CFP - Insurance Planning: Life Insurance Exam with all
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All of the following are settlement options except:
A. Fixed period payments.
B. Fixed amount installments.
C. Reduced paid-up insurance.
D. Interest Only ✔Correct Answer-C. Reduced paid-up insurance. (non-forfeiture provision)
Which of the following is true of a Modified Endowment Contract (MEC)?
I. No money can be withdrawn from the contract without incurring a 10% penalty.
II. Once a contract is a MEC, it remains so even after a 1035 Exchange for a different policy.
III. Any withdrawals are made on a LIFO basis.
IV. The contract owner can borrow the money out of the policy without incurring the penalty.
✔Correct Answer-II and III only.
If a permanent life policy provides a guaranteed option to purchase additional insurance on the
original policy, that option will include all of the following features in the new policy, except:
A. Guaranteed purchase option.
B. Disability waiver of premium.
C. Accidental death benefit.
D. Non-forfeiture provisions. ✔Correct Answer-A. Guaranteed purchase option.
Your client is considering the purchase of a Variable Universal Life (VUL) policy and asks for your
advice about this type of insurance. Which of the following is NOT a feature of this type of
policy?
A. Flexibility as to premium payments.
B. Choice as to investment funds.
C. Availability of a guaranteed minimum death benefit.
D. Availability of a guaranteed minimum cash value. ✔Correct Answer-D. Availability of a
guaranteed minimum cash value.
, The following type of insurance would be described as an unbundled policy where the company
selects the places of investment:
A. Universal life insurance.
B. Interest sensitive life insurance.
C. Variable universal life insurance.
D. Adjustable life insurance. ✔Correct Answer-A. Universal life insurance.
The best life insurance policy for the payment of federal estate taxes for a 50-year old couple
with illiquid assets is:
A. An individual whole-life policy on each spouse on a cross-ownership basis.
B. A joint and last-to-die life insurance policy owned by an irrevocable trust.
C. A joint last-to-die life insurance policy owned by the spouse with the larger estate.
D. A joint and last-to-die life insurance policy owned by the spouse with the smaller estate.
✔Correct Answer-B. A joint and last-to-die life insurance policy owned by an irrevocable trust.
Direct recognition programs used with life insurance policies are best described in the following
statement:
A. Any amount of cash that is removed from the policy is reflected in a decrease in the amount
of dividends and interest paid on that policy.
B. Mutual companies that are owned by their policy holders directly pay profits to the policy
owners.
C. Very large policies indicate a recognized tendency of the company to write primarily term
insurance.
D. If the agent has received many awards from his company, he would be a good one to select.
✔Correct Answer-A. Any amount of cash that is removed from the policy is reflected in a
decrease in the amount of dividends and interest paid on that policy.
With a "__________________" policy, when you borrow money from your policy the insurance
company first subtracts the amount of the loan from the cash value, then calculates the
dividend on the lesser amount. For example. If you have $100,000 cash value and borrow
$10,000, your dividend will be based on the $90,000 cash value amount. ✔Correct Answer-
Direct recognition
Which of the following statements are true regarding the ownership of individual life insurance?
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Already Graded A+
All of the following are settlement options except:
A. Fixed period payments.
B. Fixed amount installments.
C. Reduced paid-up insurance.
D. Interest Only ✔Correct Answer-C. Reduced paid-up insurance. (non-forfeiture provision)
Which of the following is true of a Modified Endowment Contract (MEC)?
I. No money can be withdrawn from the contract without incurring a 10% penalty.
II. Once a contract is a MEC, it remains so even after a 1035 Exchange for a different policy.
III. Any withdrawals are made on a LIFO basis.
IV. The contract owner can borrow the money out of the policy without incurring the penalty.
✔Correct Answer-II and III only.
If a permanent life policy provides a guaranteed option to purchase additional insurance on the
original policy, that option will include all of the following features in the new policy, except:
A. Guaranteed purchase option.
B. Disability waiver of premium.
C. Accidental death benefit.
D. Non-forfeiture provisions. ✔Correct Answer-A. Guaranteed purchase option.
Your client is considering the purchase of a Variable Universal Life (VUL) policy and asks for your
advice about this type of insurance. Which of the following is NOT a feature of this type of
policy?
A. Flexibility as to premium payments.
B. Choice as to investment funds.
C. Availability of a guaranteed minimum death benefit.
D. Availability of a guaranteed minimum cash value. ✔Correct Answer-D. Availability of a
guaranteed minimum cash value.
, The following type of insurance would be described as an unbundled policy where the company
selects the places of investment:
A. Universal life insurance.
B. Interest sensitive life insurance.
C. Variable universal life insurance.
D. Adjustable life insurance. ✔Correct Answer-A. Universal life insurance.
The best life insurance policy for the payment of federal estate taxes for a 50-year old couple
with illiquid assets is:
A. An individual whole-life policy on each spouse on a cross-ownership basis.
B. A joint and last-to-die life insurance policy owned by an irrevocable trust.
C. A joint last-to-die life insurance policy owned by the spouse with the larger estate.
D. A joint and last-to-die life insurance policy owned by the spouse with the smaller estate.
✔Correct Answer-B. A joint and last-to-die life insurance policy owned by an irrevocable trust.
Direct recognition programs used with life insurance policies are best described in the following
statement:
A. Any amount of cash that is removed from the policy is reflected in a decrease in the amount
of dividends and interest paid on that policy.
B. Mutual companies that are owned by their policy holders directly pay profits to the policy
owners.
C. Very large policies indicate a recognized tendency of the company to write primarily term
insurance.
D. If the agent has received many awards from his company, he would be a good one to select.
✔Correct Answer-A. Any amount of cash that is removed from the policy is reflected in a
decrease in the amount of dividends and interest paid on that policy.
With a "__________________" policy, when you borrow money from your policy the insurance
company first subtracts the amount of the loan from the cash value, then calculates the
dividend on the lesser amount. For example. If you have $100,000 cash value and borrow
$10,000, your dividend will be based on the $90,000 cash value amount. ✔Correct Answer-
Direct recognition
Which of the following statements are true regarding the ownership of individual life insurance?
