Chapter: Types of Life Policies

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

Pay-in period

Equity indexed annuities

Seek higher returns

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

SEC registration.

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.

If an agent wishes to sell variable life policies, what license must the agent obtain?

Securities

When an annuity is written, whose life expectancy is taken into account?

Annuitant

The term "fixed" in a fixed annuity refers to all of the following EXCEPT

Death benefit

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.

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.

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant.

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 products will protect an individual from outliving his or her money?

Annunity

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.

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.

Fixed annuities provide all of the following EXCEPT

Hedge against inflation.

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed.

Who bears all of the investment risk in a fixed annuity?

The Insurance company

Which of the following is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner.

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

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account.

Which of the following is an example of a limited-pay life policy?

Life Paid-up at Age 65

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

Lower

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

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

The annuitant receives a fixed amount of return.

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 is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate.

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

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

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 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

Which of the following products requires a securities license?

Variable annuity

The death benefit in a variable universal life policy

Depends on the performance of a separate account.

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death

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

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

An agent selling variable annuities must be registered with

FINRA

Annually renewable term policies provide a level death benefit for a premium that

Increase annually

Variable Whole Life insurance is based on what type of premium?

Level Fixed

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 withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

Universal Life

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT

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

The main difference between immediate and deferred annuities is

When the income payments begin.

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

Straight Life

Which of the following is called a "second-to-die" policy?

Survivorship life

In an annuity, the accumulated money is converted into a stream of income during which time period?

Annuitization period

Which of the following best describes what the annuity period is?

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

When would a 20-pay whole life policy endow?

When the insured reaches age 100

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.

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity.

Which of the following products provides income for a specified period of years or for life, and protects a person against outliving his or her money?

An annuity

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

The beneficiary

All of the following entities regulate variable life policies EXCEPT

The Guaranty Association.

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 is TRUE regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred.

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

It has a guaranteed minimum interest rate.

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

Universal Life - Option A

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

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 policy

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

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 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 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 Straight Life policy has what type of premium?

A level annual premium for the life of the insured

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio