Types of Life Policies
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 full death benefit
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
Which of the following products provides income for a specified period of years or for life, and protects against outliving their money?
An annuity (contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated fund)
The minimum interest rate on an equity indexed annuity is often based on:
An index like Standard & Poor's 500 (equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. Interest rates on equity indexed annuities are often tied to a familiar index, such as the Standard and Poor's 500)
The death protection component of Universal Life Insurance is always:
Annually Renewable Term (a universal policy has 2 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)
The LEAST expensive first-year premium is found in which of the following policies?
Annually Renewable Term (premium increases each year with the insured's attained age)
A Universal Life Policy is best described as a /an:
Annually Renewable Term policy with a cash value
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific amount is liquidated?
Annuity certain
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of 20 years, the policy's cash value will equal $100,000 (term policies do not develop cash values)
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
What characteristic makes whole life permanent protection?
Coverage until death or age 100
What is another name for interest-sensitive whole life insurance?
Current assumption life
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 decreased as the amount of debt is reduced)
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
Which policy component decreases in decreasing term insurance?
Face amount
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed amount (the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits)
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
Annually renewable term policies provide a level death benefit for a premium that:
Increases annually (level death benefit that increases each year with the age of the insured)
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
Installments for a fixed period
What are the two components of a universal policy?
Insurance and cash amount
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 (because the cash values are generated by investments, interest rates will affect the amount of the cash value)
Which of the following is TRUE regarding the accumulation period of 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
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity (deferred annuity is the period of time during which the payments earn interest and grow tax deferred)
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a:
Joint life annuity
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 NOT a type of whole life insurance?
Level term
Which of the following is an example of a limited-pay life policy?
Life Paid-up at Age 65
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:
Life income with a period certain (if the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain)
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 premium of a survivorship life policy compared with that of a joint life policy would be:
Lower
Under a straight life annuity, if the annuitant dies before the principle amount is paid out, the beneficiary will receive:
Nothing, payments will cease (straight or pure life annuity will pay a specific amount of income for the remainder of the annuitant's life)
Under a pure life annuity, an income is payable by the company:
Only for the life of the annuitant
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 (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)
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?
Payments for 15 years (with any period certain, death of the annuitant within the stated life period will provide payments to the beneficiary only for the remainder of the period certain)
Which of the following is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants
Which of the following has the right to convert the existing term coverage to permanent insurance?
Policyowner
Which of the following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive
Which of the following is NOT one of the three types of term coverage based on what happens to the face amount during the policy term?
Renewable
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy:
Required a premium increase each renewal
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities (variable products are governed in part by the Securities and Exchange Commission)
Which 2 terms are associated directly with the way an annuity is funded?
Single life payment or periodic payments
An insurance policy that only requires a payment of premium at its inception, provides insurance protection 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
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:
Straight life (the annuity payments cease at death, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant)
Which of the following is called a "second-to-die" policy?
Survivorship life
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner (the annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written)
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
The beneficiary
The annuitant 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 value
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements 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 of an annuity owner EXCEPT:
The owner must be the party to receive benefits
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 statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans
Which of the following is TRUE regarding the premium in term polices?
The premium is level for the term of the policy
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
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life-Option A
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 amount?
Universal life
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 (each withdrawal is usually charged and the amount/frequency of withdrawals is usually limited)
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% (would be based on the insured's attained age)
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
Which of the following products requires a securities license?
Variable annuity
Which of the following products requires a securities license?
Variable annuity (considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations)
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Variable universal life
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit (variable whole life insurance guarantees a minimum death benefit)
The main difference between immediate and deferred annuities is:
When the income payments begin
When would a 20-pay whole life policy endow?
When the insured reached age 100
When would a 20-pay whole life policy endow?
When the insured reached age 100 (the premium is completely paid off in 20 years)
Which of the following types of policies permanent protection?
Whole life
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
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?
$50,000