Chartered Life Underwriter Examination

1.When the insured dies and the policy conditions are met, what does life insurance primarily pay?

2.Camille needs coverage for 15 years and does not want a policy built around cash value. Which product fits?

3.Which product provides lifetime coverage and builds cash value?

4.Which product separates the death benefit, the cash value, and the expenses, and lets the premium vary within limits?

5.Which product places cash value in investment accounts whose value can rise or fall?

6.A participating policy pays a dividend only when the insurer declares one. Which statement is correct?

7.At which time must insurable interest exist for a life insurance policy?

8.Ruth owns a policy on her partner, and a trust is the beneficiary. Which statement is correct?

9.A policy names a revocable beneficiary. Who may later change that beneficiary?

10.A policy names an irrevocable beneficiary. What is required before the owner can name someone else?

11.The beneficiary wants the full death proceeds in one payment. Which settlement option is that?

12.The beneficiary leaves the proceeds with the insurer and receives periodic interest. Which option is this?

13.Proceeds are paid in installments scheduled to end after 12 years. Which settlement option is this?

14.The beneficiary chooses $1,500 a month until the proceeds run out. The number of months is not set in advance. Which option is this?

15.The beneficiary wants payments that continue no matter how long she lives. Which settlement option is this?

16.A premium is unpaid, yet the policy remains in force for a short additional time. Which provision provides that time?

17.A lapsed policy is restored after the owner satisfies the policy's conditions. What is that restoration?

18.The incontestability clause commonly limits how long the insurer may contest the policy for misstatements in the application. That period is commonly:

19.A life policy's suicide clause commonly applies for how long?

20.Which rider pays the policy premium when the insured is disabled as that rider defines disability?

21.Which rider adds an amount if the insured dies from an accident as the rider defines it?

22.Which rider gives the insured the right to purchase additional insurance at stated future dates without new evidence of insurability?

23.Waiver of premium is active because the insured is disabled under the rider. What does the rider itself pay?

24.A planner lists the cash the survivors need for income, debt payoff, and final expenses. Which method is this?

25.A planner multiplies expected lost earnings by a number of years. Which method is this?

26.Survivors need $80,000 a year for 10 years. Ignore interest. How much capital satisfies that need?

27.A bakery owns a policy on its head baker and will receive the proceeds if he dies. What is this arrangement?

28.Co-owners sign an agreement that a deceased owner's share will be purchased at a set price. What is the agreement?

29.At a partner's death, the surviving partners buy the deceased partner's share personally. Which plan is this?

30.At a shareholder's death, the corporation buys and retires that shareholder's stock. Which plan is this?

31.As a general income-tax principle, a life insurance death benefit paid to an individual beneficiary is:

32.While a permanent life policy remains in force, the annual increase in cash value is generally:

33.An owner takes a policy loan and keeps the policy in force. As a general rule, the loan is:

34.Leo surrenders a policy for more cash than his cost basis. How is the excess generally treated?

35.A contract is a modified endowment contract because premiums were paid too quickly. What tax treatment does it lose?

36.Which exchange can qualify as tax-free?

37.Which exchange can qualify as tax-free?

38.An owner moves the value of a life insurance policy directly into an annuity in a qualifying exchange. That exchange is:

39.Can an owner exchange an annuity for a new life insurance policy and have that exchange be tax-free?

40.An employer is the policyholder of life coverage for its workers. Each worker receives:

41.A policy is applied for and underwritten on one person, who is issued the policy. This is:

42.Compared with a standard class, a preferred underwriting class has:

43.An applicant answers no to treatment for diabetes, but the applicant is being treated for diabetes. This answer is:

44.Variable universal life lets premiums vary within limits and places cash value in:

45.Which description fits term life insurance?

46.After a divorce, the owner wants to replace a revocable beneficiary. Who has that right?

47.A clinic will lose revenue if its founder dies. The clinic owns a policy on the founder and is the beneficiary. This use is:

48.Partner A owns a policy on Partner B, and Partner B owns a policy on Partner A. Each will buy the other's share at death. This is:

49.A corporation owns a policy on each of four shareholders and will redeem a deceased shareholder's stock. This funding matches:

50.A needs analysis shows $50,000 a year for 8 years. Ignore interest. What capital is required?

51.Lost earnings are estimated at $100,000 a year for 12 years, with no interest and no other offsets. The human-life-value estimate is:

52.On day 10 after a missed premium, the insured dies. The policy's grace period has not ended. What is the coverage status?

53.Which statement about reinstatement is correct?

54.Which statement about policy dividends is correct?

55.The separate-account cash value of a variable life policy:

56.An owner of a universal life policy asks whether the premium must be the same amount every month. The premium:

57.Which pair of features describes whole life?

58.A trust owns a policy on Maria, and Maria's child is the beneficiary. This arrangement is allowed because:

59.An owner wishes to replace an irrevocable beneficiary with a charity. The change can be made:

60.Which item is not a life insurance settlement option?

