2. Types of Life Policies
Periodic payments of accumulated funds best describes AA group policy. BAn annuity. CA survivorship life policy. DA universal life policy.
B.An annuity An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds.
A Return of Premium term life policy is written as what type of term coverage? ARenewable BLevel CIncreasing DDecreasing
C.Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
All of the following entities regulate variable life policies EXCEPT AThe SEC. BThe Insurance Department. CThe Guaranty Association. DFederal government.
C.The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.
In a survivorship life policy, when does the insurer pay the death benefit? AHalf at the first death, and half at the second death BIf the insured survives to age 100 CUpon the last death DUpon the first death
C.Upon the last death Survivorship life pays on the last death rather than upon the first death
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? AVariable life BUniversal life CWhole life DDecreasing term
D.Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced.
A Straight Life policy has what type of premium? AA variable annual premium for the life of the insured BA level annual premium for the life of the insured CAn increasing annual premium for the life of the insured DA decreasing annual premium for the life of the insured
B.A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit
When an annuity is written, whose life expectancy is taken into account? ALife expectancy is not a factor when writing an annuity. BOwner CAnnuitant DBeneficiary
C.Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.
Which of the following has the right to convert the existing term coverage to permanent insurance? ABeneficiary BProducer CPolicyowner DInsurer
C.Policyowner Convertible term insurance gives the policyowner the right to convert the policy to a permanent insurance policy without evidence of insurability. Question 9 of 15
A domestic insurer issuing variable contracts must establish one or more AAnnuity accounts. BGeneral accounts. CSeparate accounts. DLiability accounts.
C.Separate accounts Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving his or her money? AA survivorship life policy BA universal life policy CA group policy DAn annuity
D.An annuity An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds.
What are the two components of a universal policy? AInsurance and investments BMortality cost and interest CSeparate account and policy loans DInsurance and cash account
D.Insurance and cash account A universal policy has two components: an insurance component and a cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher
Which of the following determines the cash value of a variable life policy? AThe company's general account BThe policy's guarantees. CThe premium mode DThe performance of the policy portfolio
D.The performance of the policy portfolio The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.
Why is an equity indexed annuity considered to be a fixed annuity? AIt is not tied to an index like the S&P 500. BIt has a guaranteed minimum interest rate. CIt has modest investment potential. DIt has a fixed rate of return.
B.It has a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
Which of the following is an example of a limited-pay life policy? ARenewable Term to Age 70 BLevel Term Life CStraight Life DLife Paid-up at Age 65
D.Life Paid-up at Age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? AVariable Life BAdjustable Life CGraded Premium Life DLimited-pay Life
D.Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years
If an agent wishes to sell variable life policies, what license must the agent obtain? AAdjuster BSurplus Lines CPersonal Lines DSecurities
D.Securities Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? AThe contract can be issued without an annuitant. BThe annuitant must be a natural person. CA corporation can be an annuitant as long as it is also the owner. DA corporation can be an annuitant as long as the beneficiary is a natural person
B.The annuitant must be a natural person Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
Which of the following products requires a securities license? AEquity Indexed annuity BDeferred annuity CVariable annuity DFixed annuity
C.Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.
Why is an equity indexed annuity considered to be a fixed annuity? AIt has a fixed rate of return. BIt is not tied to an index like the S&P 500. CIt has a guaranteed minimum interest rate. DIt has modest investment potential.
C.It has a guaranteed minimum interest rate While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate. Question 11 of 15
All of the following are true regarding a decreasing term policy EXCEPT AThe contract pays only in the event of death during the term and there is no cash value. BThe face amount steadily declines throughout the duration of the contract. CThe payable premium amount steadily declines throughout the duration of the contract. DThe death benefit is $0 at the end of the policy term
C.The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases
The death benefit in a variable universal life policy AIs guaranteed to be higher than when the policy is originally issued. BIs fixed. CAlways equals the face amount stated in the policy. DDepends on the performance of a separate account
D.Depends on the performance of a separate account The death benefit is not fixed, and may increase or decrease over the life of the policy depending on the investment performance of the underlying sub-account. It cannot, however, decrease below the initial face amount of the policy
Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant.
