Question

1. All of the following statements are correct EXCEPT

a.	After a life insurance policy has been in force for 2 years, the insurer can no longer contest the policy based on a false answer in the application about the insured’s health.

b.	If the insured dies 2 weeks after the policy premium was due but not paid, the life insurance company must pay the beneficiary only an amount equal to the total premiums paid.

c.	If the insured commits suicide 5 years after purchasing a life insurance policy, the insurer will pay the full death benefit to the beneficiary.

d.	The person who has the power to exercise the rights in a life insurance policy is called the policy owner.

2. All of the following statements concerning term life insurance are correct EXCEPT

a.	Because death rates rise at an increasing rate as ages increase, the mortality cost for term insurance also rises at an increasing rate

b.	Term insurance is appropriate when there is a need for a large amount of life insurance and limited resources to pay insurance premiums.

c.	Term insurance has no cash value.

d.	Term insurance is best suited for older individuals with a permanent need for life insurance.

3. All of the following statements concerning whole life insurance are correct EXCEPT

a.	As long as premiums are paid Whole life insurance provides for the payment of the policy’s face amount upon the death of the insured, regardless of when death occurs.

b.	Because Whole Life insurance has cash value the policy owner must decide how they want to invest the cash portion of their policy.

c.	Whole life insurance offers permanent protection with cash values, and it can be either participating or nonparticipating.

d.	The protection afforded by the whole life insurance contract is permanent—the term never expires, and the policy never has to be renewed or converted.

4. All of the following statements concerning universal life insurance are correct EXCEPT

a.	Universal life is similar to term insurance with a cash value account.

b.	Universal life allows for flexibility when you make your premium payments.

c.	Universal life does not provide any income tax advantages.

d.	Universal life has some guarantees such as a guaranteed minimum interest rate.

Answer 1

1. In this question all the statements are correct except statement d. The person who has the power to exercise the right of life insurance policy is known as insured and not policy owner.

Statement a is correct because false answer regarding health in life insurance policy can only be rectified within 15 days from the date of first insurance premium paid. After 2 years it cannot be changed.

Statement b is correct because the paid premium can only be paid in case of death and not the due payment.

Statement c is correct because suicide clause is applicable for one of two year as per the terms and conditions of policy. If person commit suicide within this period the company will pay only premium amount and not death benefit. But after that period if someone commit suicide then it will pay full death benefit.

So statement d is not correct.

2. In this question statement d is not correct because insurance premium will be very high for older individuals in term insurance. And since they are in need of permanent life insurance they should go for pure life insurance policy.

Statement a is correct because as age increases probability of death increases due to which mortality cost inscreases and premium payable amount is higher as age increases.

Statement b is correct because term insurance premiums are low and provide large sum of insurance cover. So if a person wants to insure for large sum with low premium, term insurance can be suitable.

Statement c is correct because term insurance doesn't have any cash value. Once the tenure over and insurer survived the tenure no benefits or cash will be paid back.

So statement d is incorrect.

3. Statement b is not correct. In whole life insurance policy it is not must to decide the way of investing cash values. Policy owner can have access to cash values by borrowing, withdrawing or surrendering policy. If he requires he can opt for following options to access cash value otherwise it will grow with time. It is not compulsion for policy owner to select the way of investing cash values.

Statement a is correct because as long as premium are paid, death benefit will be paid to benefiaciary whenever he dies.

Statement c is correct because it offers permanent protection with cash value which can be participating or non participating

Statement d is correct because whole life insurance policy are effective as long as policy premium are paid and it is never ending.

So statement b is incorrect

4. In this statement c is incorrect as universal life insurance provides tax free death benefits as well as growth within the cash value account is tax free .

Statement a is correct as universal life is similar to term insurance with cash value account.

Statement b is correct because it allows felixibility of premium payments .

Statement d is correct because universal life has some guarantees like guaranteed minimum interest rate.

So statement c is incorrect.