Chapter 12 Life Insurance Policies

By Vivian Tayor
Vivian Tayor, Insurance & Finance
Vivian, with over a decade of financial and insurance leadership, founded Celevi CE, an elite continuing education organization, aiming to empower industry experts with trust and respect.
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Life Insurance Quizzes & Trivia

Insurance companies were created to ensure that customers are cushioned from the repercussions of a risk occurring. Life insurance is a contract in which a person’s beneficiaries get some paint after the insured`s death. The quiz below is designed to help you review chapter 12 on life insurance policies that we covered in class. Give it a try and see what you’ve got.


Questions and Answers
  • 1. 

    An insured wants to purchase a policy with 3 key features: flexible premium, death benefits, and the choice of how the cash value will be invested. The insured should purchase:  

    • A.

      Adjustable Life

    • B.

      Universal Life

    • C.

      Graded Premium Whole Life

    • D.

      Variable Universal Life

    Correct Answer
    D. Variable Universal Life
    Explanation
    Variable Universal Life is the correct answer because it offers all three key features that the insured wants. It allows for flexible premium payments, provides death benefits, and gives the insured the choice of how the cash value will be invested. This type of policy allows the insured to allocate their premium payments into various investment options, such as stocks, bonds, or mutual funds, giving them the potential to earn higher returns on their policy's cash value.

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  • 2. 

     All of the following are characteristics of a Universal Life policy EXCEPT:   

    • A.

      The policy has a cash value account at a guaranteed interest rate and endowment insurance

    • B.

      The insurance company reserves the right to adjust the mortality charges and/or interest rate

    • C.

      The planned premium pays for mortality charges and expenses and any excess is returned to the policy owner

    • D.

      In effect, Universal Life is a combination of term insurance and a separate savings account joined in a single contract

    Correct Answer
    C. The planned premium pays for mortality charges and expenses and any excess is returned to the policy owner
    Explanation
    Universal Life policies do not typically have a cash value account at a guaranteed interest rate and endowment insurance. This means that the statement "The policy has a cash value account at a guaranteed interest rate and endowment insurance" is not a characteristic of a Universal Life policy.

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  • 3. 

     A Universal Life insurance policy has two types of interest rates that are called?  

    • A.

      Option A and Option B

    • B.

      Guaranteed and current

    • C.

      Fixed and Variable

    • D.

      Minimum and Target

    Correct Answer
    B. Guaranteed and current
    Explanation
    A Universal Life insurance policy has two types of interest rates: guaranteed and current. The guaranteed interest rate is the minimum rate of return that the policyholder will receive, regardless of market conditions. The current interest rate, on the other hand, is determined by the insurance company based on market performance and can fluctuate over time. These two rates provide policyholders with different options for earning returns on their policy's cash value.

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  • 4. 

    Arnold purchased a $100,000 Joint Life policy that covered himself and his wife Sarah. Eight years later, Arnold died in an automobile accident. How much will Sarah receive from the policy?

    • A.

      $200,000

    • B.

      $100,000

    • C.

      Nothing

    • D.

      $50,000

    Correct Answer
    B. $100,000
    Explanation
    Sarah will receive $100,000 from the policy. The Joint Life policy covers both Arnold and Sarah, and in the event of Arnold's death, the policy pays out the death benefit to the surviving spouse, which in this case is Sarah. Therefore, Sarah will receive the full amount of the policy, which is $100,000.

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  • 5. 

    Which of the following type of insurance covers the whole family in a single contract?  

    • A.

      Survivorship Policy

    • B.

      Whole Life Policy

    • C.

      Family Income Policy

    • D.

      Family Policy

    Correct Answer
    D. Family Policy
    Explanation
    A family policy is a type of insurance that covers the entire family under a single contract. This means that all members of the family, including the spouse and children, are included in the coverage. It provides financial protection to the entire family in case of any unfortunate event. This type of insurance is beneficial as it simplifies the insurance process by consolidating coverage for all family members into one policy.

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  • 6. 

     Which of the following is known as Mortgage Protection?  

    • A.

      Expired Term

    • B.

      Increasing Term

    • C.

      Decreasing Term

    • D.

      Whole Term

    Correct Answer
    C. Decreasing Term
    Explanation
    Decreasing term is known as Mortgage Protection because it is a type of life insurance policy that is designed to cover a decreasing amount of debt, such as a mortgage, over a specific period of time. As the policyholder pays off the debt, the coverage amount decreases accordingly. This type of policy is commonly used to ensure that if the policyholder dies before the debt is fully paid off, the remaining balance will be covered, protecting the family or beneficiaries from financial burden.

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  • 7. 

    Your client wants both protection and savings from insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?  

    • A.

      Life Annuity, Period Certain

    • B.

      Limited Pay Whole Life insurance

    • C.

      Increasing Term insurance

    • D.

      10-year endowment

    Correct Answer
    B. Limited Pay Whole Life insurance
    Explanation
    Limited Pay Whole Life insurance would be the right policy for this client. This policy provides both protection and savings as it offers lifelong coverage and accumulates cash value over time. The client is willing to pay premiums until retirement, and with Limited Pay Whole Life insurance, the premiums are paid for a limited period, such as 10, 15, or 20 years, after which the coverage remains in force for the client's entire life. This policy ensures that the client has protection throughout their lifetime and also builds cash value that can be accessed if needed.

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Vivian Tayor |Insurance & Finance
Vivian, with over a decade of financial and insurance leadership, founded Celevi CE, an elite continuing education organization, aiming to empower industry experts with trust and respect.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Mar 25, 2012
    Quiz Created by
    Vivian Tayor
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