Types of Life Policies

Which statements is NOT true regarding a Straight Life policy? a. its premium steadily decreases over time, in response to its growing cash value b. the face value of the policy is paid to the insured at age 100 c. it usually develops cash value by the end of the third policy year d. it has the lowest annual premium for the three types of Whole Life policies

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

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? a. the annuitant must be a natural person b. a corporation can be an annuitant as long as it is also the owner c. a corporation can be an annuitant as long as the beneficiary is a natural person d. the contract can be issued without an annuitant

a. the annuitant must be a natural person

All of the following statements about the equity index annuities are correct EXCEPT a. the annuitant receives a fixed amount of return b. they have a guaranteed minimum interest rate c. the interest rate is tied to an index such as Standard and Poors 500 d. they invest on a more aggressive basis aiming for higher returns

a. the annuitant receives a fixed amount of return

Who bears all of the investment in a fixed annuity? a. the insurance company b. the owner c. the beneficiary d. the annuitant

a. the insurance company

A Straight Life policy has what type of premium? a. a variable annual premium for the life of the insured b. a level annual premium for the life of the insured c. an increasing annual premium for the life of the insured d. a decreasing annual premium for the life of the insured

b. a level annual premium for the life of the insured

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 a. discounted b. adjusted to the insured's age at the time of renewal c. determined by the health of the insured d. based on the issue age of the insured

b. 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 a. level term b. annually renewable term c. increasing term d. decreasing term

b. annually renewable term

A Universal Life Insurance policy is best described as a/an a. flexible premium variable life policy b. annually renewable term policy with a cash value account c. variable life with a cash value account d. whole life policy with two premiums: target and minimum

b. annually renewable term policy with a cash value account

The term "fixed" in a fixed annuity refers to all of the following EXCEPT a. amount and length of payments b. death benefit c. guaranteed rate of interest d. equal annuity payments

b. death benefit

Both Universal and Life and Variable Universal Life have a a. increasing premium b. flexible premium c. level fixed premium d. decreasing premium

b. flexible premium

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 life insurance policy matures?

cash value is paid to the policy owner

What happens to the cash value when a whole life insurance policy matures?

cash value is paid to the policyowner

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. This policy is/an a. credit life b. annual renewable term c. adjustable life d. interest-sensitive whole life

d. interest-sensitive whole life

Which of the following best describes annually renewable term insurance? a. it requires proof of insurability at each renewal b. neither the premium nor the death benefit is affected by the insureds age c. it provides an annually increasing death benefit d. it is level term insurance

d. it is level term insurance

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? a. term to specified age b. ordinary life policy c. limited pay whole life d. level term

d. level term

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? a. variable life b. adjustable life c. grade premium life d. limited-pay life

d. limited-pay life

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? a. a corporation can be an annuitant as long as it is also the owner b. a corporation can be an annuitant as long as the beneficiary is a natural person c. the contract can be issued without an annuitant d. the annuitant must be a natural person

d. the annuitant must be a natural person

Which of the following statements is correct regarding a whole life policy? a. cash values are not guaranteed b. the policy premium is based on the attained age c. the death benefit may increase or decrease during the policy period d. the policyowner is entitled to policy loans

d. the policyowner is entitled to policy loans

What kind of policy allows withdrawals or partial surrenders? a. 20-pay life b. term policy c. variable whole life d. universal life

d. universal life

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? a. variable life b. decreasing term c. straight whole life d. universal life

d. universal life

What type of life insurance is best suited to cover a mortgage?

decreasing term

If the annuitant dies before the annuitization period starts, what will the beneficiary receive?

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

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

What type of annuity credits its interest based upon index such as S and P 500?

equity indexed annuity

What does the term "level" refer to in level 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 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 died within the first 15 years of the annuitization period; then the payments will last for fifteen years

What are the two classifications of annuities according to the time and annuity payments begin?

immediate and deferred

What type of annuity can be purchased with a single premium?

immediate annuity

In annually renewable term policies, what is the annual premium based upon?

insured's attained age

Which of the following is TRUE regarding the annuity period?

it may last for the lifetime of an annuitant

An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years

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

If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

joint life annuity

Mortality tables are used by insurance companies to predict what?

life expectancy and the death rates for specific groups of individuals

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?

life income with period certain

What type of license is/are required to sell variable annuities?

life insurance license and securities license

A whole life policy that requires that the policyowner only pays a 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 income 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

What universal life option has a gradually increasing cash value and a level death benefit?

option A

What type of life insurance offers an applicant cash value element?

permanent insurance - usually whole life

Which type of life insurance policy generates immediate cash value?

single premium

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 amount only for as long as the annuitant lives?

straight life

What type of life insurance policy offers pure death protection?

term

Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit be paid to the beneficiary?

the full death benefit

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

Who is entitled to the cash values in a life insurance policy?

the policyowner

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 policy?

