Texas Life and Health: Types of Life Policies
Level term insurance provides a level death benefit and a level premium during the policy term. If that policy renews at the ned of a specified period of time, the policy premium will be
Adjusted to te insured's age at the time of renewal
Periodic payments of accumulated funds best describes
An annuity
Which of the following products will prtect an individual from outliving his or her money?
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 calue to the one that does, is a
Convertible Term Policy
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?
Decreasing term - face amount decreases as the amount of debt is reduced
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 effeect inflation may have on her retirement follars, she would like a return that will equal the performace of the Standard and Poor's 500 index. She would likely purchase a(n)
Equity Indexed Annuity
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 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?
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
Why is the equity indexed annuity considered to be a fixed annuity?
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.
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
Which of the following is an example of a limited-pay life policy?
Life Paid-up at Age 65
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life - premium payments will cease at her age 65, but coverage will continue to her death or age 100
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?
Limited-Pay Life - the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
Which two terms are associated directly with the way an annuity is funded?
Single Payment or periodic payments
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 - 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
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return
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 determines the cash value of a variable life policy?
The performance of the policy portfolio
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following is NOT true regarding Equity Indexed Annuities?
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 types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium account?
Universal Life
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%
Which of the following products requires a securities license?
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 agents license in order to sell variable annuities
Fixed annuities provide all the following EXCEPT
hedge against inflation -
Equity indexed annuities
seek higher returns
When an annuity is written, whose life expectancy is taken into account?
Annuitant - the annuitant recveives 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 dont have to be
An agent selling variable annuities must be registered with
FINRA - because variable annuities are aconsidered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agensts license in order to sell variable annuities.
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association - variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.
Who bears all of the investment risk in a fixed annuity?
The insurance company - fixed annuities guarantee a minimum 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 omney 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 for both equipty indexed annutities and fixed annuities?
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 NOT true regarding the annuitant?
the annuitant cannot be the same person as the annuity owner
Which of the following is NOT true regarding the accumulation period of an annuity?
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 annuitiy. 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 best describes annually renewable term insurance?
Its is level term insurance
Which statement is NOT true regarding a Straight Life Policy?
Its premium steadily decreases over time, in response to its growing cash value. - Straightlife policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
All other factors being equal, what would the premiums be like in a survivorship life policy as compared to the premium in a joint life policy?
Lower
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive the 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.