D.It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected. Question 13 of 15
Which of the following is NOT true regarding the accumulation period of an annuity? AIt would not occur in a deferred annuity. BIt is the period during which the annuity payments earn interest. CIt is the period over which the owner makes payments into an annuity. DIt is also known as the pay-in period.
A.It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).
Which of the following would help prevent a universal life policy from lapsing? AFace amount BAdjustable premium CCorridor of insurance DTarget premium
D.Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid AUntil the policyowner's age 100, when the policy matures. BFor 20 years or until death, whichever occurs first. CUntil the policyowner reaches age 65. DFor 20 years.
B.For 20 years or until death, whichever occurs first. Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit
In a survivorship life policy, when does the insurer pay the death benefit? AUpon the last death BUpon the first death CHalf at the first death, and half at the second death DIf the insured survives to age 100
A.Upon the last death Survivorship life pays on the last death rather than upon the first death.
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an AAdjustable Life. BInterest-sensitive Whole Life. CCredit Life. DAnnual Renewable Term.
B.Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.
Equity indexed annuities AInvest conservatively. BSeek higher returns. CAre more risky than variable annuities. DAre security instruments.
B.Seek higher returns. Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.
Which of the following products will protect an individual from outliving his or her money? AAdjustable life policy BPermanent life insurance CAnnuity DJoint and survivor policy
C.Annuity An annuity is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving his or her money
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a ADecreasing Term Policy. BWhole Life Policy. CConvertible Term Policy. DRenewable Term Policy
C.Convertible Term Policy. A convertible term policy has a provision that allows the policyowner to convert to permanent insurance
Which policy component decreases in decreasing term insurance? ADividend BPremium CFace amount DCash value
C.Face amount Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term
Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant.
D.It may last for the lifetime of the annuitant The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
What kind of policy allows withdrawals or partial surrenders? A20-pay life BTerm policy CVariable whole life DUniversal life
D.Universal life Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.
Which of the following is TRUE regarding the accumulation period of an annuity? AIt is also referred to as the annuity period. BIt is a period of time during which the beneficiary receives income CIt is limited to 10 years. DIt is a period during which the payments into the annuity grow tax deferred
D.It is a period during which the payments into the annuity grow tax deferred. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called AGraded premium whole life. BSingle premium whole life. CModified Endowment Contract (MEC). DLevel term life.
B.Single premium whole life. Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.
All other factors being equal, the least expensive first-year premium payment is found in AAnnually Renewable Term. BIncreasing Term. CDecreasing Term. DLevel Term.
A.Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year
Who bears all of the investment risk in a fixed annuity? AThe insurance company BThe owner CThe beneficiary DThe annuitant
A.The insurance company Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners
Which of the following is TRUE regarding the accumulation period of an annuity? AIt is limited to 10 years. BIt is a period during which the payments into the annuity grow tax deferred. CIt is also referred to as the annuity period. DIt is a period of time during which the beneficiary receives income
B.It is a period during which the payments into the annuity grow tax deferred The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred
In a survivorship life policy, when does the insurer pay the death benefit? AIf the insured survives to age 100 BUpon the last death CUpon the first death DHalf at the first death, and half at the second death
B.Upon the last death Survivorship life pays on the last death rather than upon the first death.
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? AHalf the amount BLower CHigher DAs high
B.Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.
All of the following statements about equity index annuities are correct EXCEPT AThey invest on a more aggressive basis aiming for higher returns. BThe annuitant receives a fixed amount of return. CThey have a guaranteed minimum interest rate. DThe interest rate is tied to an index such as the Standard & Poor's 500.
B.The annuitant receives a fixed amount of return Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an ACredit Life. BAnnual Renewable Term. CAdjustable Life. DInterest-sensitive Whole Life.
D.Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a AConvertible Term Policy. BRenewable Term Policy. CDecreasing Term Policy. DWhole Life Policy.
