Insurance: Chapter 2 Questions

universal life insurance policy is best described as 1. annually renewable term policy with a cash value account 2. variable life with cash value 3. whole life policy with two premiums: target and minimum 4. flexible premium variable life policy

an annually renewable term policy with a cash value account

what are two components of a universal policy? 1. insurance and investments 2. mortality cost and interest 3. separate account and policy loans 4. insurance and cash account

insurance and cash account

an insured purchase 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 1. interest-sensitive whole life 2. credit life 3. annual renewable term 4. adjustable life

interest-sensitive whole life

which of the following best describes annually renewable term insurance? 1. neither the premium nor the death benefit is affected by the insured's age 2. it provides an annually increasing death benefit 3. it is level term insurance 4. it requires proof of insurability at each renewal

it is level term insurance

the annuity owner dies while the annuity is still in the accumulation stage. which of the following is TRUE? 1. because the annuitization period has not started, the owner's estate will receive the money paid into the annuity 2. the insurance company will retain the cash value and pay back the premiums to the owner's estate 3. the money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary 4. the beneficiary will receive the greater of the money paid into the annuity or the cash value

the beneficiary will receive the greater of the money paid into the annuity or the cash value

the term "fixed" in fixed annuity refers to all of the following EXCEPT 1. death benefit 2. guaranteed rate of interest 3. equal annuity payments 4. amount and length of payments

death benefit

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 1. for 20 years or until death, whichever occurs first 2. until the policyowner's age 65 3. for 20 years 4. until the policyowner's age 100, when the policy matures

for 20 years or until death, which occurs first

all of the following entities regulate variable life policies EXCEPT 1. guaranty association 2. federal government 3. sec 4. insurance department

guaranty association

which policy component decreases in decreasing term insurance? 1. cash value 2. dividend 3. premium 4. face amount

face amount

when an annuity is written, whose life expectancy is taken into account? 1. annuitant 2. beneficiary 3. life expectancy is not a factor when writing an annuity 4. owner

annuitant

which of the following is NOT a term for period of time during which the annuitant or the beneficiary receives income? 1. pay-out period 2. liquidation period 3. depreciation period 4. annuitization period

depreciation period

annually renewable term policies provide a level death benefit for a premium that 1. fluctuates 2. increases annually 3. decreases annually 4. remains level

increases annually

variable life insurance is based on what kind of premium 1. increasing 2. decreasing 3. graded 4. level fixed

level fixed

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? 1. flexible premium 2. immediate 3. deferred 4. fixed

deferred

which of the following is NOT true regarding the accumulation period of an annuity? 1. it is also know as the pay-in period 2. it would not occur in a deferred annuity 3. it is the period during which the annuity payments earn interest 4. it is the period over which the annuitant makes payments into an annuity

it would not occur in a deferred annuity

a return of premium term policy is written as what type of term coverage? 1. renewable 2. level 3. increasing 4. decreasing

increasing

which statement is NOT true regarding a straight life policy? 1. its premium steadily decreases over time, in response to its growing cash value 2. the face value of the policy is paid to the insured at age 100 3. it usually develops cash value by the end of the third policy year 4. it has the lowest annual premium of the three types of whole life products

its premium steadily decreases over time, in response to its growing cash value

which universal life option has a gradually increasing cash value and a level death benefit? 1. term insurance 2. option b 3. option a 4. juvenile life

option a

which option for universal life allows beneficiary to collect both the death benefit and cash value upon the death of the insured? 1. option a 2. option b 3. corridor option 4. variable option

option b

an insured owns a life insurance policy. to be able to pay some of her medical bill, 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? 1. adjustable life 2. term life 3. limited pay 4. universal life

universal life

all other factors being equal, the least expensive first-year premium payment is found in 1. level term 2. annually renewable term 3. increasing term 4. decreasing term

annually renewable term

all of the following are true of an annuity owner EXCEPT 1. the owner is the party who may surrender the annuity 2. the owner must be the party to receive the benefits 3. the owner pays the premiums on the annuity 4. the owner has the right to name the beneficiary

the owner must be the party to receive benefits

all of the following are true about variable products EXCEPT 1. policyowners bear the investment risk 2. the premiums are invested in the insurer's general account 3. the minimum death benefit is guaranteed 4. the cash value is not guaranteed

the premiums are invested in the insurer's general account

a man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after than. What type of annuity is it? 1. flexible 2. deferred 3. variable 4. immediate

immediate

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? 1. as high 2. half the amount 3. lower 4. higher

lower

what does "level" refer to in level term insurance? 1. cash value 2. interest rate 3. face amount 4. premium

face amount

which of the following is TRUE regarding the premium in term policies? 1. decreasing term policy will have a decreasing premium 2. premium is level 3. only level term policy has a level premium 4. premium in term policies is not based on the insured's age

the premium is level

the main difference between immediate and deferred annuities is 1. how the annuity is purchased 2. the number of insureds 3. the amount of each payment 4. when the income payments begin

when the income payments begin

periodic payments of accumulated funds best describes 1. group policy 2. annuity 3. survivorship life policy 4. universal life policy

annuity

which of the following is a feature of a variable annuity? 1. payments into the annuity are kept in the company's general account 2. interest rate is guaranteed 3. securities license is not required 4. benefit payment amounts are not guaranteed

benefit payments amounts are not guaranteed

what license or licenses are required to sell variable annuities? 1. only a securities license 2. no license is required 3. both a life insurance license and a securities license 4. only a life insurance license

both a life insurance license and a securities license

all of the following are characteristics of a universal life policy EXCEPT 1. the planned premium pays for mortality charges and expenses and any excess is returned to the policyowner 2. the insurance company reserves the right to adjust the mortality charges and./or interest rate 3. the cash amount accumulates on a tax-deferred basis 4. universal life is a combination of term insurance and a separate savings account joined in a single contract

he planned premium pays for mortality charges and expenses and any excess is returned to the policyowner

