Ch 2: Types of Life Policies
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?
$100,000
The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
At age 30, an applicant wants to start an insurance program, but realizing his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?
Adjustable life
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Adjusted to the insured's age at the time of renewal
All other factors being equal, the least expensive first-year premium payment is found in
Annually Renewable Term
A Universal Life Insurance policy is best described as a/an
Annually Renewable Term policy with a cash value account.
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of the 20 years, the policy's cash value will equal $100,000
The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a
Convertible Term policy
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount.
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)
Equity Indexed Annuity
An agent selling variable annuities must be registered with
FINRA
What does "level" refer to in level term insurance?
Face amount
Which policy component decreases in decreasing term insurance?
Face amount
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
For 20 years or until death, whichever occurs first.
The death benefit under the Universal Life Option B
Gradually increases each year by the amount that the cash value increases.
Fixed annuities provide all of the following EXCEPT
Hedge against inflation.
In which of the following cases will the insured be able to receive the full face amount from a whole life policy?
If the insured lives to age 100.
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Immediate
A Return of Premium term life policy is written as what type of term coverage?
Increasing
What are the two components of a universal policy?
Insurance and cash account
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
Interest-sensitive Whole Life Policy
Which of the following is TRUE regarding the accumulation period of an annuity?
It is a period during which the payments into the annuity grow tax deferred
Which of the following best describes annually renewable term insurance?
It is level term insurance.
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?
Joint life
Variable whole life insurance is based on what type of premium?
Level fixed.
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?
Level-term
Which of the following is an example of a limited-pay life policy?
Life Paid-up at age 65
Your client was both protection and savings from the insurance, and is willing to pay its premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life
An insured has a life 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?
Limited-pay Life
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Option B
Which of the following is another term for the accumulation period of an annuity?
Pay-in period
Which of the following is NOT one of the three basic types of coverages that are available, based on how the face amount changes during the policy term?
Renewable
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
A domestic insurer issuing variable contracts must establish one or more
Separate accounts
Which type of life insurance policy generates immediate cash value?
Single Premium
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
An insurance policy that only requires a payment of premium at its inception, provides insurance for the life of the insured, and matures at the insured's age 100 is called
Single premium whole life
Which of the following policies would be classified as a traditional level premium contract?
Straight Life
Which of the following is called a "second-to-die" policy?
Survivorship life
Which of the following would help prevent a universal life policy from lapsing?
Target premium
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?
The annuitant must be a natural person.
All of the following statements about equity indexed annuities are correct EXCEPT
The annuitant receives a fixed amount of return
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?
The beneficiary will receive the greater of the money paid into the annuity or the cash vale
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following is correct regarding this change?
The death benefit can be increased by providing evidence of insurability.
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?
The insured may renew the policy for another 10 years, but at a higher premium rate.
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
The policyowner of a Universal Life Policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance
Which of the following statements is correct regarding a whole life policy?
The policy owner is entitled to policy loans
Which of the following is TRUE regarding the premium in term policies?
The premium is level
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account
Which of the following best defines target premium in a universal life policy?
The recommended amount to keep the policy in force throughout its lifetime.
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT
The type of investment
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities
Which of the following is TRUE for both equity indexed annuities and fixed rate annuities?
They have guaranteed minimum interest rates
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Universal life
What kind of policy allows withdraw or partial surrenders?
Universal life
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
The main difference between immediate and deferred annuities is
When the income payments begin.
Which of the following types of policies will provide permanent protection?
Whole life
Annually renewable term policies provide a level death benefit for a premium that
increases annually
Why is an equity indexed annuity considered to be a fixed annuity?
it has a guaranteed minimum interest rate
Who bares all of the investment risk in a fixed annuity?
the insurance company