#1
Which of the following is NOT a type of life insurance?
Health insurance
ExplanationLife insurance typically covers financial loss due to death, not health-related expenses.
#2
What is the primary purpose of life insurance?
To protect against financial loss resulting from death
ExplanationLife insurance aims to provide financial security for dependents in the event of the insured's death.
#3
What is the purpose of a beneficiary designation in a life insurance policy?
To specify who receives the death benefit
ExplanationThe beneficiary designation ensures that the death benefit is paid to the intended recipient(s) upon the insured's death.
#4
Which of the following factors typically affects the cost of life insurance premiums?
All of the above
ExplanationFactors such as age, health, lifestyle, and coverage amount influence life insurance premiums.
#5
What is the difference between term life insurance and whole life insurance?
Term life insurance provides coverage for a specific period, while whole life insurance covers the insured's entire life.
ExplanationTerm life insurance offers coverage for a fixed duration, while whole life insurance provides lifelong coverage with cash value accumulation.
#6
Which of the following statements about the death benefit in life insurance is true?
It is the amount of money paid to the beneficiary upon the death of the insured.
ExplanationThe death benefit is the sum paid to the beneficiary upon the insured's death, providing financial support to surviving dependents.
#7
What is the surrender value of a life insurance policy?
The amount the insured receives if they cancel the policy before maturity
ExplanationSurrender value represents the cash value available to the policyholder upon cancellation of the policy before its maturity date, serving as a form of early withdrawal.
#8
Which of the following statements about term life insurance is true?
It provides coverage for a specific period of time
ExplanationTerm life insurance offers coverage for a predetermined duration, typically at lower premiums than whole life insurance.
#9
What is a cash value in a life insurance policy?
The savings component that grows over time
ExplanationCash value serves as a savings account within the policy, accumulating over time and potentially available to the policyholder.
#10
What is the main advantage of purchasing life insurance at a young age?
Lower premiums
ExplanationYounger individuals typically qualify for lower premiums due to lower perceived risk of mortality and insurability.
#11
What is the purpose of a life insurance trust?
To manage and distribute life insurance proceeds according to the insured's wishes
ExplanationA life insurance trust ensures proper management and distribution of life insurance proceeds in accordance with the insured's directives, often for estate planning purposes.
#12
What is the significance of the underwriting process in life insurance?
It calculates the premium amount based on the insured's risk profile.
ExplanationUnderwriting assesses the risk associated with insuring an individual, determining the appropriate premium based on factors such as health, lifestyle, and age.
#13
Which of the following life insurance riders provides additional coverage for specific events like accidental death or disability?
Accidental death and dismemberment rider
ExplanationThis rider offers supplemental coverage in the event of accidental death or serious injury, providing additional financial protection beyond the base policy.
#14
What is the purpose of the incontestability clause in a life insurance policy?
To prevent the insurance company from contesting the validity of the policy after a certain period
ExplanationThe incontestability clause protects policyholders by preventing insurers from challenging the policy's validity after a specified period, typically after the policy has been in force for a certain duration.
#15
Which of the following is a feature of universal life insurance?
Flexible premiums and death benefits
ExplanationUniversal life insurance allows policyholders to adjust premiums and death benefits over time to suit their changing needs.
#16
Which of the following is a tax advantage of life insurance?
Tax-free death benefit
ExplanationLife insurance death benefits are typically paid out tax-free, providing a financial advantage to beneficiaries.
#17
What is the primary advantage of purchasing a life insurance policy with a guaranteed insurability rider?
It guarantees the insured's insurability for future coverage without requiring additional underwriting.
ExplanationThis rider ensures the policyholder's ability to purchase additional coverage in the future without undergoing further medical underwriting, offering financial security against future insurability risks.
#18
What is the primary difference between whole life insurance and universal life insurance?
Whole life insurance provides lifetime coverage, while universal life insurance offers coverage for a specified period
ExplanationWhole life insurance guarantees coverage for the insured's entire life, while universal life insurance provides flexible coverage duration and premium payments.
#19
What is the primary benefit of a joint life insurance policy?
Lower premiums compared to individual policies
ExplanationJoint life insurance policies cover two individuals under a single policy, often resulting in lower premiums compared to purchasing separate policies for each individual.