Ch 2

When would a 20-pay whole life policy endow? A After 20 payments B In 20 years C When the insured reaches age 100 D At the insured's age 65

A After 20 payments A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.

What is another name for interest-sensitive whole life insurance? A Current assumption life B Variable life C Term life D Adjustable life

A Current assumption life

Variable Whole Life insurance is based on what type of premium? A Increasing B Flexible C Graded D Level fixed

C Graded Variable Whole Life insurance is a level fixed premium investment-based product.

What kind of policy allows withdrawals or partial surrenders? A Term policy B Variable whole life C Universal life D 20-pay life

D 20-pay life Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.

A policy will pay the death benefit if the insured dies during the 20-year premium- paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A Ordinary life policy B Limited pay whole life C Level term D Term to specified age

A Ordinary life policy A 20-year term policy is written to provide a level death benefit for 20 years.

Which of the following is another term for the accumulation period of an annuity? A Pay-in period B Premium period C Liquidation period D Annuity period

A Pay-in period Accumulation = Pay-in

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? A A death benefit equal to the cash value of the policy B 50% of the death benefit C The face amount minus the premiums that would have been collected until the insured reached the age of 100 D A full death benefit

B 50% of the death benefit Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

What type of premium do both Universal Life and Variable Universal Life policies have? A Decreasing B Increasing C Flexible D Level fixed

B Increasing Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit.

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount B Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount C Amount paid into the plan D Cash value of the plan

C Amount paid into the plan 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.

An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out? A $10,000 B $40,000 C $50,000 D $60,000

The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend A Installment refund. B Joint and survivor. C Straight life. D Life income with period certain.

A Installment refund. With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant.

The death protection component of Universal Life Insurance is always A Adjustable Life B Decreasing Term C Annually Renewable Term D Whole Life

B Decreasing Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Which of the following types of policies allows for a flexible premium and a variable investment component? A Variable universal life insurance B Guaranteed issue variable life insurance C Variable whole life insurance D Whole life insurance A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.

B Guaranteed issue variable life insurance A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? A The policy premiums will remain level for 20 years. B If the insured dies before the policy expired, the beneficiary will receive $100,000. C The policy will expire at the end of the 20-year period. D At the end of 20 years, the policy's cash value will equal $100,000. Term policies do not develop cash values. All the other statements are true.

B If the insured dies before the policy expired, the beneficiary will receive $100,000. Term policies do not develop cash values. All the other statements are true.

Which type of life insurance policy generates immediate cash value? A Continuous Premium B Single Premium C Level Term D Decreasing Term

B Single Premium

All of the following statements about equity index annuities are correct EXCEPT A The annuitant receives a fixed amount of return. B They have a guaranteed minimum interest rate. C The interest rate is tied to an index such as the Standard & Poor's 500. D They invest on a more aggressive basis aiming for higher returns.

D They invest on a more aggressive basis aiming for higher returns. 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 option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A Option B B Corridor option C Variable option D Option A

B Corridor option Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

A policy will pay the death benefit if the insured dies during the 20-year premium- paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A Level term B Term to specified age C Ordinary life policy D Limited pay whole life

B Term to specified age A 20-year term policy is written to provide a level death benefit for 20 years.

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? A 50% of the death benefit B The face amount minus the premiums that would have been collected until the insured reached the age of 100 C A full death benefit D A death benefit equal to the cash value of the policy

B The face amount minus the premiums that would have been collected until the insured reached the age of 100 Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A Universal Life - Option A B Universal Life - Option B C Equity Indexed Life D Variable Life

C Equity Indexed Life

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? A Survivorship Life Policy B Second-to-Die C Family Income Policy D Joint Life Policy

C Family Income Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called A Joint life annuity. B Life income with period certain. C Life income with refund. D Joint and survivorship.

C Life income with refund. If the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain.

When would a 20-pay whole life policy endow? A After 20 payments B In 20 years C When the insured reaches age 100 D At the insured's age 65

D At the insured's age 65 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount B Amount paid into the plan C Cash value of the plan D Either 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

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? A Joint and survivor B Pure life C Life with guaranteed minimum D Installment refund

D Installment refund A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.

Which of the following is NOT a type of whole life insurance? A Limited payment B Level term C Single premium D Straight life

D Straight life There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Level term is a type of term insurance.

Is someone able to skip premium payments if the cash value can cover the premium?

Yes -- Universal Life