A.Convertible Term Policy A convertible term policy has a provision that allows the policyowner to convert to permanent insurance
All other factors being equal, the least expensive first-year premium payment is found in AAnnually Renewable Term. BIncreasing Term. CDecreasing Term. DLevel Term.
A.Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year
Which policy component decreases in decreasing term insurance? ACash value BDividend CPremium DFace amount
D.Face amount Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? AThe insured must provide evidence of insurability to renew the policy. BThe insured may only convert the policy to another term policy. CThe insured may renew the policy for another 10 years at the same premium rate. DThe insured may renew the policy for another 10 years, but at a higher premium rate
D.The insured may renew the policy for another 10 years, but at a higher premium rate. Policies that are guaranteed renewable and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability
Which of the following best describes what the annuity period is? AThe period of time from the accumulation period to the annuitization period BThe period of time during which money is accumulated in an annuity CThe period of time from the effective date of the contract to the date of its termination DThe period of time during which accumulated money is converted into income payments
DThe period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream
Equity indexed annuities ASeek higher returns. BAre more risky than variable annuities. CAre security instruments. DInvest conservatively.
A.Seek higher returns. Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? AStraight whole life BUniversal life CVariable life DDecreasing term
B.Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium
Which of the following best describes what the annuity period is? AThe period of time during which accumulated money is converted into income payments BThe period of time from the accumulation period to the annuitization period CThe period of time during which money is accumulated in an annuity DThe period of time from the effective date of the contract to the date of its termination
A.The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream
Which two terms are associated directly with the way an annuity is funded? AIncreasing or decreasing BImmediate or deferred CRenewable or convertible DSingle payment or periodic payments
D.Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies
Periodic payments of accumulated funds best describes AA universal life policy. BA group policy. CAn annuity. DA survivorship life policy.
C.An annuity An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an ACredit Life. BAnnual Renewable Term. CAdjustable Life. DInterest-sensitive Whole Life.
D.Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value
An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? ADeferred BFixed CFlexible premium DImmediate
A.Deferred Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.
An agent selling variable annuities must be registered with AFINRA. BDepartment of Insurance. CThe Guaranty Association. DSEC.
A.FINRA. Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.
Which of the following is another term for the accumulation period of an annuity? APay-in period BPremium period CLiquidation period DAnnuity period
A.Pay-in period The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity
Which of the following is TRUE for both equity indexed annuities and fixed annuities? AThey have a guaranteed minimum interest rate. BThey are both tied to an equity index. CBoth are considered to be more risky than variable annuities. DThey invest on a conservative basis.
A.They have a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate
The term "fixed" in a fixed annuity refers to all of the following EXCEPT AAmount and length of payments BDeath benefit CGuaranteed rate of interest DEqual annuity payments
B.Death benefit A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefit.
Equity indexed annuities AInvest conservatively. BSeek higher returns. CAre more risky than variable annuities. DAre security instruments
B.Seek higher returns Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500
Which of the following is NOT true regarding the annuitant? AThe annuitant must be a natural person. BThe annuitant cannot be the same person as the annuity owner. CThe annuitant's life expectancy is taken into consideration for the annuity. DThe annuitant receives the annuity benefits.
BThe annuitant cannot be the same person as the annuity owner While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? AA corporation can be an annuitant as long as the beneficiary is a natural person. BThe contract can be issued without an annuitant. CThe annuitant must be a natural person. DA corporation can be an annuitant as long as it is also the owner.
C.The annuitant must be a natural person. Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
Which of the following is NOT true regarding Equity Indexed Annuities? AThey have guaranteed minimum interest rates. BThey are less risky than variable annuities. CThey earn lower interest rates than fixed annuities. DThe insurance company keeps a percentage of the returns
C.They earn lower interest rates than fixed annuities Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
If an annuitant dies before annuitization occurs, what will the beneficiary receive? AEither the amount paid into the plan or the cash value of the plan, whichever is the lesser amount BAmount paid into the plan CCash value of the plan DEither the amount paid into the plan or the cash value of the plan, whichever is the greater amount
D.Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.
