death benefit upon maturation. The correct answer is: Cash value may be used as a policy loan, without affecting the death benefit.

Normally the premium payments are higher for a shorter payment period. The correct answer is: 20-payment whole life

Cash values must begin to accrue by the third policy year. The correct answer is: 3rd

As the name indicates, a limited payment life insurance policy has a shorter premium-paying period compared to a straight life policy. The correct answer is: Premium-paying period is longer.

Limited pay whole life policies grow cash value faster than ordinary (straight) whole life policies because the premium paying period is restricted to a limited number of years. In this example, the 25-pay life policy grows cash value the fastest because the premium paying period is restricted to 25 years, whereas the 40-pay life policy premium paying period is 40 years, which grows cash value in a longer period of time. The correct answer is: 25-pay life

Indeterminate premium whole life policies provide a lower initial premium that can fluctuate up to a maximum premium as stated in the policy. The correct answer is: Indeterminate premium

Whole life insurance cash values are a nonforfeiture value that the policyowner may withdraw in part or in whole. If all policy cash values are withdrawn and no further premium payments are made, the policy will lapse. The policyowner may cease paying premiums and surrender the policy for its cash value. The correct answer is: None of the above

Ordinary whole life premiums are fixed. The fixed premiums provide the policy with a guaranteed minimum cash value and fixed death benefit. The correct answer is: Fixed

As the name suggests, a single premium whole life policy allows the insured to pay the entire premium in one lump-sum. The correct answer is: Single premium whole life

With a limited payment (LP) whole life policy, the insured is covered for their entire life, but premiums are paid for a limited time. The correct answer is: The insured is covered for their entire life and premiums are paid for a restricted period of time.

The primary differences between limited payment whole life and ordinary whole life are: 1.) foreshortened premium-payment period, and 2.) cash value accumulates faster. Do not confuse limited payment with an earlier maturation date _ limited payment whole life policies do not pay out before ordinary whole life policies. Limited payment policies are simply paid up sooner. The correct answer is: The policy pays out earlier.

Ordinary whole life policies have a fixed guaranteed death benefit. The correct answer is: Fixed

Whole life policies do not offer the opportunity to change components. The correct answer is: Opportunity to change components of the policy

Limited payment and ordinary whole life policies both mature when the insured reaches age 100, or upon the insured's death, whichever occurs first. Limited payment policies have a shorter premium-paying period. The correct answer is: The death benefit is paid out earlier.

The cash value and death benefit are guaranteed by the insurer. The correct answer is: Both cash value and death benefit

The three basic types of whole life insurance are: continuous premium, limited payment, and single premium. Interim term insurance lasts for one year or less, as a stepping stone coverage for people who intend to purchase permanent coverage. The correct answer is: Interim term

The face amount of a single premium whole life policy has a level face amount. The correct answer is: Face amount is variable

The interest earned in whole life policies grows tax-deferred. This means that interest is not taxable in the year it is earned. The correct answer is: Interest earned on cash value is taxable in the year it is earned.