#1
Which of the following is a common type of life insurance that provides coverage for a specified term?
Term life insurance
ExplanationProvides coverage for a specific period and typically has lower premiums.
#2
What is the primary characteristic of whole life insurance?
Builds cash value over time
ExplanationAccumulates cash value which can be borrowed against or withdrawn.
#3
What is the main advantage of purchasing a life insurance policy at a younger age?
Lower premiums
ExplanationYouth typically equates to lower risk and hence lower premiums.
#4
Which type of life insurance policy provides a combination of life insurance coverage and an investment component?
Universal life insurance
ExplanationOffers both life insurance coverage and an investment savings component.
#5
What does the term 'rider' refer to in the context of life insurance?
Additional coverage added to the policy
ExplanationExtra benefits or coverage enhancements beyond the base policy.
#6
What is the primary benefit of having a 'paid-up' life insurance policy?
No further premium payments required
ExplanationPolicyholder no longer needs to pay premiums but maintains coverage.
#7
In a universal life insurance policy, what can the policyholder adjust over time?
Premium payments
ExplanationFlexibility to change premium payments and death benefits.
#8
What is the primary feature of variable life insurance?
Investment component
ExplanationAllows policyholders to invest premiums in various investment options.
#9
What is the purpose of the cash value component in a life insurance policy?
Serves as an investment that can be accessed by the policyholder
ExplanationActs as a savings component that can be utilized during the policyholder's lifetime.
#10
Which of the following statements about term life insurance is correct?
Has lower premiums compared to other types of life insurance
ExplanationOffers temporary coverage at generally lower costs.
#11
What is the primary difference between term life insurance and whole life insurance?
Policy duration
ExplanationTerm life offers coverage for a specific period, while whole life is lifelong coverage.
#12
Which of the following factors is typically considered when determining life insurance premiums?
Gender
ExplanationGender can influence life expectancy, impacting risk and thus premiums.
#13
In which type of life insurance policy does the cash value fluctuate based on market performance?
Variable life insurance
ExplanationCash value is tied to the performance of underlying investments.
#14
In the context of life insurance, what is underwriting?
Evaluating the risk and determining eligibility
ExplanationAssessing an applicant's risk factors to determine insurability and premium rates.
#15
Which life insurance policy allows the policyholder to participate in investment earnings and losses?
Variable life insurance
ExplanationPolicyholders can invest premiums and bear investment risks.
#16
What is the significance of the suicide clause in a life insurance policy?
Excludes coverage for self-inflicted injuries
ExplanationPrevents payouts for deaths resulting from suicide within a certain timeframe.
#17
In a life insurance policy, what is the purpose of the 'contestability period'?
Time when the insurance company can contest a claim due to misrepresentation
ExplanationPeriod during which insurers can investigate and deny claims for misrepresentation.
#18
Which type of life insurance policy allows the policyholder to change the death benefit amount after the policy is issued?
Universal life insurance
ExplanationOffers flexibility to adjust death benefits based on changing needs.