pg. 1 2025 Life Insurance Exam Test Bank With 450 Questions and Correct Answers/ Life Health Insurance License Test 2025 Latest Questions Bank/ Ideal For Exam Prep (Newest!)
What happens when a policyowner borrows against the cash value of his life insurance policy?
The death benefit would be reduced by the outstanding loan balance No additional loans can be taken out in the future The amount borrowed is added to the policyowner's gross income for tax purposes The interest on the loan is tax-deductible The death benefit would be reduced by the outstanding loan balance Which life insurance policy would be eligible to include an automatic premium loan provision?
Increasing term Level term Decreasing term Whole life Whole life Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value?
Variable life policy Modified life policy Flexible premium fixed annuity Immediate fixed annuity Flexible premium fixed annuity John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract 1 / 4
pg. 2 investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?
0% 25% 50% 100% 100% Straight whole life insurance can be accurately described in all of these statements
EXCEPT
Policy protection normally expires at age 65 Nonforfeiture values are available to the policyowner Provides level protection with level premiums Cash value loans are permitted Policy protection normally expires at age 65 How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?
Survivorship life policy is lower Survivorship life policy is higher Depends on the investment performance of the underlying accounts Both have the same actuarial costs Survivorship life policy is lower Which statement concerning a decreasing term life policy is accurate?
Cash value decreases over the policy period Premium decreases over the policy period Face amount decreases over the policy period Face amount stays the same over the policy period Face amount decreases over the policy period Laura added a children's rider to her life insurance policy. What type of coverage was added? 2 / 4
pg. 3
Level term Increasing term Decreasing term Juvenile term Level term Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain The gain is treated as taxable income but no additional penalties are applied The gain is not taxable but a penalty is assessed Surrendering an MEC is considered a tax and penalty-free transaction The gain is treated as taxable income and a penalty tax is imposed on the gain When does the insured stop making payments under a thirty-payment whole life policy?
At the time of death or 30 years after the policy's inception, whichever comes first It depends on the performance of the underlying investment account When the cash value surpasses the face amount At age 100 At the time of death or 30 years after the policy's inception, whichever comes first What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?
$0
$50,000
Under $50,000 initially, but decreases annually over time Under $50,000 initially, but increases annually until fully insured Under $50,000 initially, but increases annually until fully insured Which of these is NOT an allowable deduction made from premium payments of the cash value of a variable life insurance policy?
- / 4
pg. 4 Mortality costs Administrative charges Investment management fees Federal premium taxes Federal premium taxes Which of the following combinations best describe a universal life insurance policy?
A mutual fund and an endowment policy A term insurance policy and a whole life policy A modified endowment policy and an annual term insurance policy A flexible premium deposit fund and a monthly renewable term insurance policy A flexible premium deposit fund and a monthly renewable term insurance policy Which statement regarding the waiver of premium rider is accurate?
Policy loans are used to keep the policy active Cash payment is not directly provided to the policyowner Insurance companies are required to offer this to all policyowners Premiums are waived in the event of bankruptcy Cash payment is not directly provided to the policyowner A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death?
Total premiums paid plus the policy face amount Face amount plus interest accrued Interest accrued plus total premiums paid Face amount minus any outstanding loan balances Total premiums paid plus the policy face amount Which life insurance policy option allows the policyowner to have coverage equal to the net death benefit of the lapsed policy?
Reduced paid-up nonforfeiture option Accelerated benefits option
- / 4