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? 1. flexible payment annuity 2. deferred interest annuity 3. immediate annuity 4. variable annuity

immediate annuity

annually renewable term policies provide a level death benefit for a premium that 1. decreases annually 2. remains level 3. fluctuates 4. increases annually

increases annually

who bears all of the investment risk in a fixed annuity? 1. annuitant 2. insurance company 3. owner 4. beneficiary

insurance company

during partial withdrawal from a universal life policy, which portion will be taxed? 1. cash value 2. principal 3. loan 4. interest

interest

why is an equity index annuity consider to be a fixed annuity/ 1. it has a fixed rate of return 2. it is not tied to an index like s&p 500 3. it has a guaranteed minimum interest rate 4. it has a modest investment potential

it has a guaranteed minimum interest rate

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? 1. level term 2. term to specified age 3. ordinary life policy 4. limited pay whole life

level term

the policyowner of an adjustable life policy wants to increase the death benefit. which of the following statements is correct regarding this change? 1. the death benefit can be increased only when the policy has developed a cash value 2. the death benefit can be increased only be exchanging the existing policy for a new one 3. the death benefit can be increased by providing insurability 4. the death benefit cannot be increased

the death benefit can be increased by providing insurability

all of the following are true regarding a decreasing term policy EXCEPT 1. it has a lower premium than level term 2. the contract pays only in the event of death during the term and there is no cash value 3. the face amount steadily declines throughout the duration of the contract 4. the payable premium amount steadily declines throughout the duration of the contract

the payable premium amount steadily declines throughout the duration of the contract

which of the following is NOT true regarding equity indexed annuities? 1. they earn lower interest rates than fixed annuities 2. the insurance company keeps a percentage of the returns 3. they have guaranteed minimum interest rates 4. they are less risky than variable annuties

they earn lower interest rates than fixed annuities

which of the following is true for both equity indexed annuities and fixed annuities? 1. both are considered to be more risky than variable annuities 2. they invest on a conservative basis 3. they have a guaranteed minimum interest rate 4. they are both tied to an equity index

they have a guaranteed minimum interest rate

what kind of policy allows withdrawals or partial surrenders? 1. variable whole life 2. universal life 3. 20-pay life 4. term policy

universal life

all of the following are true regarding the convertibility option under a term life insurance policy EXCEPT 1. upon conversion, the death benefit of the permanent policy will be reduced by 50% 2. evidence of insurability is not required 3. most term policies contain a convertibility option 4. upon conversion, the premium for the permanent policy will be based upon attained age

upon conversion, the death benefit of the permanent policy will be reduced by 50%

when would a 20-pay whole life policy endow? 1. at the insured's age 65 2. after 20 payments 3. in 20 years 4. when the insured reaches age 100

when the insured reaches age 100

all of the following are true regarding a decreasing term policy EXCEPT 1. the payable premium amount steadily declines throughout the duration of the contract 2. it has a lower premium than level term 3. the contract pays only in the event of death during the term and there is no cash value 4. the face amount steadily declines throughout the duration of the contract

the payable premium amount steadily declines throughout the duration of the contract

twin brothers are starting a new business. they know it will take years to build the business to the point that they can pay off 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? 1. whole life 2. ordinary life 3. joint life 4. decreasing term

joint life

the death protection component of universal life insurance is always 1. adjustable life 2. increasing term 3. annually renewable term 4. whole life

annually renewable term

an insured buys a 5-year level premium term policy with a face amount of $10,000. the policy also contains renewability and convertibility options. when the insured renews the policy in 5 years, what will happen to the premium? 1. will remain the same for the new 5-year term 2. it will decrease for the new 5-year term since the insured is now a lesser risk to the company 3. it will increase each year during the next 5 years as the face amount increases each year 4. it will increase because the insured will be 5 years older than when the policy was originally purchased

t will increase because the insured will be 5 years older than when the policy was originally purchased

both universal life and variable life have a 1. flexible premium 2. level fixed premium 3. decreasing premium 4. increasing premium

flexible premium

an agent selling variable annuities must be registered with 1. finra 2. department of insurance 3. the guaranty association 4. sec

finra

which of the following is another term for the accumulation period of an annuity? 1. annuity period 2. pay-in period 3. premium period 4. liquidation period

pay-in period

equity indexed annuities 1. are more risky than variable annuities 2. are security instruments 3. invest conservatively 4. seek higher returns

seek higher returns

which of the following features of the indexed whole life policy is NOT fixed? 1. cash value growth 2. premium 3. death benefit 4. policy period

cash value growth

if an annuitant dies before annuitization occurs, what will the beneficiary receive? 1. either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount 2. amount paid into the plan 3. cash value of the plan 4. either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

either the amount paid into the plan or the cash value of the plan, whichever is the greater amount