Chapter 2: Types of Life Insurance Policies

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

The least expensive first-year premium is found in which of the following policies

Annually renewable term

A universal life insurance policy is best described as a/an

Annually renewable term policy with a cash value account

Which of the following products will protect an individual from outlining his or her money

Annuity

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

What is another name for interest-sensitive whole life insurance

Current assumption life

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

Decreasing term

Which of the following best describes annually renewable term insurance

It is level term insurance

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

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

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

Which of the following is another term for the accumulation period of an annuity

Pay-in period

Which of the following is NOT one of the 3 basic types of coverages that are available, based on how the face amount changes during the policy term

Renewable

To sell variable life insurance policies, an agent must receive all of the following except

SEC registration

A domestic insurer issuing variable constructs must establish one or more

Separate accounts

All of the following statements about equity index annuities are correct EXCEPT

The annuitant receives a fixed amount of return

Which of the following best describes what the annuity period is

The period of time during which accumulated money is converted into an income stream

Which of the following policies would have an IRS required corridor or gap between the cash value and death benefit

Universal life, option A

Which of the following products requires a securities license

Variable annuity

What does "level" refer to in level term insurance

face amount

Which of the following has the right to convert the existing term coverage into permeant insurance

policy owner

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 amoutn

100

A straight life policy has what type of premium

A level annual premium for the life of the insured

The LEAST expensive first-year premium is found in which of the following policies

Annually renewable term

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

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 death benefit under Universal Life Option B

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

In which of the following cases will the insured be able to receive the full face amount from a whole life policy

If the insured lives to age 100

A Return of Premium term life policy is written as what type of term coverage

Increasing

In insured purchased a life insurance policy. The agent told him that depending upon the company's investments an expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/am

Interest-sensitive Whole Life

which two terms are associated directly with the way an annuity's funded

Single payment or periodic payments

Which of the following is TRUE regarding variable annuities

The annuitant assumes investment risk

Which of the following is not true about the annuitant

The annuitant cannot be the same person as the annuity owner

Which of the following statements is correct regarding whole life policy

The policy owner is entitled to policy loans

Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value

Variable universal life

The minimum interest rate on an equity indexed annuity is often based on

an index like standard & poor's 500

What type of premium do both universal life and variable universal life have

flexible

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

immediate

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

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

Why is an equity indexed annuity considered to be a fixed annuity

It has a guaranteed minimum interest rate

Which of the following is not true regarding the accumulation period of an annuity

It would not occur in a deferred annuity

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

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10 year term

The insured may renew the policy for another 10 years, but at a higher premium rate

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits

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 for both equity indexed annuities and fixed annuities

They have a guaranteed minimum interest rate

Which of the following policies would be classified as a traditional level premium contract

Straight life

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 insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdraw and the insurer charges a fee. What type of policy does the insured most likely have

Universal life

What type of life insurance policy allows the policyowner to pay more or less than the planned premium

Universal life

A married couple owns a permeant 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 policy

The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding the chagne

The death benefit can be increased by providing evidence of insurability

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

Which of the following best defines target premium in a universal life policy

The recommended amount to keep the policy in force throughout its lifetime

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

Which of the following features of the Indexed Whole Life policy is NOT fixed

Cash value growth

Who bears all of the investment risk in a fixed annuity

The insurance company