Life chapter 2
The term "fixed" in a fixed annuity refers to all of the following EXCEPT A) Death benefit B) Guaranteed rate of interest C) Equal annuity payments D) Amount and length of payments
A) Death benefit
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 this policy A) Required a premium increase each renewal B) Built cash values C) Required proof insurability every year D) Decreased death benefit at each renewal
A) Required a premium increase each renewal
A Straight Life policy has what type of premium? A) A decreasing annual premium for the life of the insured B) A variable annual premium for the life of the insured C) A level premium for the life of the insured D) An increasing annual premium for the life of the insured
C) A level premium for the life of the insured
An individual has just borrowed $10,000 from his bank of a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? A) Variable life B) Universal life C) Whole life D) Decreasing term
D) Decreasing term
A Return of Premium term life policy is written as what type of term coverage? A) Increasing B) Decreasing C) Renewable D) Level
A) Increasing
Equity indexed annuities A) Are more risky than variable annuities B) Are security instruments C) Invest conservatively D) Seek higher returns
D) Seek higher returns
All other factors being equal, what would the premium be like in a survivor ship life policy as compared to the premium in a joint life policy? A) Lower B) Higher C) As high D) Half the amount
A) Lower
Which of the following best describes what the annuity period is? A) The period of time from the accumulation period to the annuitization period B) The period of time during which money is accumulated is an annuity C) The period of time from the effective date of the contract to the date of its termination D) The period of time during which accumulated money is converted into income payments
D) The period of time during which accumulated money is converted into income payments
To sell variable life insurance policies, an agent must receive all of the following except A) A life insurance license B) SEC registration C) FINRA registration D) A securities license
B) SEC registration
Which two terms are associated directly with the way an annuity is funded? A) Increasing or Decreasing B) Immediate or deferred C) Renewable or convertible D) Single payment or periodic payments
D) Single payment or periodic payments
Which of the following determines the cash value of a variable life policy? A) The company's general account B) The policy's guarantees C) The premium mode D) The performance of the policy portfolio
D) The performance of the policy portfolio
Which of the following is NOT true regarding the accumulation period of an annuity? A) It would not occur in a deferred annuity B) It is the period during which the annuity payments earns interest C) It is the period over which the owner makes payments into an annuity D) It is also known as the pay-in period
A) It would not occur in a deferred annuity
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A) Upon conversion, the death benefit of the permanent policy will be reduced by 50% B) Evidence of insurabillity is not required C) Most term policies contain a convertibility option D) Upon conversion, the premium for the permanent policy will be based upon attained age
A) Upon conversion, the death benefit of the permanent policy will be reduced by 50%
A man purchased $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? A) Immediate B) Flexible C) Deferred D) Variable
A) Immediate
Which of the following is an example of a limited-pay life policy? A) Level Term Life B) Straight Life C) Life Paid-up at Age 65 D) Renewable Term to Age 70
C) Life Paid-up at Age 65
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at 65. What would be the right policy for this client? A) Life annuity with period certain B) Increasing term C) Limited pay whole life D) Interest sensitive whole life
C) Limited pay whole life
All of the following are true about variable products except? A) The cash value is not guaranteed B) Policy owners bear the investment risk C) The premiums are invested in the insurer's general account D) The minimum death benefit is guaranteed
C) The premiums are invested in the insurer's general account
Which statement is NOT true regarding a Straight Life policy? A) The face value of the policy is paid to the insured at age 100 B) It usually develops cash value by the end of the third policy year C) It has the lowest annual premium of the three types of Whole Life policies D) Its premium steadily decreases over time, in response to its growing cash value
D) Its premium steadily decreases over time, in response to its growing cash value
Both Universal Life and Variable Universal Life have a A) Flexible premium B) Level fixed premium C) Decreasing premium D) Increasing premium
A) Flexible premium
Which of the following is NOT true regarding the accumulation period of an annuity? A) It would not occur in a deferred annuity B) It is the period during which the annuity payments earn interest C) It is the period over which the owner makes payments into an annuity D) It is also known as the pay-in-period
A) It would not occur in a deferred annuity
When an annuity is written, whose life expectancy is taken into account? A) Life expectancy is not a factor when writing an annuity B) Owner C) Annuitant D) Beneficiary
C) Annuitant
A Return of Premium term life policy is written as what type of term coverage? A) Renewable B) Level C) Increasing D) Decreasing
C) Increasing
Which of the following best describes annually renewable term insurance? A) Neither the premium nor the death benefit is affected by the insured's age B) It provides an annually increasing death benefit C) It is level term insurance D) It requires proof of insurabillity at each renewal
C) It is level term insurance
All other factors being equal, the least expensive first year premium payment is found in A) Increasing Term B) Decreasing Term C) Level Term D) Annually Renewable Term
