Chapter 3 - Exam (Life Policies + Policies
Provisions Questions Latest Update 2026
(Questions and Answers-Verified solutions
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium
for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level
thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is
this? - CORRECT ANSWERS Modified Premium Life
(Modified whole-life policies are distinguished by premiums that are lower than typical whole-life
premiums during the first few years (usually five) and then higher than typical thereafter).
Which of these needs is satisfied by Adjustable Life insurance? - CORRECT ANSWERS
Insured's need for flexible premiums
(As financial needs and objectives change, the policy owner can make adjustments to the premium and
face amount).
A policy that becomes a Modified Endowment Contract (MEC): - CORRECT ANSWERS
Will lose many of its tax advantages
(When a policy becomes MEC, many of the tax advantages are lost).
Which of the following types of policies pay a benefit if the insured goes blind? - CORRECT ANSWERS
AD&D (Accidental Death and Dismemberment)
(This policy can provide financial benefits if an insured is killed, loses a limb, suffers blindness, or is
paralyzed in a covered accident).
, What type of life insurance gives the greatest amount of coverage for a limited period of time? -
CORRECT ANSWERS Term Life
K pays a 20,000 20-year Endowment policy for 10 years and dies from an automobile accident. How
much will the insurance company pay the beneficiary? - CORRECT ANSWERS
20,000 death benefit
(If the insured dies before the endowments maturity, the policy's face value - also known as the "death
benefit" - is paid in a lump sum to any beneficiaries.
The most important factor to consider when determining whether to convert term insurance at the
insured's attained age or the insured's original age is: - CORRECT ANSWERS The
cost.
(The cost of insurance is most important when an insured owner is trying to decide whether to convert
term insurance at the insured's original age or the insured's attained age).
Under a Graded Premium Whole Life Policy: - CORRECT ANSWERS the premium
increases each year during the early years (Usually first five years) of the contract and remains the same
after that time
Stranger-Owner Life Insurance (STOLI) is when a person purchases life insurance only to sell a (n): -
CORRECT ANSWERS Third-party with no insurable interest
(...who would therefore be unable to legally purchase the original policy. STOLI is a way to circumvent
the insurable interest requirement when purchasing a life insurance policy.)
*To legally purchase life insurance on someone else, the purchaser must have an insurable interest in
that person's life. STOLI is prohibited in most states.
Provisions Questions Latest Update 2026
(Questions and Answers-Verified solutions
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium
for the first 5 years. The premium then increases to $900 per year in the sixth year, and remains level
thereafter. The policy's death benefit also remains at $100,000. Which type of Life Insurance policy is
this? - CORRECT ANSWERS Modified Premium Life
(Modified whole-life policies are distinguished by premiums that are lower than typical whole-life
premiums during the first few years (usually five) and then higher than typical thereafter).
Which of these needs is satisfied by Adjustable Life insurance? - CORRECT ANSWERS
Insured's need for flexible premiums
(As financial needs and objectives change, the policy owner can make adjustments to the premium and
face amount).
A policy that becomes a Modified Endowment Contract (MEC): - CORRECT ANSWERS
Will lose many of its tax advantages
(When a policy becomes MEC, many of the tax advantages are lost).
Which of the following types of policies pay a benefit if the insured goes blind? - CORRECT ANSWERS
AD&D (Accidental Death and Dismemberment)
(This policy can provide financial benefits if an insured is killed, loses a limb, suffers blindness, or is
paralyzed in a covered accident).
, What type of life insurance gives the greatest amount of coverage for a limited period of time? -
CORRECT ANSWERS Term Life
K pays a 20,000 20-year Endowment policy for 10 years and dies from an automobile accident. How
much will the insurance company pay the beneficiary? - CORRECT ANSWERS
20,000 death benefit
(If the insured dies before the endowments maturity, the policy's face value - also known as the "death
benefit" - is paid in a lump sum to any beneficiaries.
The most important factor to consider when determining whether to convert term insurance at the
insured's attained age or the insured's original age is: - CORRECT ANSWERS The
cost.
(The cost of insurance is most important when an insured owner is trying to decide whether to convert
term insurance at the insured's original age or the insured's attained age).
Under a Graded Premium Whole Life Policy: - CORRECT ANSWERS the premium
increases each year during the early years (Usually first five years) of the contract and remains the same
after that time
Stranger-Owner Life Insurance (STOLI) is when a person purchases life insurance only to sell a (n): -
CORRECT ANSWERS Third-party with no insurable interest
(...who would therefore be unable to legally purchase the original policy. STOLI is a way to circumvent
the insurable interest requirement when purchasing a life insurance policy.)
*To legally purchase life insurance on someone else, the purchaser must have an insurable interest in
that person's life. STOLI is prohibited in most states.
