CPCU
CPCU 556 70 Practice Questions And Correct Detailed
Answers Latest Updated A+ Solution
Which one of the following statements is correct regarding how the single premium for a
substandard life annuity tends to compare to the premium for an otherwise identical standard life
annuity?
Select one:
A. The premium for the substandard life annuity is the same.
B. The premium for the substandard life annuity is slightly greater
C. The premium for the substandard life annuity is less.
D. The premium for the substandard life annuity is significantly greater. - ANSWER ✔ - C. The
premium for the substandard life annuity is less.
Paula is a successful business woman. She is married with three grown children. Paula has always
been very grateful for her college experience, and feels that it is responsible for much of her success.
She has made a pledge of $50,000 to the college when she dies. She would like to fund this pledge
through a life insurance policy. Which one of the following types of life insurance policy should she
purchase to guarantee that the separate funds are available to satisfy this pledge?
Select one:
A. Universal life insurance
B. Whole life insurance
C. Term life insurance
D. Variable universal life insurance - ANSWER ✔ - B. Whole life insurance
It provides permanent and level life insurance. The premiums are also fixed. Universal and variable
universal life insurance do not provide a fixed coverage basis or a fixed premium.
Jason recently purchased a term insurance policy that can be renewed at one year intervals for an
increasing premium, even though the death benefit remains constant. This policy is referred to as a
Select one:
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CPCU 556
©®
,CPCU
A. Yearly renewable term policy.
B. Mortgage protection term policy.
C. Mortality adjustment term policy.
D. Modified premium term policy. - ANSWER ✔ - A. Yearly renewable term policy.
During a deferred annuity's accumulation period, the contract accumulates a cash value. Eventually,
this cash value
Select one:
A. Is eventually liquidated through periodic payments.
B. Becomes the contract's death benefit during the payout period.
C. Is given to the annuitant if his or her or life expectancy is exceeded.
D. Terminates once the payout period begins. - ANSWER ✔ - A. Is eventually liquidated through
periodic payments.
An annuity contract whose value fluctuates with that of an underlying securities portfolio and which
has no guarantee as to principal or minimum interest rates is referred to as a
Select one:
A. Flexible annuity.
B. Fluctuating annuity.
C. Indexed annuity
D. Variable annuity. - ANSWER ✔ - D. Variable annuity.
Which one of the following is a characteristic of universal life insurance?
Select one:
A. Temporary protection
B. No surrender charges
C. Shifting of mortality and expense risk to the policyowner
D. Inability to withdraw cash values - ANSWER ✔ - C. Shifting of mortality and expense risk to the
policy owner
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CPCU 556
©®
, CPCU
Linda is a single mother and is concerned about financial support for her daughter if she should die.
Her sister will take care of the daughter, but Linda would like to provide at least $150,000 toward
the cost of her care. Linda would also like to have an additional $100,000 to fund her daughter's
college education. Linda estimates her final expense need would be $10,000.
Currently, Linda expects that there would be $25,000 left over from the sale of her house and car
after her death. She has $35,000 of employer-provided life insurance, but no other employee
benefits that would provide income for her daughter. Linda also has $10,000 in savings. Finally, she
expects Social Security survivors benefits to be $130,000.
Using the needs approach, how much life insurance should Linda purchase?
Select one:
A. None, her needs are currently met
B. $20,000
C. $60,000
D. $140,000 - ANSWER ✔ - C. $60,000
An applicant for a universal life insurance policy specified an initial death benefit and selected an
option that provided for a benefit upon death equal to this specified amount plus the policy's cash
value. This applicant elected a death benefit option that is referred to as
Select one:
A. Option A.
B. Option B.
C. Option C.
D. Option D. - ANSWER ✔ - B. Option B.
Which one of the following statements describes the renewability feature found in most level term
life insurance policies?
Select one:
A. The policy is renewable only if the insured increases the amount of coverage by at least 5 percent
per year.
