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Question 1
What type of life insurance provides coverage for a specified period and pays a death benefit only if the insured dies during that period?
Answer: Term life insurance. It provides pure death protection with no cash value accumulation, and coverage expires at the end of the term.
Question 2
What type of life insurance provides lifetime coverage and builds cash value on a guaranteed, fixed basis?
Answer: Whole life insurance. Premiums are fixed, the death benefit is guaranteed, and cash value grows at a guaranteed rate tax-deferred.
Question 3
How does universal life insurance differ from whole life insurance in terms of premium flexibility?
Answer: Universal life allows the policyowner to vary the amount and timing of premium payments within certain limits, while whole life requires fixed scheduled premiums.
Question 4
In a variable life insurance policy, where are the cash values invested?
Answer: Cash values are invested in separate accounts chosen by the policyowner, such as stock or bond sub-accounts, meaning the cash value and death benefit can fluctuate based on investment performance.
Question 5
What is an endowment policy, and when does it pay its face amount?
Answer: An endowment policy pays the face amount either upon the insured's death or when the policy matures (reaches its endowment date), whichever comes first.