the premium is based on the average age of the insureds

Fixed annuities provide all of the following EXCEPT a. future income payments b. hedge against inflation c. equally monthly payments for life d. minimum guaranteed rate of interest

b. 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? a. at age 65 b. if the insured lives to age 100 c. as soon as the cash value exceeds the face amount d. if there are no named beneficiaries when the policy is paid up

b. if the insured lives to age 100

The premium of a survivorship life policy compared with that of a joint life policy would be a. half the amount b. lower c. higher d. as high

b. lower

A domestic insurer issuing variable contracts must establish one or more a. general accounts b. separate accounts c. liability accounts d. annuity accounts

b. separate accounts

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? a. 65 b. 70 1/2 c. 90 d. 100

d. 100

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of insurance policy would be best suited to this situation? a. variable life b. universal life c. whole life d. decreasing term

d. decreasing term

Annually renewable term policies provide a level death benefit for a premium that a. decreases annually b. remains level c. fluctuates d. increases annually

d. increases annually

During partial withdrawal from a universal life policy, which portion will be taxed? a. cash value b. principal c. loan d. interest

d. interest

What elements of an adjustable life policy can be changed by the policyowners?

the amount and payment period of the premium, the face amount, and the period for protection

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

In term policies, what happens to the premium throughout the term of the policy?

the premium remains level

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 policy from lapsing

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is a enough cash value in the policy to cover the premium amount?

universal

All of the following are TRUE regarding the convertibility option under a term life policy EXCEPT

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

What type of annuity requires an agent to have a securities license?

variable annuity

What type of insurance policy provides permanent protection?

whole life

What type of insurance would perform the function of cash accumulation?

whole life insurance

When would a 20-pay whole life policy endow?

When the insured reaches age 100

what characteristic makes whole life permanent protection? a. coverage until death or age 100 b. guaranteed death benefit c. guaranteed level premium d. living benefits

a. coverage until death or 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? a. immediate b. flexible c. deferred d. variable

a. immediate

An insurance policy that only requires a payment at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a. single premium whole life b. Modified Endowment Contract c. level term life d. graded premium whole life

a. single premium whole life

Which of the following terms best describes the coverage provided by term policies, as compared to any other form of protection? a. longest b. greatest c. least d. most comprehensive

b. greatest

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? a. universal life b. adjustable life c. term life d. limited pay

a. universal life

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a. universal life- option A b. universal life- option B c. equity indexed universal life d. variable universal life

a. universal life- option A

what are the two phases of an annuity?

accumulation or annuitization - pay in or pay out

The policyowner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policys face amount?

age 100

Whole life policies provide protection until the insured reaches what age?

age one hundred

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?

annually renewable term

Who receives payments from an annuity?

annuitant

Whole life expectancy is taken into consideration in an annuity contract?

annuitant

If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

annuitant's estate

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

The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a a. whole life policy b convertible term policy c. renewable term policy d. decreasing term policy

b convertible term policy

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a. the money will continue to grow tax-deferred until the liquidation, and then will be paid to the beneficiary b. the beneficiary will receive the greater of the money paid into the annuity or the cash value c. the owner's estate will receive they money paid into the annuity d. the insurance company will retain the cash value and pay back premiums to the owner's estate

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

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? a. nothing b. 50,000 c. 100,000 d. 200,000

c. 100,000

An agent selling variable annuities must be registered with a. The Guaranty Association b. SEC c. FINRA d. Department of Insurance

c. FINRA

When an annuity is written, whose life expectancy is taken into account? a. life expectancy is not a factor when writing an annuity b. owner c. annuitant d. beneficiary

c. annuitant

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? a. second-to-die b. family income policy c. joint life policy d. survivorship life policy

c. joint life policy

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? a. ordinary life policy b. limited pay whole life c. level term d. term to specified age

c. level term

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? a. level b. increasing c. renewable d. decreasing

c. renewable

If an agent wishes to sell variable life policies, what license must the agent obtain? a. surplus lines b. personal lines c. securities d. adjuster

c. securities

Which of the following determines the cash value of a variable life policy? a. the policy's guaranteed b. the premium mode c. the performance of the policy portfolio d. the companys general account

c. the performance of the policy portfolio

Which of the following is NOT true regarding Equity Indexed Annuities? a. they have guaranteed minimum interest rates b. they are less risky than variable annuities c. they earn lower interest rates than fixed annuities d. the insurance company keeps a percentage of the returns

c. they earn lower interest rates than fixed annuities

When would a 20-pay whole life policy endow? a. after 20 payments b. in 20 years c. when the insured reaches age 100 d. at the insureds age 65

c. when the insured reaches age 100

All of the following are true about variable products EXCEPT a. the minimum death benefit is guaranteed b. the cash value is guaranteed c. policyowners bear the investment risk d. the premiums are invested in the insurer's general account

d. the premiums are invested in the insurer's general account