Which statement is NOT true regarding a Straight Life policy? AThe face value of the policy is paid to the insured at age 100. BIt usually develops cash value by the end of the third policy year. CIt has the lowest annual premium of the three types of Whole Life policies. DIts premium steadily decreases over time, in response to its growing cash value.
D.Its premium steadily decreases over time, in response to its growing cash value Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called AModified Endowment Contract (MEC). BLevel term life. CGraded premium whole life. DSingle premium whole life
D.Single premium whole life Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception
Which of the following is TRUE regarding variable annuities? AThe funds are invested in the company's general account. BThe company guarantees a minimum interest rate. CA person selling variable annuities is required to have only a life agent's license. DThe annuitant assumes the risks on investment.
D.The annuitant assumes the risks on investment The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment
Which of the following is TRUE regarding variable annuities? AThe funds are invested in the company's general account. BThe company guarantees a minimum interest rate. CA person selling variable annuities is required to have only a life agent's license. DThe annuitant assumes the risks on investment.
D.The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.
All of the following statements about equity index annuities are correct EXCEPT AThey invest on a more aggressive basis aiming for higher returns. BThe annuitant receives a fixed amount of return. CThey have a guaranteed minimum interest rate. DThe interest rate is tied to an index such as the Standard & Poor's 500
B.The annuitant receives a fixed amount of return Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield
Which of the following is NOT true regarding a Variable Universal Life policy? AThe cash values are not guaranteed. BThe death benefit is fixed. CThe policyowner can participate in some of the investment decisions. DThe minimum death benefit is guaranteed.
B.The death benefit is fixed. In a variable universal life policy, the death benefit is adjustable, and the cash values are not guaranteed. While the death benefit may decrease and increase, it cannot go below a guaranteed minimum face amount
Which of the following policies would be classified as a traditional level premium contract? AAdjustable Life BUniversal Life CVariable Universal Life DStraight Life
D.Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured
Which of the following best describes what the annuity period is? AThe period of time during which accumulated money is converted into income payments BThe period of time from the accumulation period to the annuitization period CThe period of time during which money is accumulated in an annuity DThe period of time from the effective date of the contract to the date of its termination
A.The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.
Which of the following best describes what the annuity period is? AThe period of time from the effective date of the contract to the date of its termination BThe period of time during which accumulated money is converted into income payments CThe period of time from the accumulation period to the annuitization period DThe period of time during which money is accumulated in an annuity
B.The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream
All of the following are true regarding a decreasing term policy EXCEPT AThe payable premium amount steadily declines throughout the duration of the contract. BThe death benefit is $0 at the end of the policy term. CThe contract pays only in the event of death during the term and there is no cash value. DThe face amount steadily declines throughout the duration of the contract
A.The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.
Which statement is NOT true regarding a Straight Life policy? AThe face value of the policy is paid to the insured at age 100. BIt usually develops cash value by the end of the third policy year. CIt has the lowest annual premium of the three types of Whole Life policies. DIts premium steadily decreases over time, in response to its growing cash value
D.Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit
The equity in an equity index annuity is linked to AThe returns from the insurance company's separate account. BThe annuitant's individual stock portfolio. CThe insurance company's general account investments. DAn index like Standard & Poor's 500.
D.An index like Standard & Poor's 500 Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500
All of the following are true about variable products EXCEPT APolicyowners bear the investment risk. BThe premiums are invested in the insurer's general account. CThe minimum death benefit is guaranteed. DThe cash value is not guaranteed.
B.The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
The equity in an equity index annuity is linked to AThe returns from the insurance company's separate account. BThe annuitant's individual stock portfolio. CThe insurance company's general account investments. DAn index like Standard & Poor's 500.
