2025 Alabama life and health insurance
questions with complete solutions
___________ on a joint life policy are determined by averaging the ages of both
insureds. - ✔️✔️Premium rates
Although the insurer guarantees a ________________________, there is also potential
for the policyowner to get a ____________________-, which is not guaranteed in the
contract but may be higher because of current market conditions. - ✔️✔️contract
interest rate; current interest rate
Contributory Plan - ✔️✔️Premiums are shared between the employer and employees
and the insurer will require that 75% of eligible employees be included in the plan.
Convertible Provision - ✔️✔️provides the policyowner with the right to convert the
policy to a permanent insurance policy without evidence of insurability
Cross Purchase - ✔️✔️used in partnerships when each partner buys a policy on the
other
Death Benefit - ✔️✔️the death benefit is guaranteed and also remains level for life
3 basic forms of whole life insurance: - ✔️✔️1. Straight whole life
2. Limited-pay whole life
3. Single premium whole life
7 Pay Test - ✔️✔️if premiums paid during the first 7 years exceed the net level
premium that should have been paid, it is a MEC (Modified Endowment Contract) and
loses the standard tax benefits of a life insurance contract.
A MEC is an overfunded life insurance policy = __________ - ✔️✔️failed the 7-pay test
A universal life policy has two components: - ✔️✔️1. Insurance Component
2. Cash Account
Adjustable Life - ✔️✔️was developed in an effort to provide the policyowner with the
best of both worlds (term and permanent coverage)
Adjustable Life Policy - ✔️✔️-Term or Whole life; can convert
, -Premium: Can be increased or decreased by policyowners
-Face Amount-Flexible; set by policyowner with proof of insurability
-Cash Value: Fixed rate of return; general account
-Policy Loans: Can borrow cash value
Agents selling variable life insurance products must: - ✔️✔️-Be registered with FINRA
-Be licensed by the state to sell life insurance
-Have received a securities license
All life insurance policies are subject to the ___________ - ✔️✔️7-pay test, and any
time there is a material change to a policy, a new 7-pay test is required
_______________ provides lifetime (permanent) protection and accumulates cash
value. - ✔️✔️Whole life insurance
Annually Renewable Term (ART) - ✔️✔️the purest form of term insurance. The death
benefit remains level, and the policy may be guaranteed to be renewable each year
without proof of insurability, but the premium increases annually according to the
attained age, as the probability of death increases.
Buy-Sell Agreement or Business Continuation Agreement - ✔️✔️A legal contract that
determines what will be done with a business in the event that an owner dies or
becomes disabled.
Cash Value - ✔️✔️created by the accumulation of premium, is scheduled to equal the
face amount of the policy when the insured reaches age 100 (the policy maturity date),
and is paid out to the policyowner.
Cash value exceeding premiums paid - ✔️✔️Taxable at surrender
Cash Value of an adjustable life policy only develops when the premiums paid are
______ than the cost of the policy - ✔️✔️more
Decreasing Term - ✔️✔️policies feature a level premium and a death benefit that
decreases each year over the duration of the policy term. Nonrenewable
Dividend Interest are _________ - ✔️✔️taxable in the year earned
Due to the element of investment risk, the federal government has declared that
variable contracts are _____________, and are thus regulated by the SEC and FINRA.
- ✔️✔️securities
Endowment Insurance - ✔️✔️a type of insurance that pays the face value of the policy
to beneficiaries if the insured dies before the endowment period ends
questions with complete solutions
___________ on a joint life policy are determined by averaging the ages of both
insureds. - ✔️✔️Premium rates
Although the insurer guarantees a ________________________, there is also potential
for the policyowner to get a ____________________-, which is not guaranteed in the
contract but may be higher because of current market conditions. - ✔️✔️contract
interest rate; current interest rate
Contributory Plan - ✔️✔️Premiums are shared between the employer and employees
and the insurer will require that 75% of eligible employees be included in the plan.
Convertible Provision - ✔️✔️provides the policyowner with the right to convert the
policy to a permanent insurance policy without evidence of insurability
Cross Purchase - ✔️✔️used in partnerships when each partner buys a policy on the
other
Death Benefit - ✔️✔️the death benefit is guaranteed and also remains level for life
3 basic forms of whole life insurance: - ✔️✔️1. Straight whole life
2. Limited-pay whole life
3. Single premium whole life
7 Pay Test - ✔️✔️if premiums paid during the first 7 years exceed the net level
premium that should have been paid, it is a MEC (Modified Endowment Contract) and
loses the standard tax benefits of a life insurance contract.
A MEC is an overfunded life insurance policy = __________ - ✔️✔️failed the 7-pay test
A universal life policy has two components: - ✔️✔️1. Insurance Component
2. Cash Account
Adjustable Life - ✔️✔️was developed in an effort to provide the policyowner with the
best of both worlds (term and permanent coverage)
Adjustable Life Policy - ✔️✔️-Term or Whole life; can convert
, -Premium: Can be increased or decreased by policyowners
-Face Amount-Flexible; set by policyowner with proof of insurability
-Cash Value: Fixed rate of return; general account
-Policy Loans: Can borrow cash value
Agents selling variable life insurance products must: - ✔️✔️-Be registered with FINRA
-Be licensed by the state to sell life insurance
-Have received a securities license
All life insurance policies are subject to the ___________ - ✔️✔️7-pay test, and any
time there is a material change to a policy, a new 7-pay test is required
_______________ provides lifetime (permanent) protection and accumulates cash
value. - ✔️✔️Whole life insurance
Annually Renewable Term (ART) - ✔️✔️the purest form of term insurance. The death
benefit remains level, and the policy may be guaranteed to be renewable each year
without proof of insurability, but the premium increases annually according to the
attained age, as the probability of death increases.
Buy-Sell Agreement or Business Continuation Agreement - ✔️✔️A legal contract that
determines what will be done with a business in the event that an owner dies or
becomes disabled.
Cash Value - ✔️✔️created by the accumulation of premium, is scheduled to equal the
face amount of the policy when the insured reaches age 100 (the policy maturity date),
and is paid out to the policyowner.
Cash value exceeding premiums paid - ✔️✔️Taxable at surrender
Cash Value of an adjustable life policy only develops when the premiums paid are
______ than the cost of the policy - ✔️✔️more
Decreasing Term - ✔️✔️policies feature a level premium and a death benefit that
decreases each year over the duration of the policy term. Nonrenewable
Dividend Interest are _________ - ✔️✔️taxable in the year earned
Due to the element of investment risk, the federal government has declared that
variable contracts are _____________, and are thus regulated by the SEC and FINRA.
- ✔️✔️securities
Endowment Insurance - ✔️✔️a type of insurance that pays the face value of the policy
to beneficiaries if the insured dies before the endowment period ends