61.Death proceeds of $180,000 are paid over exactly 15 years. Ignore interest. Which option applies, and what is each year's principal?

62.If the insured dies by suicide during the period the suicide clause commonly covers, the clause generally:

63.After the incontestability period has ended, the insurer commonly:

64.An accidental death rider is in force. The insured dies of a long illness, not an accident. The rider:

65.A guaranteed insurability rider offers an option date. The insured does not exercise it. What is the usual result?

66.Survivors need $60,000 a year for 10 years. Assets already set aside will provide $20,000 a year. Ignore interest. How much new capital is still needed?

67.Earnings are $90,000 a year. Personal consumption is $30,000 a year, so $60,000 a year would be lost to the family. Use 20 years and ignore interest. The human-life-value estimate is:

68.A firm estimates $80,000 to recruit a successor and $120,000 of lost profit if its chief engineer dies. What key-person face amount matches that sum?

69.Three owners use a cross-purchase plan, and each owner buys a policy on each of the others. How many policies are required?

70.Three owners use an entity plan. The business owns one policy on each owner. How many policies does the business own?

71.Under a cross-purchase buy-sell, who buys the deceased owner's share?

72.Under an entity buy-sell, who buys the deceased owner's share?

73.Maya paid $28,000 of premiums. She surrenders the policy for $34,000. What amount is taxable gain?

74.Owen's cost basis is $45,000, and he surrenders the policy for $45,000. The taxable gain is:

75.The face amount is $250,000. An unpaid policy loan is $20,000. Ignore loan interest. If the insured dies, the beneficiary generally receives:

76.Death proceeds of $100,000 are left with the insurer under interest only. This year the insurer pays $3,000 of interest. As a general rule:

77.A fixed-period settlement pays $11,000 this year. Of that payment, $10,000 is principal and $1,000 is interest. What is generally taxable?

78.A life policy with a $15,000 basis and a $22,000 cash value is exchanged tax-free for another life policy. No cash is taken. The new policy's basis is generally:

79.In a life-to-life exchange, the owner takes $4,000 of cash. The policy had $9,000 of gain. How much of the cash is generally taxable?

80.Which transfer fails to qualify as a tax-free exchange?

81.Which statement correctly contrasts the two forms of issue?

82.A substandard, or rated, class compared with a standard class generally means:

83.Which act is a misrepresentation on a life application?

84.A term policy allows a change to permanent insurance during a stated period without new evidence of insurability. That right is:

85.Yearly renewable term lets the insured continue coverage for another year without new evidence of insurability. The renewed premium is generally based on:

86.A family wants the death benefit to decline as the mortgage balance declines. Which product fits that pattern?

87.In a universal life policy, monthly insurance charges and expenses are commonly taken from:

88.A universal life policy has a level death benefit of $300,000 and cash value of $40,000. The amount at risk is:

89.Who bears the investment risk of the cash value in a variable life policy?

90.A participating policy's dividend is used to buy small fully paid amounts of whole life. Which dividend use is this?

91.A whole life policy ends its premium-paying coverage, and the cash value buys a smaller lifetime policy with no further premiums. Which nonforfeiture option is this?

92.A whole life policy's cash value is used to continue the same face amount as term insurance for as long as that value will buy. This nonforfeiture option is:

93.An owner takes the cash surrender value and coverage ends. This choice is:

94.After death, the insurer finds that the insured's age on the application was understated. The usual age-misstatement clause:

95.Which person can insure his or her own life and name a chosen beneficiary?

96.Investors with no relationship to an older person arrange, at issue, to own a policy on that person so they can profit. What is missing at issue?

97.A business validly insured a key person. She later retires, so the business no longer depends on her. What is the insurable-interest result?

98.A lender insures a borrower. As a principle of insurable interest, the lender's interest is:

99.A policy is assigned to a bank only to secure a loan. The bank's interest ends when the loan is repaid. This assignment is:

100.An owner transfers every ownership right in a policy to another person as a gift. This transfer is:

101.The primary beneficiary dies before the insured. A living contingent beneficiary was named. Proceeds are generally paid to:

102.A policy on two spouses pays only after both have died. Which product is this?

103.Two business partners want proceeds at the first death to fund a buy-sell. Which policy form matches that timing?

104.Heirs will need $500,000 of cash at the second spouse's death to pay stated settlement costs. A policy designed to pay at that second death is:

105.A corporation owns a policy on a key employee, is the beneficiary, and pays the premiums. As a general income-tax principle, those premiums are:

106.A corporation is the beneficiary of a key-person policy it owns. When the employee dies, the death proceeds are generally:

107.In a cross-purchase plan, the surviving owner buys the deceased owner's share for $150,000 using policy proceeds. The buyer's cost basis in the purchased share is generally:

108.In an entity plan, the corporation uses life proceeds to redeem a deceased shareholder's stock for $150,000. Which basis result follows for the surviving shareholders?