D.An index like Standard & Poor's 500. Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500
Which policy component decreases in decreasing term insurance? AFace amount BCash value CDividend DPremium
A.Face amount Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? ADeferred interest annuity BImmediate annuity CVariable annuity DFlexible payment annuity
B.Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement
Which Universal Life option has a gradually increasing cash value and a level death benefit? ATerm insurance BOption B COption A DJuvenile life
C.Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
Which of the following is NOT true regarding the accumulation period of an annuity? AIt would not occur in a deferred annuity. BIt is the period during which the annuity payments earn interest. CIt is the period over which the owner makes payments into an annuity. DIt is also known as the pay-in period.
A.It would not occur in a deferred annuity The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).
Which of the following is another term for the accumulation period of an annuity? AAnnuity period BPay-in period CPremium period DLiquidation period
B.Pay-in period The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.
Which of the following is TRUE for both equity indexed annuities and fixed annuities? AThey are both tied to an equity index. BBoth are considered to be more risky than variable annuities. CThey invest on a conservative basis. DThey have a guaranteed minimum interest rate.
D.They have a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate
Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant
D.It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
Which of the following is NOT true regarding the accumulation period of an annuity? AIt is also known as the pay-in period. BIt would not occur in a deferred annuity. CIt is the period during which the annuity payments earn interest. DIt is the period over which the owner makes payments into an annuity.
B.It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy ARequired a premium increase each renewal. BBuilt cash values. CRequired proof of insurability every year. DDecreased death benefit at each renewal.
A.Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? AOrdinary Life BJoint Life CDecreasing Term DWhole Life
B.Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
Annually renewable term policies provide a level death benefit for a premium that ADecreases annually. BRemains level. CFluctuates. DIncreases annually.
D.Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured
Which of the following is a feature of a variable annuity? APayments into the annuity are kept in the company's general account. BInterest rate is guaranteed. CSecurities license is not required. DBenefit payment amounts are not guaranteed.
D.Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license
Equity indexed annuities ASeek higher returns. BAre more risky than variable annuities. CAre security instruments. DInvest conservatively.
A.Seek higher returns Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500. Question 13 of 15
Which of the following best describes annually renewable term insurance? ANeither the premium nor the death benefit is affected by the insured's age. BIt provides an annually increasing death benefit. CIt is level term insurance. DIt requires proof of insurability at each renewal
C.It is level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.
Which of the following policies would be classified as a traditional level premium contract? AUniversal Life BVariable Universal Life CStraight Life DAdjustable Life
C.Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.
Which of the following is TRUE regarding variable annuities? AThe company guarantees a minimum interest rate. BA person selling variable annuities is required to have only a life agent's license. CThe annuitant assumes the risks on investment. DThe funds are invested in the company's general account.
C.The annuitant assumes the risks on investment The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment
All of the following entities regulate variable life policies EXCEPT AThe Guaranty Association. BFederal government. CThe SEC. DThe Insurance Department.
A.The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC
All of the following are true of an annuity owner EXCEPT AThe owner must be the party to receive benefits. BThe owner pays the premiums on the annuity. CThe owner has the right to name the beneficiary. DThe owner is the party who may surrender the annuity
A.The owner must be the party to receive benefits The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.
Which of the following is TRUE regarding the accumulation period of an annuity? AIt is limited to 10 years. BIt is a period during which the payments into the annuity grow tax deferred. CIt is also referred to as the annuity period. DIt is a period of time during which the beneficiary receives income
B.It is a period during which the payments into the annuity grow tax deferred. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred
Variable Life insurance is based on what kind of premium? AGraded BLevel fixed CIncreasing DDecreasing
B.Level fixed Variable Life insurance is a level fixed premium investment based product.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT AUpon conversion, the death benefit of the permanent policy will be reduced by 50%. BEvidence of insurability is not required. CMost term policies contain a convertibility option. DUpon conversion, the premium for the permanent policy will be based upon attained age.
Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.
