Chapter 1

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

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

Variable Whole Life insurance is based on what type of premium?

Level fixed

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 main difference between immediate and deferred annuities is

when the income payments begin

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

What does "level" refer to in level term insurance?

Face Amount

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

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?

$9,800

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

Common Disaster

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

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.

Which of the following is an example of a limited-pay life policy?

Life Paid-up at Age 65

Which of the following settlement options in life insurance is known as straight life?

Life income

Equity indexed annuities

Seek higher returns.

Which of the following is TRUE regarding variable annuities? AThe company guarantees a minimum interest rate. BA person selling variable annuities is required to have only a life agent's license. CThe annuitant assumes the risks on investment. DThe funds are invested in the company's general account.

The annuitant assumes the risks on investment.

The main difference between immediate and deferred annuities is AThe number of insureds. BThe amount of each payment. CWhen the income payments begin. DHow the annuity is purchased.

When the income payments begin

When would a 20-pay whole life policy endow?

When the insured reaches age 100

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

paid up option

Which of the following types of policies will provide permanent protection?

whole life

Fixed annuities provide all of the following EXCEPT A Minimum guaranteed rate of interest. B Future income payments. C Hedge against inflation. D Equal monthly payments for life.

Hedge against inflation

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

Adjusted to the insured's age at the time of renewal

During partial withdrawal from a universal life policy, which portion will be taxed?

interest

What required provision protects against unintentional lapse of the policy?

grace period

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

Family term rider

Which of the following is another term for the accumulation period of an annuity?

Pay-in period

Which of the following riders would NOT cause the Death Benefit to increase?

Payor Benefit Rider

Which of the following determines the cash value of a variable life policy? AThe company's general account BThe policy's guarantees. CThe premium mode DThe performance of the policy portfolio

The performance of the policy portfolio

What license or licenses are required to sell variable annuities?

both a life insurance license and a securities license

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 called a "second-to-die" policy?

survivorship life

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

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

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 is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

Which of the following is TRUE regarding the premium in term policies? A The premium is level. B Only level term policy has a level premium. C The premium in term policies is not based on the insured's age. D Decreasing term policy will have a decreasing premium

The premium is level

Which type of life insurance policy generates immediate cash value?

Single Premium

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.

Which of the following products requires a securities license?

Variable annuity

Which two terms are associated directly with the way an annuity is funded?

Single 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

All of the following are true regarding a decreasing term policy EXCEPT A The contract pays only in the event of death during the term and there is no cash value. B The face amount steadily declines throughout the duration of the contract. C The payable premium amount steadily declines throughout the duration of the contract. D The death benefit is $0 at the end of the policy term.

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

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

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy

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.

A Return of Premium term life policy is written as what type of term coverage?

increasing

What type of insurance would be used for a Return of Premium rider?

increasing term

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 best defines target premium in a universal life policy?

The recommended amount to keep the policy in force throughout its lifetime

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower

A Universal Life Insurance policy is best described as a/an

annually renewable term policy with a cash value account