Chapter 2 Types of life policies

Larry wants Mortgage protection. This can be covered by which type of insurance policy? A. Decreasing B. Increasing C. Adjustable D. Modified

A. Decreasing Decreasing Term insurance is generally used for mortgage protection.

An Industrial Life Insurance Policy has a face amount that is: A. $3,000 or less B. $1,000 or less C. $2,500 or less D. $5,000 or less

B. $1,000 or less An Industrial Life Insurance Policy has a face amount that is $1,000 or less.

The word level and level term refers to the: A. Cash value B. Face amount C. Length of the policy D. Premium

B. Face amount Word level and level term refer to the face amount.

Who bears the investment risk in a Fixed Annuity? A. Beneficiary B. Insurance company C. Assignee D. Customer

B. Insured Company In a Fixed Annuity, the insurance company bears the investment risk.

Which of the following policies would generally be paid with the lowest premium? A. Whole Life B. Term Life C. Variable Life D. Adjustable Life

B. Term Life A Term life policy would generally be paid with a lower premium than Whole life, Variable life, and Adjustable life.

Gill is 50 years old. She bought an annuity that will pay a guaranteed amount of $2,000 per month at age 70 for her life. What kind of annuity did Gill purchase? A. Immediate B. Term C. Deferred D. Variable

C. Deferred A fixed deferred annuity pays out a fixed amount for life starting at a future time.

What is a feature regarding a 10 Year Term policy that is guaranteed renewable and convertible? A. At the end of its term, it can only be renewed for another year B. The policy can only be renewed by proof of insurability C. The policy can be renewed, but for a higher premium D. The policy can be converted in 31 days

C. The policy can be renewed, but for a higher premium A 10 Year Term policy that is guaranteed renewable and convertible can be renewed, but for a higher premium.

If the policyholder chooses to pay premiums for a specified number of years, the policy is referred to as: A. An Adjustable Policy B. Accured Premium Whole Life C. Variable Whole Life Policy D. Limited Payment

D. Limited Payment For a policy to be referred to as "limited payment," the policyholder must choose to pay premiums for a specified number of years.

Which policy is not restricted to a stated period of time? A. Increasing term B. Decreasing term C. Endowment D. Whole life

D. Whole life A whole life policy is not restricted to a stated period of time.

1. What type of insurance is often used to gradually increase the amount of coverage with a cost of living adjustment rider?

Increasing term

What type of annuity is purchased with a a lump sum?

Single premium

What kind of Life policies are generally used for key employee indemnification? A. Term, Whole and Universal B. Variable and Equity C. Modified and Term D. Variable and Fixed

A. Term, Whole and Universal Term, Whole and Universal Life policies are generally used for key employee indemnification.

Who determines the neefit time in a short term annuity with installments provided for a fixed period of time?

Annuitant

When may a Universal Life policy may be surrendered for its cash value? A. After 3 years B. At any time its targeted value is reached C. Within 2 years of developing cash value D. Never, it is only pure death protection

B. At any time its targeted value is reached Any time the targeted value of a Universal Life policy is reached, it may be surrendered for its cash value.

Under a Multiple Protection Policy, the policy that pays on the death of the last person is called? A. Joint Life B. Survivorship C. Annuity D. Universal

B. Survivorship Under a Multiple Protection Policy, a Survivorship policy pays on the death of the last person.

Mary's Modified Life policy has like features of which policy? A. Limited Pay B. Increasing Term C. Graded Premium D. Survivorship Life

C. Graded Premium A Modified Life policy has the same features as a Graded Premium policy.

Which of the following is not a characteristic of an annuity with installments for a fixed period? A. Life contingencies B. No life contingencies C. Annuitant selects benefit period D. Installments are paid over certain time

A. Life contingencies An annuity with installments for a fixed period does not have life contingencies.

Mr. Simms has a Variable Annuity. He is required to be notified about his annuity's accumulated value. When must this occur? A. Each month B. At least once each year C. Only upon request D. Bi-annually

B. At least once each year A Variable annuity policy owner must be notified at least once a year about it accumulated value.

Which of the following is provided by Term insurance coverage? A. Lifetime insurance protection B. Pure insurance protection C. Cash value protection D. Loan protection

B. Pure insurance protection Term insurance provides pure insurance protection.

What type of policy has an adjustable death benefit, flexible premium and a cash value investment?

