Types of Life Policies
To sell variable life insurance policies an agent must receive
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 do insurers do with variable products
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.
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 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.
The equity in an equity index annuity is linked to
An index like standard & Poor's 500
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: Term policies do no develop cash values
Which statements are true regarding a $100,000 20 year level term policy
If the insured dies before the policy expired, the beneficiary will receive $100,000/the policy will expire at the end of the 20 yr period/the policy premiums will remain level 20 years
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
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.
How are annuities characterized
By how they can be paid for either a single payemnt (lump sum) or through periodic payments where premiums are payed in installments over time
What characteristic makes whole life permanent protection?
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.
Survivorship Life and Joint Life both
Insure two or more lives for a premium that is based on a joint age
What does "level" refer to in level term insurance?
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.
Which policy component decreases in decreasing term insurance?
Face Amount decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
Which statement is NOT true regarding a Straight Life policy?
It's Premium steadily decreases over time, in response to its growing cash value
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
Joint life policies: cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.
Equity Indexed Annuities
Seek higher returns
Which of the following is TRUE regarding the premium in term policies?
The premium is level
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account
The death protection component of Universal Life Insurance is always
Annually renewable term
Which of the following best describes annually renewable term insurance?
Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.
How do periodic payments work
Annuities can be either level, in with the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies
How is a whole life policy paid out
Guaranteed death benefit. If insured lives to 100 insurance company will pay owner the face amount (Cash Value). If they die prior to policy maturity date death benefit is paid to beneficiary
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. Why type of annuity is it?
Immediate
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
In an annuity, the accumulated money is converted into a stream of income during which time period?
The "annuitization period" (annuity period): is the time during which accumulated money is converted into an income stream.
What two components does a universal policy have
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.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
required a premium increase each renewal Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
With an immediate annuity when does distribution start
within 1 year of purcahse
A Return of Premium term life policy is written as what type of term coverage?
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.
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 Whole Life, Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
What is synonymous with the annuitization period?
Liquidation period, pay-out period
What are Equity Indexed Annuities
Not Securities. Invest on an aggressive basis in order to yield higher return. Have guaranteed minimum interest rates. Insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Less risky than variable annuities and earn higher interest rates than fixed annuities. Annuitant will not receive less than what min interest rate would yield
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
When would a 20-pay whole life policy endow
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.
Which are entities that regulate variable life policies
Ins Department, Fed Gov, SEC
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 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.
What is the purpose of establishing the target premium for a universal life policy?
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.
Which of the following statements is correct regarding a whole life policy
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.
Whats the major difference between Survivorship Life and Joint Life
Survivorship life pays on the last death rather than the first death
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)
Equity Indexed Annuity The interest rates of Equity Indexed Annuities are tied to the Standard and Poor's Index.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate
Which of the following is an example of a limited-pay life policy?
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.
Which of the following is TRUE regarding variable annuities?
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.
Which of the following is NOT true regarding Equity Indexed Annuities
They earn lower interest rates than fixed annuities
In an Adjustable Life policy all of the following can be changed by the policy owner
Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
Define Straight Life policy
Face value is paid to the insured at age 100, develops CV by the end of the 3rd year, has the lowest annual premium of the three types of whole life, charges a level annual premium and has guaranteed death benefit
Which does not regulate variable life policies
guaranty association
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, since the death benefit is not paid until the last death the joint life in a sense is extended resulting in a lower premium than that which is typically charged for joint life
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
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
Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.
In a survivorship life policy, when does the insurer pay the death benefit?
Survivorship life pays on the last death rather than upon the first death.
Which of the following is TRUE regarding the accumulation period of an 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.
What license or licenses are required to sell variable annuities?
Agents are required to have both a life insurance license and a securities license to sell variable annuities.
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: the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
All of the following statements about equity annuities are correct EXCEPT
The annuitant receives a fixed amount of return
An Adjustable Life policyowner can change which of the following policy features?
Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.
The main difference between immediate and deferred annuities is
When the income payments begin
