1. Under a Universal Life Insurance policy, a corridor represents the
A. gap between the total death benefit and the policy's cash value. Correct
B. time allotted to the insured to convert a group policy to an individual policy.
C. stipulated time period that a policy may be reinstated after it has lapsed.
D. percentage of benefits paid to each of the policy's beneficiaries.
Explanation
In a Universal Life Insurance policy, the corridor is the difference between the death benefit and the cash value, ensuring the policy qualifies as life insurance for tax purposes. This gap is maintained to meet IRS requirements. It does not relate to conversion periods, reinstatement, or beneficiary distributions.
2. When trying on wedding rings at a jewelry store, a woman left her engagement ring on the countertop only to return later and find it missing. The woman experienced a
A. transfer of risk.
B. hazard.
C. peril.
D. loss. Correct
Explanation
A loss occurs when an asset, such as the engagement ring, is misplaced or stolen, resulting in its absence. This is distinct from a transfer of risk (shifting risk to another party), hazard (condition increasing loss likelihood), or peril (specific cause of loss).
3. Licenses for a life settlement broker MUST be renewed
A. every year.
B. every 2 years. Correct
C. every 4 years.
D. every 7 years.
Explanation
Life settlement broker licenses typically require renewal every two years, depending on state regulations. This ensures brokers maintain compliance with current laws. The other options do not align with standard renewal periods.
4. An insured wants to purchase a policy with three key elements: flexible premium, death benefit, and the choice of how the cash value will be invested. The insured should purchase
A. adjustable life.
B. universal term life.
C. variable universal life. Correct
D. graded premium whole life.
Explanation
Variable universal life insurance offers flexible premiums, a death benefit, and the ability to choose how the cash value is invested. Adjustable life allows premium adjustments but not investment choice, universal term life is not a standard product, and graded premium whole life has fixed investments.
5. A common disaster clause states that if the beneficiary dies from the same accident as the insured individual, the insurer will proceed as if the
A. insured individual outlived the beneficiary. Correct
B. beneficiary outlived the insured individual.
C. beneficiary was never named on the policy.
D. beneficiary and the insured individual died simultaneously.
Explanation
A common disaster clause assumes the insured outlived the beneficiary in a simultaneous accident to ensure proceeds go to the insured's estate or secondary beneficiaries. This prevents complications in estate distribution. The other options do not align with this clause's purpose.