Types of Life Policies
A level annual premium for the life of the insured
A Straight Life policy has what type of premium?
Annually Renewable Term policy with a cash value account
A Universal Life Insurance policy is best described as an
20-Year Level Term
A policy states that it will pay a specified face amount 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?
Adjustable Life
Age 30, wants to buy insurance but his needs are going to change. To be able to modify his policy as the changes occur, what policy should he choose?
The Coverage Period
An Adjustable Life policyowner can change what feature?
Limited-Pay Life
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?
$50,000
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?
Increases Annually
Annually renewable term policies provide a level death benefit for a premium that
Retirement Plans
Annuities can be used to fund
No, an annuitant must always be a natural person
Can a business or a corporation be an annuitant?
Equity Indexed Annuity
Doesn't know what effect inflation may have on retirement dollars; wants a return that will equal the performance of the Standard Poor's 500 Index. What should she purchase?
Seek higher returns
Equity indexed annuities
The premium is based on the average age of the insureds
How is the premium determined in a joint life insurance policy?
For the life of the annuitant unless he/she dies within the first 15 years of the annuization period, then the payments will last for 15 years
How long will a life annuity with a 15-year period certain pay?
Upon the first death
In a joint life policy, when is the death benefit paid?
Amount of Premium
In flexible premium payment annuities, the term flexible refers to what?
Life expectancy and the death rates for specific groups of individuals
Mortality tables are used by insurance companies to predict what?
Required a premium increase each renewal
Someone purchased a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finish college. He discovered that his policy
Immediate Annuity
Someone won the lottery; what type of annuity products are they likely to use to provide these benefits?
Gradually increases each year by the amount that the cash value increases
The death benefit under the Universal Life Option B
Annually Renewable Term
The death protection component of a universal life policy is expressed as what type of coverage?
The policy contains sufficient cash value to cover the cost of insurance
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
Death Benefit
The term "fixed" in a fixed annuity refers to
Convertible Term Policy
The type of policy that can be changed from one that does not accumulate cash value to one that does is a
Coverage until death or age 100
What characteristic makes whole life permanent protection?
The period of time during which accumulated money is converted into income payments
What describes what the annuity period is?
The performance of the policy portfolio
What determines the cash value of a variable life policy?
The premiums are invested in the insurer's general account
What is FALSE about variable products?
The owner must be the party to receive benefits
What is FALSE of an annuity
Depreciation Period
What is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Creating an Estate
What is NOT an appropriate use of a deferred annuity?
The annuitant assumes risks of the investment
What is TRUE regarding variable annuities?
The annuitant assumes the risk on investment
What is TRUE regarding variable annuities?
Both a life insurance license and a securities license
What licenses are required to sell variable annuities?
An Annuity
What product provides income for a specified period of years or for life and protects a person against outliving their money?
Renewable
What term policy CANNOT have face amounts that change during the policy term?
Immediate Annuity
What type of annuity can be purchased with a single premium?
Variable Universal Life Insurance
What type of policy allows for a flexible premium and a variable investment component?
Option A
What universal life option has a gradually increasing cash value and a level death benefit?
Target Premium
What would prevent a universal life policy from lapsing?
When the premiums paid are more than the cost of the policy
When does an adjustable life policy accumulate cash value?
Universal Life 2
Which Life Insurance policy would be considered interest sensitive?
The Insurance Company
Who bears all of the investment risk in a fixed annuity?
The Insurer
Who bears the investment risk in a fixed annuity?
It has a guaranteed minimum interest rate
Why is an equity indexed annuity considered to be a fixed annuity?
The insured may renew the policy for another 10 years, but at a higher premium rate
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?
Joint Life Annuity
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?
Cash value and death benefit
In variable universal life insurance, to what policy component does the term "variable" refer?
Insurance and cash account
What are the two components of a universal life policy?
Accumulation and Annuitization (pay-in and pay-out)
What are the two phases of an annuity?
The number of payments that purchase the annuity
What is the difference between a single premium's and a flexible premium's payment options in a deferred annuity?
Face Amount
What policy component must decrease in decreasing term insurance?
Universal Life
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Annuitant
Who receives income payments from an annuity?
Guaranteed and Current
A Universal Life insurance policy has two types of interest rates that are called
FINRA
An agent selling variable annuities must be registered with
The death benefit can be increased by providing evidence of insurability
The policyowner of an adjustable life policy wants to increase the death benefit. What is true regarding this change?
For 20 years or until the insured's death, whichever occurs first
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 in what time period?
Option A - Level Death Benefit Option B - Increasing Death Benefit
What are the death benefit options in universal life policies?
Age 100
Whole life policies provide protection until the insured reaches what age?
No sooner than 1 year after the annuity purchase
With a single premium deferred annuity, when will the annuity payments become available?
