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PEARSON VUE - TYPES OF LIFE INSURANCE POLICIES REVIEW EXAM
QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS
A Key Employee policy is taken out by Company X on its vice
president. Ten years later, this employee leaves Company X and
begins working for Company Y. If this individual were to die and
the policy is still in force and unchanged, where would the
death proceeds be directed? - ANSWER Company X
Which statement regarding a Key Employee Life policy is NOT
true? - ANSWER The beneficiary is named by the key employee
In a Key Employee life insurance policy, the third-party owner
can be all of the following, EXCEPT: - ANSWER Insured
Two partners own equal shares in a business worth a total of
$1,000,000. If they both commit to the purchase of a life
insurance policy that will fund a Buy-Sell Agreement, which of
the following is TRUE? - ANSWER Two partners own equal
shares in a business worth a total of $1,000,000. If they both
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commit to the purchase of a life insurance policy that will fund
a Buy-Sell Agreement, which of the following is TRUE?
What is considered a valid reason for small businesses to insure
the lives of its major shareholders? - ANSWER Fund a buy-sell
agreement
Which of these factors does NOT influence an applicant's need
for life insurance? - ANSWER Self-maintenance expenses
Which of these is NOT a reason for a business to buy key person
life insurance? - ANSWER A pension deficiency if the key
employee diesA pension deficiency if the key employee dies
Which statement regarding third-party ownership of a life
insurance policy is true? - ANSWER It is used extensively in
estate-planning as well as business circumstances
What type of life insurance incorporates flexible premiums and
an adjustable death benefit? - ANSWER Universal Life
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What type of insurance offers permanent life coverage with
premiums that are payable for life? - ANSWER Whole Life
What type of life policy has a death benefit that adjusts
periodically and is written for a specific period of time? -
ANSWER Decreasing term
Which of these statements describe a Modified Endowment
Contract (MEC)? - ANSWER Exceeds the maximum amount of
premium that can be paid into a policy and still have it
recognized as a life insurance contract
What type of life insurance are credit policies issued as? -
ANSWER Term
Which of these would be considered a Limited-Pay Life policy? -
ANSWER Life Paid-Up at Age 70
Which of the following features of a group Term Life policy
enables an individual to leave the group and continue his or her
insurance without providing evidence of insurability? - ANSWER
Conversion privilege
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Which provision allows the policyowner to change a term life
policy to a permanent one without providing proof of good
health? - ANSWER Conversion
A(n) __________ term life policy is normally used when
covering an insured's mortgage balance. - ANSWER decreasing
All of these insurance products require an agent to have proper
FINRA securities registration in order to sell them, EXCEPT for: -
ANSWER Modified Whole Life
Which type of policy is considered to be overfunded, as stated
by IRS guidelines? - ANSWER Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values,
the result would create which of the following? - ANSWER
Modified Endowment Contract (MEC)
When an individual is planning to protect his family with life
insurance, one method of doing so is called needs analysis.
PEARSON VUE - TYPES OF LIFE INSURANCE POLICIES REVIEW EXAM
QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS
A Key Employee policy is taken out by Company X on its vice
president. Ten years later, this employee leaves Company X and
begins working for Company Y. If this individual were to die and
the policy is still in force and unchanged, where would the
death proceeds be directed? - ANSWER Company X
Which statement regarding a Key Employee Life policy is NOT
true? - ANSWER The beneficiary is named by the key employee
In a Key Employee life insurance policy, the third-party owner
can be all of the following, EXCEPT: - ANSWER Insured
Two partners own equal shares in a business worth a total of
$1,000,000. If they both commit to the purchase of a life
insurance policy that will fund a Buy-Sell Agreement, which of
the following is TRUE? - ANSWER Two partners own equal
shares in a business worth a total of $1,000,000. If they both
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commit to the purchase of a life insurance policy that will fund
a Buy-Sell Agreement, which of the following is TRUE?
What is considered a valid reason for small businesses to insure
the lives of its major shareholders? - ANSWER Fund a buy-sell
agreement
Which of these factors does NOT influence an applicant's need
for life insurance? - ANSWER Self-maintenance expenses
Which of these is NOT a reason for a business to buy key person
life insurance? - ANSWER A pension deficiency if the key
employee diesA pension deficiency if the key employee dies
Which statement regarding third-party ownership of a life
insurance policy is true? - ANSWER It is used extensively in
estate-planning as well as business circumstances
What type of life insurance incorporates flexible premiums and
an adjustable death benefit? - ANSWER Universal Life
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What type of insurance offers permanent life coverage with
premiums that are payable for life? - ANSWER Whole Life
What type of life policy has a death benefit that adjusts
periodically and is written for a specific period of time? -
ANSWER Decreasing term
Which of these statements describe a Modified Endowment
Contract (MEC)? - ANSWER Exceeds the maximum amount of
premium that can be paid into a policy and still have it
recognized as a life insurance contract
What type of life insurance are credit policies issued as? -
ANSWER Term
Which of these would be considered a Limited-Pay Life policy? -
ANSWER Life Paid-Up at Age 70
Which of the following features of a group Term Life policy
enables an individual to leave the group and continue his or her
insurance without providing evidence of insurability? - ANSWER
Conversion privilege
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Which provision allows the policyowner to change a term life
policy to a permanent one without providing proof of good
health? - ANSWER Conversion
A(n) __________ term life policy is normally used when
covering an insured's mortgage balance. - ANSWER decreasing
All of these insurance products require an agent to have proper
FINRA securities registration in order to sell them, EXCEPT for: -
ANSWER Modified Whole Life
Which type of policy is considered to be overfunded, as stated
by IRS guidelines? - ANSWER Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values,
the result would create which of the following? - ANSWER
Modified Endowment Contract (MEC)
When an individual is planning to protect his family with life
insurance, one method of doing so is called needs analysis.
