Life Insurance - Chapter 2 - Types of Life Policies

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?

Joint Life

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

An insured has a life insurance policy 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

Which Universal Life option has a gradually increasing cash value and level death benefit?

Option A

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

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

Pay-In Period

Another term for the accumulation period of an annuity?

Pay-in period

Which of the following has the right to convert the existing term coverage to permanent insurance?

Policyowner

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

Equity indexed annuities?

Seek higher returns

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 is called a "second-to-die" policy?

Survivorship Life

What would help prevent a universal life policy from lapsing?

Target Premium

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?

Term Level

Who does not regulate variable life policies?

The Guaranty Association

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

The Insurance Company

This is NOT TRUE about an annuitant?

The annuitant cannot be the same person as the annuity owner

The annuity owner 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 policy owner 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.

This is NOT TRUE regarding a decreasing term policy?

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 best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

The following is NOT a characteristic of a Universal Life policy?

The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as?

The policy contains sufficient cash value to cover the cost of insurance

Which of the following statements is correct regarding a whole life policy?

The policyowner is entitled to policy loans

This is TRUE regarding the premium in term policies?

The premium is level

Which of the following best defines target premium in a universal life policy?

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

What is NOT TRUE regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities

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

They have a guaranteed minimum interest rate

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

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

This is not true about a Convertability Option under a Term Life insurance policy?

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

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

When would a 20-pay whole life policy endow?

When the insured reaches age 100

In which of the following cases will the insured be able to receive the full face amount from the whole life policy?

if the insured lives to age 100

The death protection component of Universal Life Insurance is always?

Annually Renewable Term

When an annuity is written, whose life is taken in account?

Annuitant

The insured is also the policyowner if a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

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

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 specific period of time, the policy premium will be?

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

A Universal Life Insurance policy is best described as?

An Annually Renewable Term policy with a cash value account

Periodic payments of accumulated funds best describes

An Annuity

The equity in an equity index annuity is lined to?

An index like Standard & Poor's 500

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

Annually Renewable Term

This is NOT true about a $100,000 20-year level term policy?

At the end of 20 years, the policy's CASH VALUE will equal $100,000 (they do not develop cash values)

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed

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 characteristics makes whole life permanent protection?

Coverage until death or age 100

The term "Fixed" in a fixed annuity does NOT refer to?

Death Benefit

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of like insurance policy would be best suited to this situation?

Decreasing Term

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

Depreciation period

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a?

Equity Indexed Annuity

Which of the following must an agent receive in order to sell variable life insurance policies?

FINRA registration

Which policy component decreases in decreasing term insurance?

Face Amount

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

Face amount

Both Universal Life and Variable Universal Life has a?

Flexible Premium

The death benefit under the Universal Life Option B?

Gradually increases each year by the amount that the cash value increases

Fixed annuities DO NOT Provide?

Hedge against inflation

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?

Immediate

Annually renewable term policies provide a level death benefit for a premium that

Increases annually

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

Increasing

What are the two components of a universal policy?

Insurance and cash account

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 show in the policy at issue time. The policy is a?

Interest-sensitive Whole Life

Which statement is NOT true regarding a Straight Life policy?

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