Insurance Ch 2
When an annuity is written, whose life expectancy is taken into account?
Annuitant
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
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
Which of the following has the right to convert the existing term coverage to permanent insurance?
Policyowner
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?
$100,000
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
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.
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
Beneficiary
Equity indexed annuities
Seek higher returns
Which of the following is a feature of a variable annuity?
Benefit payment amounts are not guaranteed.
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
Adjusted to the insured's age at the time of renewal.
Periodic payments of accumulated funds best describes
An annuity
Which of the following is NOT a type of whole life insurance?
Increasing term
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner.
A domestic insurer issuing variable contracts must establish one or more
separate accounts.
Which of the following products will protect an individual from outliving his or her money?
Annuity
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.
Which policy component decreases in decreasing term insurance?
Face amount
A Return of Premium term life policy is written as what type of term coverage?
Increasing
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
Who bears all of the investment risks in a fixed annuity?
The insurance company
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 is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant.
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
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits.
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account.
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?
Greatest
Annually renewable term policies provide a level death benefit for a premium that
Increases annually.
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
They have a guaranteed minimum interest rate.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
A SEC registration.
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
Which of the following features of the Indexed Whole Life policy is NOT fixed?
Cash value growth
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?
Limited-pay Life
A Universal Life Insurance policy is best described as a/an
Annually Renewable Term policy with a cash value account.
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
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.
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?
Immediate annuity
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal life
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?
Universal life
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
Interest-sensitive Whole Life.
The equity in an equity index annuity is linked to
An index like Standard & Poors 500.
All other factors being equal, the least expensive first-year premium payment is found in
Annually Renewable Term
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?
Lower
Which of the following is NOT true regarding Equity Indexed Annuities?
they earn lower interest rates than fixed annuities.
Both Universal Life and Variable Universal Life have a
Flexible premium.
Which type of life insurance policy generates immediate cash value?
Single-Premium
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following is TRUE regarding the premium in term policies?
The premium is level.
The death protection component of Universal Life Insurance is always
Annually Renewable Term
The death benefit under the Universal Life Option B
Gradually increases each year by the amount that the cash value increases.
What characteristic makes whole life permanent protection?
Coverage until death or age 100
The term "fixed" in a fixed annuity refers to all of the following EXCEPT
Death benefit
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity.
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
Which of the following is another term for the accumulation period of an annuity?
Pay-in period
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
Which of the following statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans.
Which of the following products requires a securities license?
Variable annuity
The main difference between immediate and deferred annuities is
When the income payments begin.
Which of the following is called a "second-to-die" policy?
Survivorship life
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?
The annuitant must be a natural person.
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return.
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Variable Life insurance is based on what kind of premium?
Level fixed
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
Which of the following best describes annually renewable term insurance?
It is level term insurance.
Which of the following is TRUE regarding variable annuities?
The annuitant assumes the risks on investment.
What license or licenses are required to sell variable annuities?
Both a life insurance license and a securities license
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
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.
Which of the following types of policies will provide permanent protection?
Whole 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
Which of the following would help prevent a universal life policy from lapsing?
Target premium
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.
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?
Deferred
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?
It will increase because the insured will be 5 years older than when the policy was originally purchased
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
