Types of Life Policies
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
Beneficiary
In variable universal life insurance, to what policy component does the term "variable" refer?
Cash value and death benefit
What feature of an Indexed Whole Life Policy is NOT fixed?
Cash value growth
What happens to the cash value when a whole life insurance policy matures?
Cash value is paid to the policyowner
What is another name for interest-sensitive whole life insurance?
Current assumption life
What type of life insurance is best suited to cover a mortgage?
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?
Decreasing term
If the annuitant dies before the annuitization period starts, what will the beneficiary receive?
Either the amount paid into the annuity or the cash value, whichever is greater
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
What type of annuity credits its interest based upon an index such as S&P 500?
Equity indexed annuity
An agent selling variable annuities must be registered with
FINRA
What does the term "level" refer to in level term insurance?
Face Amount
What policy component must decrease in decreasing term insurance?
Face Amount
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?
Flexible premium deferred annuity
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 what time period?
For 20 years or until the insured's death, whichever occurs first
How long will a life annuity with a 15-year period certain pay?
For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years
What is included with the Life with Guaranteed Minimum annuity settlement option?
If the annuitant dies before the principal amount ( the amount paid for the annuity ) has been paid out, the remainder of the principal amount will be refunded to the beneficiary. Pure life provideds the highest monthly benefits for an individual annuitant
What type of annuity can be purchased with a single premium?
Immediate Annuity
What are the two classification of annuities according to the time when annuity payments begin?
Immediate and deferred
A Return of Premium term life policy is written as what type of term coverage?
Increasing, pays additional death benefit to the beneficiary equal to the amount of the premiums paid
During partial withdrawal from a universal life policy, what portion, if any, will be taxed?
Interest earned on the withdrawn cash value
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate
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?
Joint life annuity
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
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?
Life income with period certain
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?
Limited pay whole life
What type of life insurance policy is Life Paid up at Age 65?
Limited pay whole life
Your clients 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
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than 1 year after the annuity purchase
Can a business or a corporation be an annuitant?
No, an annuitant must always be a natural person
What universal life option has a gradually increasing cash value and a level death benefit?
Option A
Which universal life insurance policy does the IRS require corridor or gap between the cash value and the death benefit?
Option A
What are the death denefit options in universal life policies?
Option A- level death benefit, and Option B- increasing death benefit
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
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually whole life)
What type of whole life insurance policies only require 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?
Single premium whole life
What type of annuity is suitable for someone who wants to select the benfit option that will pay the largest amount only for as lond as the annuitant lives?
Straight life
What are the types of whole life insurance?
Straight life, single premium, limited payment
What type of life insurance policy offers pure death protection?
Term
What entities regulate variable life policies?
The SEC, federal government, and the Insurance Department
The term "fixed" in a fixed annuity refers to what?
The amount and length of payments, equal annuity payments, and a guaranteed rate of interest
What element of an adjustable life policy can be charged by the policyowners?
The amount and payment period of the premium, the face amount, and the period for protection
Regarding the annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
The annuitant receieves payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death
How do installments for a fixed period annuity settlement option work?
The annuitant selects the time period for the benefits, the insurer determines how much each payment will be and only pays for a specific amount of time. There are no life contingencies.
The policyowner of an adjustable life policy wants to increase the death benefit. How does it increase?
The death benefit can be increased by providing evidence of insurability
Under Option B in a universal life policy, what happens to the death benefit?
The death benefit increases wach year by the amount of the cash value increases
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 benficiary?
The full death benefit
Term policies provide what kind of protection compared to any other form of protection?
The greatest amount of coverage for the lowest premium
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
Who bears the investment rish in a fixed annuity?
The insurer
What is the difference between a single premium and a flexible premium payment options in a deferred annuity?
The number of payments that purchase the annuity
What is the accumulation period in an annuity?
The period during which the payments into the annuity grow tax deferred
Describe the annuity period
The period of time during which accumulated money is converted into income payments
Who is entitles to the cash values in a life insurance policy?
The policyowner
What happens to the premium in an annually renewable term life policy?
The premium increases with each renewal
How is the premium determined in a joint life insurance policy?
The premium is based on the average age of the insureds
Why are policy loans not available on term insurance?
There is no cash value to borrow against
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
What is the main reason for purchasing an annuity?
To provide income that the annuitant cannot outlive
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Universal Life
What kind of policy allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
Universal life
What kind of policy allows withdrawals or partial surrenders?
Universal life
In a joint life policy, when is the death benefit paid?
Upon the first death
What type of annuity requires an agent to have a securities license?
Variable annuity
When would a 20-pay whole life policy endow?
When the insured reaches age 100
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
What type of life insurance policy provides permanent protection?
Whole Life
What type of insurance would perform the function of cash accumulation?
Whole life insurance
Universal life policies allow withdrawals, what is the catch?
Withdrawals are a limited portion of the policy's cash value. Each withdrawal is charged typically, and the amount and frequency are usually lim
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?
$50,000. The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount
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?
20 year level term
How do payments for joint and survivor annuities work?
A joint and survivor annuity will pay until the last annuitant has died; however, the surviving annuitant may receive reduced payments
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
What type of license(s) is/are required to sell variable annuities?
A life insurance license and a securities license
What are the two phases of an annuity?
Accumulation and annuitization ( or pay-in and pay-out)
Whole life policies provide protection until the insured reaches what age?
Age 100
In flexible premium payment annuities, the term flexible refers to what?
Amount of premium
The death protection component of Universal Life Insurance is always
Annually renewable term
The death protection component of a universal life policy is expressed as what type of coverage?
Annually renewable term
Who receives income payments from an annuity?
Annuitant
Whose life expectancy is taken into consideration in an annuity contract?
Annuitant
If there is no named beneficiary for the annuity benefits, to which entitiy will the benefits be paid?
Annuitant's estate
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period
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?
Annuity