D) Annually Renewable Term
In a survivor ship life policy, when does the insurer pay the death benefit? A) If the insured survives to age 100 B) Upon the last death C) Upon the first death D) Half at the first death, and half at the second death
B) Upon the last death
The equity in an equity index annuity is linked to A) An index like standard & Poor's 500 B) The returns from the insurance company's separate account C) The annuitant's individual stock portfolio D) The insurance company's general account investments
A) An index like standard & Poor's 500
Which of the following is a feature of a variable annuity? A) Securities license is not required B) Benefit payment amounts are not guaranteed C) Payments into the annuity are kept in the company's general account D) Interest rate is guaranteed
B) Benefit payment amounts are not guaranteed
Why is an equity indexed annuity considered to be a fixed annuity? A) It is not tied to an index like the S&P 500 B) It has a guaranteed minimum interest rate C) It has modest investment potential D) It has a fixed rate of return
B) It has a guaranteed minimum interest rate
Which of the following is another term for the accumulation period of an annuity? A) Premium period B) Liquidation period C) Annuity period D) Pay in period
D) Pay in period
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a A) Convertible Term Policy B) Renewable Term Policy C) Decreasing Term Policy D) Whole Life Policy
A) Convertible Term Policy
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 A) For 20 years or until death, whichever occurs first B) Until the policy owner reaches age 65 C) For 20 years D) Until the policy owners age 100, when the policy matures
A) For 20 years or until death, whichever occurs first
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? A) A corporation can be a annuitant as long as the beneficiary is a natural person B) The contract can be issued without an annuitant C) The annuitant must be a natural person D) A corporation can be an annuitant as long as it is also the owner
C) The annuitant must be a natural person
Who bears all of the investment risk in a fixed annuity? A) The beneficiary B) The annuitant C) The insurance Company D) The owner
C) The insurance Company
Which of the following is NOT true regarding Equity Indexed Annuities? A) They have guaranteed minimum interest rates B) They are less risky than variable annuities C) They earn lower interest rates than fixed annuities D) The insurance company keeps a percentage of the returns
C) They earn lower interest rates than fixed annuities
Which of the following is TRUE for both equity indexed annuities and fixed annuities? A) Both are considered to be more risky than variable annuities B) They invest on a conservative basis C) They have a guaranteed minimum interest rate D) They are both tied to an equity index
C) 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 A) Interest-sensitive Whole Life B) Credit Life C) Annual Renewable Term D) Adjustable Life
A) Interest-sensitive Whole Life
The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A) The death benefit can be increased by providing evidence of insurabillity B) The death benefit cannot be increased C) The death benefit can be increased only when the policy has developed a cash value D) The death benefit can be increased only by exchanging the existing policy for a new one
A) The death benefit can be increased by providing evidence of insurabillity
All of the following entities regulate variable life policies except A) The guaranty Association B) Federal government C) The SEC D) The Insurance Department
A) The guaranty Association
Which of the following is TRUE regarding the annuity period? A) During this of time the annuity payments grow interest tax deferred B) It is also referred to a as the accumulation period C) It is the period of time during which the annuitant makes premium payments into the annuity D) It may last for the lifetime of the annuitant
D) It may last for the lifetime of the annuitant
Which of the following is NOT true regarding Equity Indexed Annuities? A) The insurance company keeps a percentage of the returns B) They have guaranteed minimum interest rates C) They are less risky than variable annuities D) They earn lower interest rates than annuities
D) They earn lower interest rates than annuities
Which of the following is TRUE regarding variable annuities? A) The company guarantees a minimum interest rate B) A person selling variable annuities is required to have only a life agent's license C) The annuitant assumes the risks on investment D) The funds are invested in the company's general account
C) The annuitant assumes the risks on investment
An agent selling variable annuities must be registered with A) The Guaranty Association B) SEC C) FINRA D) Department of Insurance
C) FINRA
All of the following are true regarding a decreasing term policy EXCEPT A) The contract pays only in the event of death during the term and there is no cash value B) The face amount steadily declines throughout the duration of the contract C) The payable premium amount steadily declines throughout the duration of the contract D) The death benefit is $0 at the end of the policy term
C) The payable premium amount steadily declines throughout the duration of the contract
Which of the following is TRUE for both equity indexed annuities and fixed annuities? A) Both are considered to be more risky than variable annuities B) They invest on a conservative basis C) They have a guaranteed minimum interest rate D) They are both tied to an equity index
C) They have a guaranteed minimum interest rate
Which of the following in NOT true regarding Equity Indexed Annuities? A) The insurance company keeps a percentage of the returns B) They have guaranteed minimum interest rates C) They are less risk than variable annuities D) They earn lower interest rates than fixed annuities
D) They earn lower interest rates than fixed annuities