Separate Accounts
A domestic insurer issuing variable contracts must establish one or more
Hedge against inflation
Fixed annuities DO NOT provide
Either the amount paid into the annuity or the cash value, whichever is greater
If the annuitant dies before the annuitization period starts, what will the beneficiary receive?
Beneficiary
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
Annuitant's Estate
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
Annuitization Period
In an annuity, the accumulated money is converted into a stream of income during which phase?
The insured's attained age
In annually renewable term policies, what is the annual premium based upon?
Immediate and deferred
What are the two classifications of annuities according to the time when the annuity payments began?
The amount and payment period of the premium, the face amount, and the period for protection
What elements of an adjustable life policy can be changed by the policy owners?
Cash value is paid to the policyowner
What happens to the cash value when a whole life insurance policy matures?
The premium increases with each renewal
What happens to the premium in an annually renewable term life policy?
The payable premium amount steadily declines throughout the duration of the contract
What is FALSE regarding a decreasing term policy?
The annuitant receives a fixed amount of return
What is NOT true about equity index annuities?
The premiums are invested in the insurer's general account
What is NOT true about variable products?
It is a period which the payments into the annuity grow tax deferred
What is TRUE regarding the accumulation period of an annuity?
It may last for the lifetime of the annuitant
What is TRUE regarding the annuity period?
Variable whole life has a guaranteed death benefit
What is a key distinction between variable whole life and variable universal life products?
Variable Annuity
What type of annuity requires an agent to have a securities license?
The full death benefit
Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (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?
Annuitant 2
Whose life expectancy is taken into consideration in an annuity contract?
There is no cash value to borrow against
Why are policy loans not available on term insurance?
Level Term
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
What type of life insurance policy offers pure death protection?
Whole Life
What type of life insurance policy provides permanent protection?
Interest earned on the withdrawn cash value
During partial withdrawal from a universal life policy, what portion, if any, will be taxed?
Life Income with Period Certain
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?
Limited-Pay Whole Life
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kinds of policy?
Decreasing Term
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
No later than 1 year from the time of annuity purchase
How soon can income payments begin in an immediate annuity?
The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
SEC Registration
To sell variable life insurance policies, an agent DOES NOT need a
The death benefit increases each year by the amount of the cash value increases
Under Option B in a universal life policy, what happens to the death benefit?
Level Fixed
Variable Whole Life insurance is based on what type of premium?
It is level term insurance
What best describes annually renewable term insurance?
Face Amount
What does the term "level" refer to in level term insurance?
To provide income that the annuitant cannot outlive
What is the main reason for purchasing an annuity?
To keep the policy in force
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
What is the purpose of establishing the target premium for a universal life policy?
Equity Indexed Annuity
What type of annuity credits its interest based upon an index such as S&P 500?
Straight 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?
Whole Life Insurance
What type of insurance would perform the function of cash accumulation?
Life Insurance and Securities
What type of license(s) are required to sell variable annuities?
Decreasing Term
What type of life insurance is best suited to cover a mortgage?
Permanent Insurance (usually Whole Life)
What type of life insurance offers an applicant a cash value element?
Limited-Pay Whole Life
What type of life insurance policy is Life Paid-Up at Age 65?
Flexible
What type of premium do both Universal Life and Variable Universal Life policies have?
A level premium for the life of the insured
What type of premium is charged on a straight life policy?
Single Premium Whole Life
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?
Single Premium Whole Life
What type of whole life insurance policy generates immediate cash value?
When the insured reaches age 100
When would a 20-pay whole life policy endow?
Death Benefit 2
Which component increases in the increasing term insurance?
Variable Universal Life
Which life insurance policy allows a policyowner to take out a loan from the policy's cash value?
Universal Life Option A
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Single Premium
Which type of life insurance policy generates immediate cash value?
Policyowner
Who has the right to convert the existing term coverage to permanent insurance?
The Policyowner
Who is entitled to the cash values in a life insurance policy?
Universal Life
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Flexible Premium Deferred Annuity
An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?
Annuity
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?
$100,000
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?
Death Benefit 3
Term policies are available as Level, Increasing and Decreasing. Which policy component fluctuates depending on the policy type?
Annually Renewable Return
The LEAST expensive first-year premium is found in which of the following policies?
The beneficiary will receive the greater of the money paid into the annuity or the cash value
The annuity owner dies while the annuity is still in the accumulation stage. What is TRUE?
Death Benefits
What is NOT fundable by annuities?
They earn lower interest rates than fixed annuities
What is NOT true regarding Equity Indexed Annuities?
It would not occur in a deferred annuity
What is NOT true regarding the accumulation period of an annuity?
They have a guaranteed minimum interest rate
What is TRUE for both equity indexed annuities and fixed annuities?
It is a period during which the payments into the annuity grow tax deferred
What is TRUE regarding the accumulation period of an annuity?
Benefit payment amounts are not guaranteed
What is a feature of variable annuity?
