Practice quiz Types of insurance
A Universal Life Insurance policy is best described as a/an 1.Annually Renewable Term policy with a cash value account. 2.Variable Life with a cash value account. 3.Whole Life policy with two premiums: target and minimum. 4.Flexible Premium Variable Life policy.
Annually Renewable Term policy with a cash value account. A universal policy has two components: 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.
Which Universal Life option has a gradually increasing cash value and a level death benefit? A Juvenile life B Term insurance C Option B D Option A
Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
What is another name for interest-sensitive whole life insurance? A Term life B Adjustable life C Current assumption life D Variable life
Current assumption life Interest-sensitive whole life, also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100.
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? A Ordinary life policy B Limited pay whole life C Level term D Term to specified age
Level Term A 20-year term policy is written to provide a level death benefit for 20 years.
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 A Built cash values. B Required proof of insurability every year. C Decreased death benefit at each renewal. D Required a premium increase each renewal.
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.
Why is an equity indexed annuity considered to be a fixed annuity? A It has modest investment potential. B It has a fixed rate of return. C It is not tied to an index like the S&P 500. D It has a guaranteed minimum interest rate.
It has a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
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? Flexible Deferred Variable Immediate
Immediate - With an immediate annuity, distribution starts within 1 year of purchase.
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? A Joint Life B Decreasing Term C Whole Life D Ordinary Life
Joint life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
Variable Whole Life insurance is based on what type of premium? A Graded B Level fixed C Increasing D Flexible
Level Fixed Variable Whole Life insurance is a level fixed premium investment-based product.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT A A securities license. B A life insurance license. C SEC registration. D FINRA registration.
SEC registration. 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.
Who bears the risk in a
THE INSURANCE COMPANY Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.
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? A The insured must provide evidence of insurability to renew the policy. B The insured may only convert the policy to another term policy. C The insured may renew the policy for another 10 years at the same premium rate. D The insured may renew the policy for another 10 years, but at a higher premium rate.
The Insurer may renew the policy for another 10 years, but at a higher premium rate. Policies that are guaranteed renewable and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability.
All of the following statements about equity index annuities are correct EXCEPT-- The interest rate is tied to an index such as the Standard & Poor's 500. They invest on a more aggressive basis aiming for higher returns. The annuitant receives a fixed amount of return. They have a guaranteed minimum interest rate.
The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.
Which of the following best defines target premium in a universal life policy? A The minimum amount to make sure the policy is annually renewable B The corridor of insurance C The recommended amount to keep the policy in force throughout its lifetime D The maximum amount the policyowner may pay on a policy
The recommended amount to keep the policy in force throughout its lifetime 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 policies would have an IRS required corridor or gap between the cash value and the death benefit? A Equity Indexed Universal Life B Variable Universal Life C Universal Life - Option A D Universal Life - Option B
Universal Life Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.