3|Page
CPCU 556
©®
CPCU 556 70 Practice Questions And Correct Detailed
Answers Latest Updated A+ Solution
Which one of the following statements is correct regarding how the single premium for a
substandard life annuity tends to compare to the premium for an otherwise identical standard life
annuity?
Select one:
A. The premium for the substandard life annuity is the same.
B. The premium for the substandard life annuity is slightly greater
C. The premium for the substandard life annuity is less.
D. The premium for the substandard life annuity is significantly greater. - ANSWER ✔ - C. The
premium for the substandard life annuity is less.
Paula is a successful business woman. She is married with three grown children. Paula has always
been very grateful for her college experience, and feels that it is responsible for much of her success.
She has made a pledge of $50,000 to the college when she dies. She would like to fund this pledge
through a life insurance policy. Which one of the following types of life insurance policy should she
purchase to guarantee that the separate funds are available to satisfy this pledge?
Select one:
A. Universal life insurance
B. Whole life insurance
C. Term life insurance
D. Variable universal life insurance - ANSWER ✔ - B. Whole life insurance
It provides permanent and level life insurance. The premiums are also fixed. Universal and variable
universal life insurance do not provide a fixed coverage basis or a fixed premium.
Jason recently purchased a term insurance policy that can be renewed at one year intervals for an
increasing premium, even though the death benefit remains constant. This policy is referred to as a
Select one:
1|Page
CPCU 556
©®
,CPCU
A. Yearly renewable term policy.
B. Mortgage protection term policy.
C. Mortality adjustment term policy.
D. Modified premium term policy. - ANSWER ✔ - A. Yearly renewable term policy.
During a deferred annuity's accumulation period, the contract accumulates a cash value. Eventually,
this cash value
Select one:
A. Is eventually liquidated through periodic payments.
B. Becomes the contract's death benefit during the payout period.
C. Is given to the annuitant if his or her or life expectancy is exceeded.
D. Terminates once the payout period begins. - ANSWER ✔ - A. Is eventually liquidated through
periodic payments.
An annuity contract whose value fluctuates with that of an underlying securities portfolio and which
has no guarantee as to principal or minimum interest rates is referred to as a
Select one:
A. Flexible annuity.
B. Fluctuating annuity.
C. Indexed annuity
D. Variable annuity. - ANSWER ✔ - D. Variable annuity.
Which one of the following is a characteristic of universal life insurance?
Select one:
A. Temporary protection
B. No surrender charges
C. Shifting of mortality and expense risk to the policyowner
D. Inability to withdraw cash values - ANSWER ✔ - C. Shifting of mortality and expense risk to the
policy owner
2|Page
CPCU 556
©®
, CPCU
Linda is a single mother and is concerned about financial support for her daughter if she should die.
Her sister will take care of the daughter, but Linda would like to provide at least $150,000 toward
the cost of her care. Linda would also like to have an additional $100,000 to fund her daughter's
college education. Linda estimates her final expense need would be $10,000.
Currently, Linda expects that there would be $25,000 left over from the sale of her house and car
after her death. She has $35,000 of employer-provided life insurance, but no other employee
benefits that would provide income for her daughter. Linda also has $10,000 in savings. Finally, she
expects Social Security survivors benefits to be $130,000.
Using the needs approach, how much life insurance should Linda purchase?
Select one:
A. None, her needs are currently met
B. $20,000
C. $60,000
D. $140,000 - ANSWER ✔ - C. $60,000
An applicant for a universal life insurance policy specified an initial death benefit and selected an
option that provided for a benefit upon death equal to this specified amount plus the policy's cash
value. This applicant elected a death benefit option that is referred to as
Select one:
A. Option A.
B. Option B.
C. Option C.
D. Option D. - ANSWER ✔ - B. Option B.
Which one of the following statements describes the renewability feature found in most level term
life insurance policies?
Select one:
A. The policy is renewable only if the insured increases the amount of coverage by at least 5 percent
per year.
3|Page
CPCU 556
©®
