Florida Agent's Health & Life (including Annuities & Variable Contracts) Chapter 2

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? A Interest-sensitive whole life B Life annuity with period certain C Increasing term D Limited pay whole life

D Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

A Straight Life policy has what type of premium? A A variable annual premium for the life of the insured B A level annual premium for the life of the insured C An increasing annual premium for the life of the insured D A decreasing annual premium for the life of the insured

B A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.

In an annuity, the accumulated money is converted into a stream of income during which time period? A Payment period B Amortization period C Conversion period D Annuitization period

D Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream.

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

D It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

Both Universal Life and Variable Universal Life have a A Increasing premium. B Flexible premium. C Level fixed premium. D Decreasing premium.

B Flexible premium. Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.

Annually renewable term policies provide a level death benefit for a premium that A Fluctuates. B Increases annually. C Decreases annually. D Remains level.

B Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

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 To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

If the annuitant dies during the accumulation period, who will receive the annuity benefits? A Owner B Insurance company C Estate D Beneficiary

D Beneficiary If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.

Which of the following features of the Indexed Whole Life policy is NOT fixed? A Cash value growth B Premium C Death benefit D Policy period

A Cash value growth Under the Indexed Whole Life policy, the premium is fixed, and the death benefit is guaranteed. Cash value is dependent upon the performance of the equity index although a minimum cash value is guaranteed.

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? A Deferred B Fixed C Flexible premium D Immediate

A Deferred Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.

What does "level" refer to in level term insurance? A Face amount B Premium C Cash value D Interest rate

A Face amount Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.

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 A For 20 years or until death, whichever occurs first. B Until the policyowner's age 65. C For 20 years. D Until the policyowner's age 100, when the policy matures.

A For 20 years or until death, whichever occurs first. Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

The death benefit under the Universal Life Option B A Gradually increases each year by the amount that the cash value increases. B Decreases by the amount that the cash value increases. C Increases for the first few years of the policy, and then levels off. D Remains level.

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

Fixed annuities provide all of the following EXCEPT A Hedge against inflation. B Equal monthly payments for life. C Minimum guaranteed rate of interest. D Future income payments.

A Hedge against inflation. Fixed annuities invest premium payments into a general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection 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? A Immediate B Flexible C Deferred D Variable

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

A Return of Premium term life policy is written as what type of term coverage? A Increasing B Decreasing C Renewable D Level

A Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

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 shown in the policy at issue time. The policy is a/an A Interest-sensitive Whole Life. B Credit Life. C Annual Renewable Term. D Adjustable Life.

A Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.

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 Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

Question 7 of 15 Which type of life insurance policy generates immediate cash value? A Single Premium B Level Term C Decreasing Term D Continuous Premium

A Single Premium Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

All of the following entities regulate variable life policies EXCEPT A The Guaranty Association. B Federal government. C The SEC. D The Insurance Department.

A The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.

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 The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.

Which of the following is TRUE regarding the premium in term policies? A The premium is level. B Only level term policy has a level premium. C The premium in term policies is not based on the insured's age. D Decreasing term policy will have a decreasing premium. Incorrect!

A The premium is level. Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy. Only the amount of the death benefit may change.

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? A Universal life B Flexible life C Variable life D Adjustable life

A Universal life 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.

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? A Universal life B Variable life C Decreasing term D Straight whole life

A Universal life 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.

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

A Variable annuity A variable 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.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT A A life insurance license. B A SEC registration. C A FINRA registration. D A securities license.

B A SEC registration. Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

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 Both a life insurance license and a securities license Agents are required to have both a life insurance license and a securities license to sell variable annuities

What characteristic makes whole life permanent protection? A Living benefits B Coverage until death or age 100 C Guaranteed death benefit D Guaranteed level premium

B Coverage until death or age 100 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 or till the insured's age 100.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT A Amount and length of payments B Death benefit C Guaranteed rate of interest D Equal annuity payments

B Death benefit A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefit.

All other factors being equal, which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection? A Longest B Greatest C Least D Most comprehensive

B Greatest Term policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection.

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? A It will increase each year during the next 5 years as the face amount increases each year. B It will increase because the insured will be 5 years older than when the policy was originally purchased. C It will remain the same for the new 5-year term. D It will decrease for the new 5-year term since the insured is now a lesser risk to the company.

B It will increase because the insured will be 5 years older than when the policy was originally purchased The premium will remain level during the entire level premium term policy period. If the policy renews at the end of the term, the premium will be based on the insured's attained age at the time of renewal.

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 Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

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 Ordinary Life B Joint Life C Decreasing Term D Whole Life

B Joint Life 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.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A Option A B Option B C Corridor option D Variable option

B Option B 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. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

Which of the following has the right to convert the existing term coverage to permanent insurance? A Producer B Policyowner C Insurer D Beneficiary

B Policyowner Convertible term insurance gives the policyowner the right to convert the policy to a permanent insurance policy without evidence of insurability.

