1. Many Universal Life Policies will permit a partial surrender of cash value. The surrender amount would
A. increase the face amount.
B. not need to be repaid. Correct
C. increase the cash value.
D. have to be repaid.
Explanation
A partial surrender in universal life insurance is a withdrawal of cash value that does not require repayment, reducing the cash value and potentially the death benefit. A typically decreases the face amount. C decreases the cash value. D applies to policy loans, not surrenders.
2. Which of the following represents a reduced paid-up nonforfeiture option?
A. Further premiums must be paid on the reduced policy.
B. The new face amount is the same as the original policy.
C. A full share of expense loading must be included in the premium on the reduced coverage.
D. The policy will have a decreased face amount. Correct
Explanation
The reduced paid-up option provides a lower face amount of insurance that is fully paid up, requiring no further premiums. A is incorrect as no further premiums are needed. B is incorrect as the face amount decreases. C is incorrect as expense loading is not a defining feature.
3. Which rider allows the policyowner to increase the face amount to adjust for inflation?
A. Payor benefit.
B. Cost of living. Correct
C. Guaranteed insurability.
D. Return of premium.
Explanation
The cost of living rider adjusts the face amount based on inflation, typically tied to the Consumer Price Index. A waives premiums for juvenile policies. C allows future increases without insurability proof, not tied to inflation. D refunds premiums, not adjusting face amount.
4. Which of the following methods could eliminate the risk of having a sky diving accident?
A. risk avoidance Correct
B. risk aversion
C. risk prevention
D. risk reduction
Explanation
Risk avoidance eliminates exposure by not engaging in skydiving. B is a preference, not a method. C and D reduce risk but do not eliminate it, as they involve mitigation while still participating.
5. An annuity where the policyowner chooses a pre-determined number of benefit payments is referred to as
A. Refund Life.
B. Period Certain. Correct
C. Amount Certain.
D. Straight Life.
Explanation
A period certain annuity guarantees payments for a specific number of periods, regardless of the annuitant’s survival. A returns premiums if the annuitant dies early. C is not a standard term. D provides payments for the annuitant’s lifetime, not a fixed number.