What license or licenses are required to sell variable annuities? AOnly a life insurance license BOnly a securities license CNo license is required DBoth a life insurance license and a securities license
D.Both a life insurance license and a securities license Agents are required to have both a life insurance license and a securities license to sell variable annuities
Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant
D.It may last for the lifetime of the annuitant The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
Which of the following is TRUE regarding the annuity period? AIt is also referred to as the accumulation period. BIt is the period of time during which the annuitant makes premium payments into the annuity. CIt may last for the lifetime of the annuitant. DDuring this period of time the annuity payments grow interest tax deferred
C.It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
Which of the following is TRUE regarding variable annuities? AThe company guarantees a minimum interest rate. BA person selling variable annuities is required to have only a life agent's license. CThe annuitant assumes the risks on investment. DThe funds are invested in the company's general account.
C.The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment
Which of the following is NOT true regarding the annuitant? AThe annuitant's life expectancy is taken into consideration for the annuity. BThe annuitant receives the annuity benefits. CThe annuitant must be a natural person. DThe annuitant cannot be the same person as the annuity owner.
D.The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
What is the purpose of establishing the target premium for a universal life policy? ATo pay up the policy faster BTo cover all policy expenses CTo keep the policy in force DTo accumulate cash value faster
C.To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
A Return of Premium term life policy is written as what type of term coverage? AIncreasing BDecreasing CRenewable DLevel
A.Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid AFor 20 years or until death, whichever occurs first. BUntil the policyowner reaches age 65. CFor 20 years. DUntil the policyowner's age 100, when the policy matures.
A.For 20 years or until death, whichever occurs first Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit
Fixed annuities provide all of the following EXCEPT AHedge against inflation. BEqual monthly payments for life. CMinimum guaranteed rate of interest. DFuture income payments.
A.Hedge against inflation Fixed annuities invest premium payments into a general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection against inflation
Which of the following is TRUE regarding the annuity period? AIt may last for the lifetime of the annuitant. BDuring this period of time the annuity payments grow interest tax deferred. CIt is also referred to as the accumulation period. DIt is the period of time during which the annuitant makes premium payments into the annuity.
A.It may last for the lifetime of the annuitant The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
Which of the following is an example of a limited-pay life policy? ALife Paid-up at Age 65 BRenewable Term to Age 70 CLevel Term Life DStraight Life
A.Life Paid-up at Age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
Which of the following is called a "second-to-die" policy? ASurvivorship life BFamily income CJuvenile life DJoint life
A.Survivorship life Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.
Which of the following is NOT true regarding a Variable Universal Life policy? AThe death benefit is fixed. BThe policyowner can participate in some of the investment decisions. CThe minimum death benefit is guaranteed. DThe cash values are not guaranteed
A.The death benefit is fixed. In a variable universal life policy, the death benefit is adjustable, and the cash values are not guaranteed. While the death benefit may decrease and increase, it cannot go below a guaranteed minimum face amount
Who bears all of the investment risk in a fixed annuity? AThe insurance company BThe owner CThe beneficiary DThe annuitant
A.The insurance company Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? ALiquidation period BDepreciation period CAnnuitization period DPay-out period
B.Depreciation period The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.
Which of the following is NOT true regarding the accumulation period of an annuity? AIt is also known as the pay-in period. BIt would not occur in a deferred annuity. CIt is the period during which the annuity payments earn interest. DIt is the period over which the owner makes payments into an annuity
B.It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? AGraded Premium Life BLimited-pay Life CVariable Life DAdjustable Life
B.Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years
Which of the following is TRUE regarding variable annuities? AA person selling variable annuities is required to have only a life agent's license. BThe annuitant assumes the risks on investment. CThe funds are invested in the company's general account. DThe company guarantees a minimum interest rate.
B.The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the
Which of the following is NOT true regarding the annuitant? AThe annuitant must be a natural person. BThe annuitant cannot be the same person as the annuity owner. CThe annuitant's life expectancy is taken into consideration for the annuity. DThe annuitant receives the annuity benefits.
B.The annuitant cannot be the same person as the annuity owner While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
All of the following statements about equity index annuities are correct EXCEPT AThey invest on a more aggressive basis aiming for higher returns. BThe annuitant receives a fixed amount of return. CThey have a guaranteed minimum interest rate. DThe interest rate is tied to an index such as the Standard & Poor's 500.