Which two terms are associated directly with the way an annuity is funded? A Renewable or convertible B Single payment or periodic payments C Increasing or decreasing D Immediate or deferred

B Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

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 A Graded premium whole life. B Single premium whole life. C Modified Endowment Contract (MEC). D Level term life.

B Single premium whole life. Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.

Which of the following is TRUE regarding variable annuities? A A person selling variable annuities is required to have only a life agent's license. B The annuitant assumes the risks on investment. C The funds are invested in the company's general account. D The company guarantees a minimum interest rate.

B The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? A The contract can be issued without an annuitant. B The annuitant must be a natural person. C A corporation can be an annuitant as long as it is also the owner. D A corporation can be an annuitant as long as the beneficiary is a natural person.

B The annuitant must be a natural person. Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.

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 The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. B The beneficiary will receive the greater of the money paid into the annuity or the cash value. C Because the annuitization period has not started, the owner's estate will receive the money paid into the annuity. D The insurance company will retain the cash value and pay back the premiums to the owner's estate.

B The beneficiary will receive the greater of the money paid into the annuity or the cash value. If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever is greater.

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 only by exchanging the existing policy for a new one. B The death benefit can be increased by providing evidence of insurability. C The death benefit cannot be increased. D The death benefit can be increased only when the policy has developed a cash value.

B 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.

All of the following are true of an annuity owner EXCEPT A The owner is the party who may surrender the annuity. B The owner must be the party to receive benefits. C The owner pays the premiums on the annuity. D The owner has the right to name the beneficiary.

B The owner must be the party to receive benefits. The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as A The next month's premium is sufficient to cover both the current premium amount and the skipped amount. B The policy contains sufficient cash value to cover the cost of insurance. C The previous premium payments were high enough to create an excess of premium. D The policyowner cannot skip premiums without the policy lapsing.

B The policy contains sufficient cash value to cover the cost of insurance. In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.

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 The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

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 $100,000 In joint life policies, the death benefit is paid upon the first death only.

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 50% of the death benefit B The face amount minus the premiums that would have been collected until the insured reached the age of 100 C A full death benefit D A death benefit equal to the cash value of the policy

C 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.

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 specified period of time, the policy premium will be A Based on the issue age of the insured. B Discounted. C Adjusted to the insured's age at the time of renewal. D Determined by the health of the insured.

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

Periodic payments of accumulated funds best describes A A universal life policy. B A group policy. C An annuity. D A survivorship life policy.

C An annuity An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds.

The equity in an equity index annuity is linked to 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 An index like Standard & Poor's 500. Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

The death protection component of Universal Life Insurance is always A Adjustable Life B Increasing Term C Annually Renewable Term D Whole Life

C Annually Renewable Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

When an annuity is written, whose life expectancy is taken into account? A Life expectancy is not a factor when writing an annuity. B Owner C Annuitant D Beneficiary

C Annuitant 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.

Which of the following products will protect an individual from outliving his or her money? A Adjustable life policy B Permanent life insurance C Annuity D Joint and survivor policy

C Annuity An annuity is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving his or her money.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? A If the insured dies before the policy expired, the beneficiary will receive $100,000. B The policy will expire at the end of the 20-year period. C At the end of 20 years, the policy's cash value will equal $100,000. D The policy premiums will remain level for 20 years.

C At the end of 20 years, the policy's cash value will equal $100,000. Term policies do not develop cash values. All the other statements are true.

Which of the following is a feature of a variable annuity? A Interest rate is guaranteed. B Securities license is not required. C Benefit payment amounts are not guaranteed. D Payments into the annuity are kept in the company's general account.

C Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.

The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a A Decreasing Term Policy. B Whole Life Policy. C Convertible Term Policy. D Renewable Term Policy.

C Convertible Term Policy. A convertible term policy has a provision that allows the policyowner to convert to permanent insurance.

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

C Depreciation period 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.

Which policy component decreases in decreasing term insurance? A Dividend B Premium C Face amount D Cash value

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

Why is an equity indexed annuity considered to be a fixed annuity? A It has a fixed rate of return. B It is not tied to an index like the S&P 500. C It has a guaranteed minimum interest rate. D It has modest investment potential.

C It has a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.

Which of the following is TRUE regarding the annuity period? A It is also referred to as the accumulation period. B It is the period of time during which the annuitant makes premium payments into the annuity. C It may last for the lifetime of the annuitant. D During this period of time the annuity payments grow interest tax deferred.

C It may last for the lifetime of the annuitant. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.

