NC LIFE AND HEALTH INSURANCE
STUDY QUESTIONS & COMPLETE
CORRECT ANSWERS
Which of the following is NOT a characteristic of universal life insurance?
A Flexible death benefit
B Cash account
C Fixed premium
D Unbundled premium - CORRECT ANSWER C
Universal life policies allow the policy owner to increase the amount of premium going
into the policy and to later decrease it again. They may even skip a premium payment.
The rest of the features apply to universal life policies.
Which of the following would help prevent a universal life policy from lapsing?
A Corridor of insurance
B Target premium
C Face amount
D Adjustable premium - CORRECT ANSWER B
The target premium is a recommended amount that should be paid on a policy in order
to cover the cost of insurance protection and to keep the policy in force throughout its
lifetime.
A 20-year family income policy was purchased effective April 1, 2001. The insured died
four months later, on August 1, 2001. The beneficiary receives monthly income for
A10 years.
B19 years and 8 months.
C9 years and 8 months.
D20 years. - CORRECT ANSWER B
Monthly benefits paid for the remainder of the 20 year benefit period.
When the breadwinner that is insured by a Family Policy dies, what rights are provided
to other family members that are covered under the policy?
AThey can convert their coverage to permanent life insurance with evidence of
insurability.
BFamily members are not provided any rights.
CThey can surrender the coverage for its cash value.
DThey can convert their coverage to permanent life insurance without evidence of
insurability. - CORRECT ANSWER D
Family members may convert their term coverage to permanent insurance if requested
within the time stated in the policy.
,Which of the following types of insurance policies would provide the greatest amount of
protection for a temporary period during which an insured will have limited financial
resources?
AVariable life
BTerm
CWhole Life
DAnnuity - CORRECT ANSWER B
Term insurance provides a death benefit only; cost per $1,000 of coverage is less than
other types of policies that create cash values.
Review Content
A Universal Life insurance policy has two types of interest rate that are called
AFixed and Variable
BMinimum and Target
CGuaranteed and Current
DOption A and Option B - CORRECT ANSWER C
The insurer credits the cash value in the policy with a current (nonguaranteed) interest
rate and backs the cash value with a contract (lower guaranteed) rate of interest.
What are the two components of a universal policy?
AInsurance and investments
BMortality cost and interest
CSeparate account and policy loans
DInsurance and cash account - CORRECT ANSWER D
A universal policy has two components: an insurance component and a cash account.
The insurance component of a universal life policy is always annual renewable term
insurance. The cash account accumulates on a tax deferred basis each year and earns
either the guaranteed contract rate or the current rate, whichever is higher.
What is the purpose of establishing the target premium for a universal life policy?
ATo pay up the policy faster
BTo cover all policy expenses
CTo keep the policy in force
DTo accumulate cash value faster - CORRECT ANSWER C
The target premium is a recommended amount that should be paid on a policy in order
to cover the cost of insurance protection and to keep the policy in force throughout its
lifetime.
Which of the following is an example of a limited-pay life policy?
ALevel Term Life
BStraight Life
CLife Paid-up at Age 65
DRenewable Term to Age 70 - CORRECT ANSWER C
Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65.
The policy endows when the insured turns 100. It is the premium paying period that is
limited, not the maturity.
, An insured purchased a 10-year level term life policy that is guaranteed renewable and
convertible. What happens at the end of the 10-year term?
AThe insured must provide evidence of insurability to renew the policy.
BThe insured may only convert the policy to another term policy.
CThe insured may renew the policy for another 10 years at the same premium rate.
DThe insured may renew the policy for another 10 years, but at a higher premium rate. -
CORRECT ANSWER D
Policies that are guaranteed renewable and convertible may be renewed, without
evidence of insurability, for another like term, or may be converted to permanent
insurance, without evidence of insurability.
A father purchases a life insurance policy on his teenage daughter and adds the Payor
Benefit rider. In which of the following scenarios will the rider waive the payment of
premium?
AIf the daughter is disabled for more than 3 months
BIf the daughter is disabled for any length of time
CIf the father is disabled for more than 6 months
DIf the father is disabled for at least a year - CORRECT ANSWER C
Payor benefit only pays if the owner, the father in this example, is disabled for at least 6
months.
An insured has a life insurance policy that requires him to only pay premiums for a
specified number of years until the policy is paid up. What kind of policy is it?
AGraded Premium Life
BLimited-pay Life
CVariable Life
DAdjustable Life - CORRECT ANSWER B
In limited-pay policies, the premiums for coverage will be completely paid-up well before
age 100, usually after a specified number of years.
Which of the following allows the insurer to relieve a minor insured from premium
payments if the minor's parents have died or become disabled?
AJumping Juvenile
BJuvenile Premium Provision
CWaiver of Premium
DPayor Benefit - CORRECT ANSWER D
If the payor (usually a parent or guardian) becomes disabled for at least 6 months or
dies, the insurer will waive the premiums until the minor reaches a certain age, such as
21.
All of the following are true regarding a decreasing term policy EXCEPT
AThe payable premium amount steadily declines throughout the duration of the
contract.