B.The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.
An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? ANothing B$50,000 C$100,000 D$200,000
C.$100,000 In joint life policies, the death benefit is paid upon the first death only
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) AFlexible Annuity. BImmediate Annuity. CEquity Indexed Annuity. DVariable Annuity.
C.Equity Indexed Annuity. The interest rates of Equity Indexed Annuities are tied to the Standard and Poor's Index.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? AWhole Life BOrdinary Life CJoint Life DDecreasing Term
C.Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? AThe insurance company will retain the cash value and pay back the premiums to the owner's estate. BThe money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. CThe beneficiary will receive the greater of the money paid into the annuity or the cash value. DBecause the annuitization period has not started, the owner's estate will receive the money paid into the annuity.
C.The beneficiary will receive the greater of the money paid into the annuity or the cash value If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever is greater.
All of the following are true of an annuity owner EXCEPT AThe owner has the right to name the beneficiary. BThe owner is the party who may surrender the annuity. CThe owner must be the party to receive benefits. DThe owner pays the premiums on the annuity
C.The owner must be the party to receive benefits The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary
Which of the following is NOT true regarding Equity Indexed Annuities? AThey have guaranteed minimum interest rates. BThey are less risky than variable annuities. CThey earn lower interest rates than fixed annuities. DThe insurance company keeps a percentage of the returns
C.They earn lower interest rates than fixed annuities Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? AEquity Indexed Universal Life BVariable Universal Life CUniversal Life - Option A DUniversal Life - Option B
C.Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
A Straight Life policy has what type of premium? AAn increasing annual premium for the life of the insured BA decreasing annual premium for the life of the insured CA variable annual premium for the life of the insured DA level annual premium for the life of the insured
D.A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.
Which of the following is TRUE regarding the annuity period? ADuring this period of time the annuity payments grow interest tax deferred. BIt is also referred to as the accumulation period. CIt is the period of time during which the annuitant makes premium payments into the annuity. DIt may last for the lifetime of the annuitant.
D.It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
Which statement is NOT true regarding a Straight Life policy? AThe face value of the policy is paid to the insured at age 100. BIt usually develops cash value by the end of the third policy year. CIt has the lowest annual premium of the three types of Whole Life policies. DIts premium steadily decreases over time, in response to its growing cash value
D.Its premium steadily decreases over time, in response to its growing cash value Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy ABuilt cash values. BRequired proof of insurability every year. CDecreased death benefit at each renewal. DRequired a premium increase each renewal.
D.Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? AJoint Life Policy BSurvivorship Life Policy CSecond-to-Die DFamily Income Policy
A.Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends. Question 3 of 15
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? AHalf the amount BLower CHigher DAs high
B.Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life
A domestic insurer issuing variable contracts must establish one or more ALiability accounts. BAnnuity accounts. CGeneral accounts. DSeparate accounts.
D.Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account
Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
A.Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater
All of the following entities regulate variable life policies EXCEPT AThe Guaranty Association. BFederal government. CThe SEC. DThe Insurance Department
A.The Guaranty Association Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC
All other factors being equal, the least expensive first-year premium payment is found in AAnnually Renewable Term. BIncreasing Term. CDecreasing Term. DLevel Term.
A.Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
Which of the following is TRUE regarding the annuity period? AIt may last for the lifetime of the annuitant. BDuring this period of time the annuity payments grow interest tax deferred. CIt is also referred to as the accumulation period. DIt is the period of time during which the annuitant makes premium payments into the annuity.
A.It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected
All of the following statements about equity index annuities are correct EXCEPT AThe annuitant receives a fixed amount of return. BThey have a guaranteed minimum interest rate. CThe interest rate is tied to an index such as the Standard & Poor's 500. DThey invest on a more aggressive basis aiming for higher returns.
A.The annuitant receives a fixed amount of return Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield
All other factors being equal, the least expensive first-year premium payment is found in ALevel Term. BAnnually Renewable Term. CIncreasing Term. DDecreasing Term.
B.Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year