Variable universal life

With a Single Premium Deferred Annuity (SPDA), when are the benefits paid? A. After more than one year B. When the owner turns 100 C. After the death of the owner D. When the owner retires

A. After more than one year The benefits of a Single Premium Deferred Annuity are paid after more than one year.

An annuity that returns the difference between the annuity value and the income payments made to a beneficiary, when the annuitant dies during the distribution period is a A. Pre-Annuity B. Refund Annuity C. Variable Annuity D. Liquidated Annuity

B. Refund Annuity A Refund Annuity is an annuity that returns the difference between the annuity value and the income payments made to a beneficiary, when the annuitant dies during the distribution period.

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

B. The insurance company The insurance company bears all of the investment risk in a fixed annuity.

Vince bought a Joint Life policy for $300,000 on his life and his wife's life. Four years afterwards Vince was killed in a motorcycle accident. What did Vince's wife receive in benefits? A. Nothing B. There is not enough information to answer the question C. $300,000 D. $150,000

C. $300,000 A Joint Life policy pays on the first death.

A predetermined percentage placed on an annuity surrendered prior to age 59 1/2, is called? A. A discounted charge B. A penalty charge C. A surrender charge D. A bail out charge

C. A surrender charge A surrender charge is a predetermined percentage placed on an annuity surrendered prior to age 59 1/2.

What kind of an annuity will pay a lump sum amount, the difference between the annuity's value, and its income payments, to a beneficiary upon an annuitant's death? A. Variable Annuity B. Straight Life Annuity C. Cash Refund Annuity D. Installment for a Fixed Period Annuity

C. Cash Refund Annuity Upon the death of an annuitant, a Cash Refund Annuity will pay the beneficiary a lump sum amount.

In relationship to a Universal Life policy, which is not flexible? A. Death benefit B. Schedule of premium C. Guaranteed interest rate D. Amount of premium

C. Guaranteed interest rate In a Universal Life policy, the guaranteed interest rate is not flexible.

Which of the following describes the effect of the market value adjustment in a market value adjustment annuity? A. There is no effect B. It provides the annuitant to adjust their investment rate C. It transfers part of the investment risk to the policy owner D. It transfers the investment risk to the contingent beneficiary for 3 years

C. It transfers part of the investment risk to the policy owner The market value adjustment in a market value adjustment annuity transfers part of the investment risk to the policy owner.

Producers must obtain information about a consumer in order to make a professional annuity recommendation. Which of the following would not be an acceptable relevant source of information needed by the producer? A. Tax background B. Financial status C. Income D. Beneficiary's age

D. Beneficiary's age A beneficiary's age is not a factor needed to make an annuity recommendation.

An Equity Index Universal Life policy and a Variable Universal Life policy vary by which difference? A. They only vary by name B. An Equity Index Universal Life policy has fixed withdrawal amounts C. Universal life only contains a current interest rate D. Producers are required to have a Securities license to sell Variable policies

D. Producers are required to have a Securities license to sell Variable policies While producers are required to have a Securities license to sell Variable Universal policies, they are not require to have a Securities license to sell Equity Index Universal Life policies.

Nelson needs a Securities License to sell which Life insurance product? A. Term insurance B. Variable Life insurance C. Limited Pay insurance D. Modified Life insurance

B. Variable Life insurance A Securities license is required to sell Variable Life insurance.

Which of the following is true about a Universal Life insurance policy? A. Cash value accumulations have a guaranteed minimum interest rate B. The premium may be changed by the policy owner but not the face amount C. The face amount may be changed but not the premium D. A partial withdrawal may not be paid from the cash value

A. Cash value accumulations have a guaranteed minimum interest rate In a Universal Life policy the cash value accumulations have a guaranteed minimum interest rate.

The kind of annuity that Mary has will guarantee her an income for the rest of her life. It also has a special feature that if Mary dies before receiving her 20 year payments the rest of the funds will go to her daughter Jane for the remaining years. Mary has what kind of annuity? A. Survivor B. Joint and Survivor C. Life Annuity with Period Certain D. Survivorship

C. Life Annuity with Period Certain Mary's situation involves a Life Annuity with Period Certain.

Ted has a Whole Life policy with a guaranteed insurability option. It allows him to buy stated amounts of coverage without evidence of insurability. The allowable amounts are additional: A. Term life coverage at any time B. Term life at certain times C. Whole life in the next three months D. Whole life at specified times

D. Whole life at specified times A guaranteed option allows a policy owner to purchase Whole life at specified times without evidence of insurability.