Chapter Two: Types of Life Policies

The premium of a survivorship life policy compared with that of a joint life policy would be A. Lower. B. Higher. C. As high. D. Half the amount.

A

Which of the following is TRUE regarding the accumulation period of an annuity? A. It is limited to 10 years. B. It is a period during which the payments into the annuity grow tax deferred. C. It is also referred to as the annuity period. D. It is a period of time during which the beneficiary receives income

B

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

B

What is another name for interest-sensitive whole life insurance? A. Term life B. Adjustable life C. Current assumption life D. Variable life

C

What type of life insurance is most commonly used for group plans? A. Flexible premium whole life B. Decreasing term C. Annually renewable term D. Whole life

C

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A. Liquidation period B. Depreciation period C. Annuitization period D. Pay-out period

B

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive A. Nothing; the payments will cease. B. Guaranteed minimum benefit. C. The amount paid into the annuity. D. The remainder of the principal.

A

Which of the following is called a "second-to-die" policy? A. Survivorship life B. Family income C. Juvenile life D. Joint life

A

All of the following are true about variable products EXCEPT A. Policyowners bear the investment risk. B. The premiums are invested in the insurer's general account. C. The minimum death benefit is guaranteed. D. The cash value is not guaranteed.

B

Which of the following best describes annually renewable term insurance? A. It is level term insurance. B. It requires proof of insurability at each renewal. C. Neither the premium nor the death benefit is affected by the insured's age. D. It provides an annually increasing death benefit.

A

All of the following statements about equity index annuities are correct EXCEPT A. They invest on a more aggressive basis aiming for higher returns. B. The annuitant receives a fixed amount of return. C. They have a guaranteed minimum interest rate. D. The interest rate is tied to an index such as the Standard & Poor's 500.

B

In a survivorship life policy, when does the insurer pay the death benefit? A. If the insured survives to age 100 B. Upon the last death C. Upon the first death D. Half at the first death, and half at the second death

B

The main difference between immediate and deferred annuities is A. The amount of each payment. B. When the income payments begin. C. How the annuity is purchased. D. The number of insureds.

B

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

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? A. Universal life B. Whole life C. Decreasing term D. Variable life

C

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

Which of the following types of annuities will generally provide the highest monthly income? A. Installment refund B. Life with a 10-year period certain C. Straight life D. Joint and survivor

C

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 A. Built cash values. B. Required proof of insurability every year. C. Decreased death benefit at each renewal. D. Required a premium increase each renewal.

D

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? A. Joint annuity B. Cash refund annuity C. Straight life D. Joint and survivor

D

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. Adjustable life B. Term life C. Limited pay D. Universal life

D

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A. Upon conversion, the death benefit of the permanent policy will be reduced by 50%. B. Evidence of insurability is not required. C. Most term policies contain a convertibility option. D. Upon conversion, the premium for the permanent policy will be based upon attained age.

A

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. Limited-pay Life B. Variable Life C. Adjustable Life D. Graded Premium Life

A

The minimum interest rate on an equity indexed annuity is often based on A. The annuitant's individual stock portfolio. B. The insurance company's general account investments. C. An index like Standard & Poor's 500. D. The returns from the insurance company's separate account.

C

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

An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario? A. Preferred premium reduction B. Contract review C. Revision of consideration D. Re-entry

D

Which of the following products requires a securities license? A. Equity Indexed annuity B. Deferred annuity C. Variable annuity D. Fixed annuity

C

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A. Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount B. Amount paid into the plan C. Cash value of the plan D. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

D

In a single employer group plan, what is the name of the policy issued to the employer? A. Certificate of insurance B. Employer-insurer contract C. Certificate of authority D. Master contract

D

All of the following statements are true regarding installments for a fixed amount EXCEPT A. The payments will stop when the annuitant dies. B. Value of the account and future earnings will determine the time period for the benefits. C. This option pays a specific amount until the funds are exhausted. D. The annuitant may select how big the payments will be.

A

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits? A. $50,000 B. $62,500 C. $75,000 D. Nothing

A

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A. The death benefit can be increased by providing evidence of insurability. B. The death benefit cannot be increased. C. The death benefit can be increased only when the policy has developed a cash value. D. The death benefit can be increased only by exchanging the existing policy for a new one.

A

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? A. Joint Life B. Decreasing Term C. Whole Life D. Ordinary Life

A

Under a pure life annuity, an income is payable by the company A. Only for the life of the annuitant. B. Until the principal and interest are exhausted. C. For a guaranteed period of time, whether or not the annuitant survives to the end of that period. D. For as long as either the annuitant or a named beneficiary is alive.

A

Which of the following best describes what the annuity period is? A. The period of time during which accumulated money is converted into income payments B. The period of time from the accumulation period to the annuitization period C. The period of time during which money is accumulated in an annuity D. The period of time from the effective date of the contract to the date of its termination

A

Who bears all of the investment risk in a fixed annuity? A. The insurance company B. The owner C. The beneficiary D. The annuitant

A

What is the purpose of establishing the target premium for a universal life policy? A. To cover all policy expenses B. To keep the policy in force C. To accumulate cash value faster D. To pay up the policy faster

B

What license or licenses are required to sell variable annuities? A. No license is required B. Both a life insurance license and a securities license C. Only a life insurance license D. Only a securities license

B

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? A. $10,000 B. $40,000 C. $50,000 D. $60,000

C

Which of the following is an example of a limited-pay life policy? A. Level Term Life B. Straight Life C. Life Paid-up at Age 65 D. Renewable Term to Age 70

C