BIt has a lower premium than level term.
STUDY QUESTIONS & COMPLETE
CORRECT ANSWERS
Which of the following is NOT a characteristic of universal life insurance?
A Flexible death benefit
B Cash account
C Fixed premium
D Unbundled premium - CORRECT ANSWER C
Universal life policies allow the policy owner to increase the amount of premium going
into the policy and to later decrease it again. They may even skip a premium payment.
The rest of the features apply to universal life policies.
Which of the following would help prevent a universal life policy from lapsing?
A Corridor of insurance
B Target premium
C Face amount
D Adjustable premium - CORRECT ANSWER B
The target premium is a recommended amount that should be paid on a policy in order
to cover the cost of insurance protection and to keep the policy in force throughout its
lifetime.
A 20-year family income policy was purchased effective April 1, 2001. The insured died
four months later, on August 1, 2001. The beneficiary receives monthly income for
A10 years.
B19 years and 8 months.
C9 years and 8 months.
D20 years. - CORRECT ANSWER B
Monthly benefits paid for the remainder of the 20 year benefit period.
When the breadwinner that is insured by a Family Policy dies, what rights are provided
to other family members that are covered under the policy?
AThey can convert their coverage to permanent life insurance with evidence of
insurability.
BFamily members are not provided any rights.
CThey can surrender the coverage for its cash value.
DThey can convert their coverage to permanent life insurance without evidence of
insurability. - CORRECT ANSWER D
Family members may convert their term coverage to permanent insurance if requested
within the time stated in the policy.
,Which of the following types of insurance policies would provide the greatest amount of
protection for a temporary period during which an insured will have limited financial
resources?
AVariable life
BTerm
CWhole Life
DAnnuity - CORRECT ANSWER B
Term insurance provides a death benefit only; cost per $1,000 of coverage is less than
other types of policies that create cash values.
Review Content
A Universal Life insurance policy has two types of interest rate that are called
AFixed and Variable
BMinimum and Target
CGuaranteed and Current
DOption A and Option B - CORRECT ANSWER C
The insurer credits the cash value in the policy with a current (nonguaranteed) interest
rate and backs the cash value with a contract (lower guaranteed) rate of interest.
What are the two components of a universal policy?
AInsurance and investments
BMortality cost and interest
CSeparate account and policy loans
DInsurance and cash account - CORRECT ANSWER D
A universal policy has two components: an insurance component and a cash account.
The insurance component of a universal life policy is always annual renewable term
insurance. The cash account accumulates on a tax deferred basis each year and earns
either the guaranteed contract rate or the current rate, whichever is higher.
What is the purpose of establishing the target premium for a universal life policy?
ATo pay up the policy faster
BTo cover all policy expenses
CTo keep the policy in force
DTo accumulate cash value faster - CORRECT ANSWER C
The target premium is a recommended amount that should be paid on a policy in order
to cover the cost of insurance protection and to keep the policy in force throughout its
lifetime.
Which of the following is an example of a limited-pay life policy?
ALevel Term Life
BStraight Life
CLife Paid-up at Age 65
DRenewable Term to Age 70 - CORRECT ANSWER C
Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65.
The policy endows when the insured turns 100. It is the premium paying period that is
limited, not the maturity.
, An insured purchased a 10-year level term life policy that is guaranteed renewable and
convertible. What happens at the end of the 10-year term?
AThe insured must provide evidence of insurability to renew the policy.
BThe insured may only convert the policy to another term policy.
CThe insured may renew the policy for another 10 years at the same premium rate.
DThe insured may renew the policy for another 10 years, but at a higher premium rate. -
CORRECT ANSWER D
Policies that are guaranteed renewable and convertible may be renewed, without
evidence of insurability, for another like term, or may be converted to permanent
insurance, without evidence of insurability.
A father purchases a life insurance policy on his teenage daughter and adds the Payor
Benefit rider. In which of the following scenarios will the rider waive the payment of
premium?
AIf the daughter is disabled for more than 3 months
BIf the daughter is disabled for any length of time
CIf the father is disabled for more than 6 months
DIf the father is disabled for at least a year - CORRECT ANSWER C
Payor benefit only pays if the owner, the father in this example, is disabled for at least 6
months.
An insured has a life insurance policy that requires him to only pay premiums for a
specified number of years until the policy is paid up. What kind of policy is it?
AGraded Premium Life
BLimited-pay Life
CVariable Life
DAdjustable Life - CORRECT ANSWER B
In limited-pay policies, the premiums for coverage will be completely paid-up well before
age 100, usually after a specified number of years.
Which of the following allows the insurer to relieve a minor insured from premium
payments if the minor's parents have died or become disabled?
AJumping Juvenile
BJuvenile Premium Provision
CWaiver of Premium
DPayor Benefit - CORRECT ANSWER D
If the payor (usually a parent or guardian) becomes disabled for at least 6 months or
dies, the insurer will waive the premiums until the minor reaches a certain age, such as
21.
All of the following are true regarding a decreasing term policy EXCEPT
AThe payable premium amount steadily declines throughout the duration of the
contract.
BIt has a lower premium than level term.
