Hs 311 Insurance, Ch 8--T/f

Front 1

An individual's human life value may arise out of family or business relationships.

Back 1

True

Front 2

Yearly renewable term insurance pays the policy face value if the insured is alive at the end of the protection period.

Back 2

True

Front 3

Yearly renewable term insurance premiums increase each year because of increases in the death rate at increasing ages.

Back 3

True

Front 4

With a level-premium whole life policy, premiums in excess of the policy's share of death claims in the early years of the contract are accumulated with interest in a reserve.

Back 4

True

Front 5

To safeguard against adverse selection, insurers that offer term insurance on an individual basis typically allow it to be renewed, regardless of the insured's age at the time of renewal.

Back 5

False. Insurers offering term insurance on an individual basis often place a limit on the period during which the insurance can be renewed, in order to protect against adverse selection.

Front 6

With a whole life policy, the policyowner receives a combination of increasing cash values and decreasing (pure insurance) protection.

Back 6

True

Front 7

With renewable term insurance, the policyowner/insured would be permitted to renew the policy if he or she had contracted a terminal disease prior to a renewal date.

Back 7

True

Front 8

Decreasing term life insurance is sold primarily by agents who also sell property insurance.

Back 8

False. Decreasing term insurance is sold primarily through mortgage lenders.

Front 9

Term insurance tends to be suitable when the need for protection is either purely temporary or when it is permanent but the insured temporarily cannot afford the premiums for permanent insurance.

Back 9

True

Front 10

When using the convertibility option with the attained age method, the policyowner has the option of selecting either the insurer's current contract or the contract that was in use when the original policy was issued.

Back 10

False. When the attained age method is used, the insurer uses the contract currently in use. The contract originally in use is available only when the original-age (retroactive) method is used.

Front 11

Favorable investment results account for the largest portion of policyowner dividends paid by participating policies.

Back 11

True

Front 12

Because of federal income tax reform in 1984, endowment policies play a major role in financial planning in the United States today.

Back 12

False. Federal income tax reform in 1984 eliminated the tax-free buildup of cash values in most endowment policies, so few endowment policies are sold today.

Front 13

In exchange for investment flexibility, variable life insurance shifts the investment risk to the policyowner and provides no guarantee of either interest rate or minimum cash value.

Back 13

True

Front 14

With variable life insurance, cash values reflect investment performance, but death benefit amounts do not.

Back 14

False. Both the cash value and the level of death benefits reflect investment performance.

Front 15

Variable life insurance policies may be sold without an accompanying prospectus.

Back 15

False. Variable life insurance can be sold only with an accompanying prospectus.

Front 16

The surrender charge in a universal life policy increases as the insured ages.

Back 16

False. Surrender charges are commonly levied only during the first 10 or 15 years of the contract.

Front 17

With universal life insurance, the policyowner can skip premium payments (after the first year) and the policy will stay in force as long as there is enough money in the policy's cash value account to cover current mortality and expense charges and any applicable surrender charges.

Back 17

True

Front 18

With universal life insurance, death benefits are always level unless the cash value gets too close to the death benefit to comply with federal income tax law.

Back 18

False. Under the level death benefit design, death benefits are level unless the cash value gets too close to the death benefit to comply with the federal income tax law, in which case the death benefit will start increasing. However, under the increasing death benefit design, the death benefit will increase or decrease with the policy's cash value.

Front 19

Indexed universal life insurance incorporates the premium flexibility features of the universal life policy with the policyowner-directed investment aspects of variable life products.

Back 19

False. The performance of indexed universal life policies is based on an external index, not on investments selected by the policyowner.

Front 20

A survivorship policy is payable upon the death of the last of two or more lives insured under the single contract.

Back 20

True

Front 21

Most group life coverage is provided without individual evidence of insurability.

Back 21

True