Variable Life insurance is based on what kind of premium? A Decreasing B Graded C Level fixed D Increasing

C Level fixed Variable Life insurance is a level fixed premium investment based product.

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? A Ordinary life policy B Limited pay whole life C Level term D Term to specified age

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

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 Life Paid-up at Age 65 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.

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? A As high B Half the amount C Lower D Higher

C Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

A domestic insurer issuing variable contracts must establish one or more A Annuity accounts. B General accounts. C Separate accounts. D Liability accounts.

C Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.

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

C Survivorship life Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.

Which of the following would help prevent a universal life policy from lapsing? A Adjustable premium B Corridor of insurance C Target premium D Face amount

C Target premium The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Which of the following is NOT true regarding the annuitant? A The annuitant receives the annuity benefits. B The annuitant must be a natural person. C The annuitant cannot be the same person as the annuity owner. D The annuitant's life expectancy is taken into consideration for the annuity.

C The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.

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

C The insurance company Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

Which of the following best defines target premium in a universal life policy? A The minimum amount to make sure the policy is annually renewable B The corridor of insurance C The recommended amount to keep the policy in force throughout its lifetime D The maximum amount the policyowner may pay on a policy

C The recommended amount to keep the policy in force throughout its lifetime The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

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 They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

Which of the following is TRUE for both equity indexed annuities and fixed annuities? A Both are considered to be more risky than variable annuities. B They invest on a conservative basis. C They have a guaranteed minimum interest rate. D They are both tied to an equity index.

C They have a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A Equity Indexed Universal Life B Variable Universal Life C Universal Life - Option A D Universal Life - Option B

C Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

Question 10 of 15 All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A Most term policies contain a convertibility option. B Upon conversion, the premium for the permanent policy will be based upon attained age. C Upon conversion, the death benefit of the permanent policy will be reduced by 50%. D Evidence of insurability is not required.

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

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

C Upon the last death Survivorship life pays on the last death rather than upon the first death.

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

C When the income payments begin. 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.

Which of the following types of policies will provide permanent protection? A Term life B Group life C Whole life D Credit life

C Whole life 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.

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? A 65 B 70 1/2 C 90 D 100

D 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.

All other factors being equal, the least expensive first-year premium payment is found in A Increasing Term. B Decreasing Term. C Level Term. D Annually Renewable Term.

D Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

A Universal Life Insurance policy is best described as a/an A Variable Life with a cash value account. B Whole Life policy with two premiums: target and minimum. C Flexible Premium Variable Life policy. D Annually Renewable Term policy with a cash value account.

D Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Which of the following is a feature of a variable annuity? A Payments into the annuity are kept in the company's general account. B Interest rate is guaranteed. C Securities license is not required. D Benefit payment amounts are not guaranteed.

D Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.

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 Variable life B Universal life C Whole life D Decreasing term

D Decreasing term A decreasing term policy's face amount decreases as the amount of debt is reduced.

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 Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? A Variable annuity B Flexible payment annuity C Deferred interest annuity D Immediate annuity

D Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement.

Which of the following is NOT a type of whole life insurance? A Single premium B Straight life C Limited payment D Increasing term

D Increasing term 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. Increasing term is a type of term insurance.

Which of the following is NOT true regarding the accumulation period of an annuity? A It is the period during which the annuity payments earn interest. B It is the period over which the annuitant makes payments into an annuity. C It is also known as the pay-in period. D It would not occur in a deferred annuity.

D It would not occur in a deferred annuity. The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Which of the following is another term for the accumulation period of an annuity? A Premium period B Liquidation period C Annuity period D Pay-in period

D Pay-in period 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.

Equity indexed annuities A Are more risky than variable annuities. B Are security instruments. C Invest conservatively. D Seek higher returns.

D Seek higher returns. Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

Which of the following policies would be classified as a traditional level premium contract? A Adjustable Life B Universal Life C Variable Universal Life D Straight Life

D Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

All of the following are true regarding a decreasing term policy EXCEPT A The death benefit is $0 at the end of the policy term. B The contract pays only in the event of death during the term and there is no cash value. C The face amount steadily declines throughout the duration of the contract. D The payable premium amount steadily declines throughout the duration of the contract.

D The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.

Which of the following determines the cash value of a variable life policy? A The company's general account B The policy's guarantees. C The premium mode D The performance of the policy portfolio

D The performance of the policy portfolio The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

Which of the following statements is correct regarding a whole life policy? A Cash values are not guaranteed. B The policy premium is based on the attained age. C The death benefit may increase or decrease during the policy period. D The policyowner is entitled to policy loans.

D The policyowner is entitled to policy loans. Whole life policies offer 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 would a 20-pay whole life policy endow? A At the insured's age 65 B After 20 payments C In 20 years D When the insured reaches age 100

D When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.