Exam FX Chapter 2 Quizzes

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?

0%

Which of the following policies would be classified as a traditional level premium contract?

Straight Life

The "annuitization period" is the time during which accumulated money is

converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.

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?

100. ! Whole life insurance policies mature when the insured reaches the age of 100. The cash value at that time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

The Accidental Death Rider pays

2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.

When may an insurance company use suicide as a defense against paying a death claim?

When death occurs within a specified period of time after the policy was issued

The annuity period is the

time during which accumulated money is converted into an income stream

The main difference between immediate and deferred annuities is

when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

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 insurance would be used for a Return of Premium rider?

Increasing Term

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

Pay-in period

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Term rider. ! Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

Which of the following is TRUE regarding variable annuities?

The annuitant assumes the risks on investment.

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

The contingent beneficiary.

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate. both types of annuities guarantee a specific minimum interest rate.

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time

A universal policy has two components:

an insurance component and a cash account.

The accumulation period is also known as

the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.

If a level term product is renewed at the end of the term period

the premium will be based upon the attained age of the insured.

If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer

will waive the premiums until the minor reaches a certain age, such as 21.

Accelerated benefits are paid when

insureds endure financial hardship due to severe illness

The equity in an equity index annuity is linked to

An index like Standard & Poor's 500.

the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age.

Annually renewable term is

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 automatic premium loan provision is activated at the end of the

Grace period.

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

Interest. During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.

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

It has a guaranteed minimum interest rate.

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. A 20-year term policy is written to provide a level death benefit for 20 years.

A _______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 agent's license in order to sell variable annuities.

Variable

The_____ allows an insurer to send the policyholder an annual, nontaxable dividend check.

cash option

With the_____, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned

paid-up option

Under Option A, the death benefit

remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender, Once the cash surrender value is paid, the contract is over.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated.

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. Proof of insurability not required.

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

Whole life policies are referred to as

permanent protection, since as long as the premium is paid coverage will continue for the life of the insured. Both the premiums and death benefit are guaranteed and will remain level for life.

Universal Life policies allow for

policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.

The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65.

A spouse term rider (just like any other insured rider) is usually level term insurance.

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

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?

Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

Limited Pay Whole Life premiums are

all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.

An agent selling variable annuities must be registered with

FINRA. Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.

While equity indexed annuities earn ______ interest rates than fixed annuities

higher

Universal Life products allow the

partial withdrawal, or surrender, of the policy cash value.

All other factors being equal, the least expensive first-year premium payment is found in

Annually Renewable Term.

Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?

Automatic premium loan

Which policy component decreases in decreasing term insurance?

Face amount. Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

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 death, whichever occurs first.

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die.

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. t! Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

Universal life

Straight Life policies charge

a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

The "annuity period" is the time during which

accumulated money is converted into an income stream

The insurance component (or the death protection) of a universal life policy is always

annual renewable term insurance.

The______ clause contains the company's promise to pay.

insuring

Under 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.

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. ! Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

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. The policyowner (insured) would need to prove insurability for the amount of the increase.

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing.

Which of the following products requires a securities license?

Variable annuity

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium.

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?

With an immediate annuity, distribution starts within 1 year of purchase.

Nonforfeiture values are required by state law to

be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.

Payor benefit only pays if the owner is

disabled for at least 6 months.

with a decreasing term policy;

Premiums remain level only the face amount decreases

There are several types of whole life policies. The first three,

Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life.

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy?

The full death benefit. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.

Who bears all of the investment risk in a fixed annuity?

The insurance company

The death protection component of Universal Life Insurance is always

Annually Renewable Term

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

Entire contract.

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount

Equal to the original policy for as long a period of time that the cash values will purchase.

Both Universal Life and Variable Universal Life have a

Flexible premium.

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant.

Which two terms are associated directly with the premium?

Level or flexible

If a settlement option is not chosen by the beneficiary or policyowner, which option will be used?

Lump sum

Regarding the free-look provision, the insurance company

Must allow the policyowner to return the policy for a full refund.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One-year term option.

Whole life policies offer

Policy loans. level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy as well as a refund of all of the premiums paid. Which rider is attached to the policy?

Return of premium

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.

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate.

In a reduced paid-up policy, the original policy's cash value is used

as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.

Convertible term insurance is

convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

A Joint Life policy

covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without

having to issue proof of insurability.

Straight whole life policies have a

level guaranteed face amount and a level premium for the life of the insured.

The annuitant receives 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 do not have to be.