Chapter 2
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
$50,000
A policy states that it will pay a specified face amount 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?
20-year level term
Wha type of premium is charged on a straight life policy?
A level premium for the life of the insured
What type of license(s) is/are required to sell variable annuities?
A life insurance license and a securities license
What are the two phases of an annuity?
Accumulation and annuitization (or pay-in and pay-out)
While life policies provide protection until the insured reaches what age?
Age 100
In flexible premium payment annuities, the term flexible refers to what?
Amount of premium
The death protection component of a universal life policy is expressed as what type of coverage?
Annual Renewable Term
Whose life expectancy is take into consideration in an annuity contract?
Annuitant
whole life who receives income payments from an annuity?
Annuitant
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
Annuitant's estate
In an annuity, the accumulated money is converted into a streak of income during which time period?
Annuitization period
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period
Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period it until a specific fixed amount is liquidated?
Annuity certain
In variable universal life insurance, to what policy component does the term "variable" refer?
Cash value and death benefit
What happens to the cash value when a whole Kline insurance policy matures?
Cash value is paid to the policyowner
The term "fixed" in a fixed annuity refers to all of the following EXCEPT
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.
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
Decreasing term
What type of life insurance is best suited to cover a mortgage?
Decreasing term
If the annuitant dies before the accumulation period starts, what will the beneficiary receive?
Either the amount paid into the annuity or the cash value, whichever is greater
What type of annuity credits it's interest based upon an index such as S&P 500?
Equity indexed annuity
What does level refer to in the term insurance?
Face amount
What does the term level refer to in level insurance?
Face amount
What policy component must decrease in decreasing term insurance?
Face amount
An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity?
Flexible premium deferred annuity
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 what time period?
For 20 years or until the insured's death, whichever occurs first.
How long will a life annuity with a 15-year period certain pay
For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years
What are the two classifications of annuities according to the time when annuity payments begin?
Immediate and deferred
What type of annuity can be purchased with a single premium?
Immediate annuity
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest earned on the withdrawn cash value
Why is an equity annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
In an annuity provides a set amount of income for two ore more persons with the income ceasing upon the first death, what type of annuity is that?
Joint life annuity
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
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
What annuity settlement options provides income payments to the annuitant for the duration of their life, and also guarantees payment for a specified number of years?
Life income with period certain
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?
Limited pay whole life
What type of life insurance policy is life paid up at age 65?
Limited pay whole life
How soon can I come payments begin in an immediate annuity?
No later than 1 year from the time of the annuity purchase
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than 1 year after the annuity purchase
Can a business or a corporation be an annuitant?
No, an annuitant must always be a natural person
What universal life option has a gradually increasing cash value and a level death benefit?
Option A (level death benefit)
What are the death benefit options in universal life policies?
Option A - level death benefit, and Option B - increasing death benefit?
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
Who is entitled to the cash values in a life insurance policy?
Policyowner
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?
Single premium whole life
What type of whole life insurance policy generates immediate cash value?
Single premium whole life
What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest only for as long as the annuitant lives?
Straight life
Which of the following policies would be classified as a traditional level premium contract?
Straight life
What type of life insurance policy offers pure death protection?
Term life
What elements of an adjustable life policy can be changed by the policy owners?
The amount and payment period of the premium, the face amount, and the period for protection
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death
Whole life insurance policies nature when the insured reaches age 100. If the owner of a whole life policy (the insured) dies at age 80, and there are no outstanding loans in the policy, what portion of the death benefit will be paid to the beneficiary?
The full death benefit
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
What is the difference between a single premium and a flexible premium payment options in a deferred annuity?
The number of payments that purchase the annuity
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
What happens to the premium in an annually renewable term life policy?
The premium increases with each renewal
How is the premium determined in a joint life insurance policy?
The premium is based on the average age of the insureds
Why are policy loans not available on term insurance?
There is no cash value to borrow against
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
What is the main reason for purchasing an annuity?
To provide income that the annuitant cannot outlive
Under Option B in a universal life policy, what happens to the death benefit?
Under Option B, the death benefit increases each year by the amount of the cash value increases
What kind of policy allows withdrawals or partial surrenders?
Universal Life
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal Life
In what type of life insurance can the policyowner skip premium payments without the policy lapsing?
Universal life
In a joint life policy, when is the death benefit paid?
Upon the first death
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
What type of annuity requires an agent to have a securities license?
Variable annuity
When would a 20-pay whole life policy endow?
When the insured reaches age 100
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
An individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have?
annuity
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
beneficiary
Who bears the investment risk in a fixed annuity?
insurer
All of the following are true regarding a decreasing term policy EXCEPT
the payable premium amount steadily declines throughout the duration of the contract
What type of life insurance policy provides permanent protection?
whole life
What type of insurance would perform the function of cash accumulation?
whole life insurance
