CH2 life insurance
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT AThe insurer determines the amount for each payment. BIt is a life contingency option. CIt will pay the benefit only for a designated period of time. DThe payments are not guaranteed for life.
.B.)Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT AUpon conversion, the death benefit of the permanent policy will be reduced by 50%. BEvidence of insurability is not required. CMost term policies contain a convertibility option. DUpon conversion, the premium for the permanent policy will be based upon attained age.
A.)Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.
The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called ALife income with period certain. BLife income with refund. CJoint and survivorship. DJoint life annuity.
A.)If the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain.
What is another name for interest-sensitive whole life insurance? ACurrent assumption life BVariable life CTerm life DAdjustable life
A.)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.
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? AThe insured may renew the policy for another 10 years, but at a higher premium rate. BThe insured must provide evidence of insurability to renew the policy. CThe insured may only convert the policy to another term policy. DThe insured may renew the policy for another 10 years at the same premium rate.
A.)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.
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? ALimited pay whole life BInterest-sensitive whole life CLife annuity with period certain D Increasing term
A.)Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
Which of the following types of annuities will generally provide the highest monthly income? AStraight life BJoint and survivor CInstallment refund DLife with a 10-year period certain
A.)Pure or straight life annuity settlement option will only pay for as long as the annuitant lives; therefore, it has the potential to provide the highest monthly income. Any time a "period certain" option is included, it will reduce the monthly payout amount because, even if the annuitant dies, the company must continue to pay benefits for the period certain.
Which of the following is NOT true regarding the accumulation period of an annuity? AIt would not occur in a deferred annuity. BIt is the period during which the annuity payments earn interest. CIt is the period over which the owner makes payments into an annuity. DIt is also known as the pay-in period.
A.)The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).
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? AUniversal life BAdjustable life CTerm life DLimited pay
A.)Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.
Why is an equity indexed annuity considered to be a fixed annuity? AIt is not tied to an index like the S&P 500. BIt has a guaranteed minimum interest rate. CIt has modest investment potential. DIt has a fixed rate of return.
B.) While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? AJoint and survivor BPure life CLife with guaranteed minimum DInstallment refund
B.)A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
Who bears all of the investment risk in a fixed annuity? AThe annuitant BThe insurance company CThe owner DThe beneficiary
B.)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.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? AThe money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. BThe beneficiary will receive the greater of the money paid into the annuity or the cash value. CThe owner's estate will receive the money paid into the annuity. DThe insurance company will retain the cash value and pay back the premiums to the owner's estate.
B.)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.
All of the following are true regarding a decreasing term policy EXCEPT AThe contract pays only in the event of death during the term and there is no cash value. BThe face amount steadily declines throughout the duration of the contract. CThe payable premium amount steadily declines throughout the duration of the contract. DThe death benefit is $0 at the end of the policy term.
B.)Premiums remain level with a decreasing term policy; only the face amount decreases.
All of the following are true of an annuity owner EXCEPT AThe owner is the party who may surrender the annuity. BThe owner must be the party to receive benefits. CThe owner pays the premiums on the annuity. DThe owner has the right to name the beneficiary.
B.)The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.
What kind of policy allows withdrawals or partial surrenders? AVariable whole life BUniversal life C20-pay life DTerm policy
B.)Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a ADecreasing Term Policy. BWhole Life Policy. CConvertible Term Policy. DRenewable Term Policy.
C.)A convertible term policy has a provision that allows the policyowner to convert to permanent insurance.
The death protection component of Universal Life Insurance is always AAdjustable Life BDecreasing Term CAnnually Renewable Term DWhole Life
C.)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.
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? ANothing B$50,000 C$100,000 D$200,000
C.)In joint life policies, the death benefit is paid upon the first death only.
All of the following statements are true regarding installments for a fixed amount EXCEPT AThis option pays a specific amount until the funds are exhausted. BThe annuitant may select how big the payments will be. CThe payments will stop when the annuitant dies. DValue of the account and future earnings will determine the time period for the benefits.
C.)Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.
Which type of life insurance policy generates immediate cash value? ADecreasing Term BContinuous Premium CSingle Premium DLevel Term
C.)Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.
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? AA corporation can be an annuitant as long as the beneficiary is a natural person. BThe contract can be issued without an annuitant. CThe annuitant must be a natural person. DA corporation can be an annuitant as long as it is also the owner.
C.)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.
Which of the following policies would be classified as a traditional level premium contract? AUniversal Life BVariable Universal Life CStraight Life DAdjustable Life
C.)Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.
The premium of a survivorship life policy compared with that of a joint life policy would be AAs high. BHalf the amount. CLower. DHigher.
C.)Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.
Which of the following is called a "second-to-die" policy? AJuvenile life BJoint life CSurvivorship life DFamily income
C.)Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.
Which of the following is TRUE regarding the accumulation period of an annuity? AIt is a period of time during which the beneficiary receives income BIt is limited to 10 years. CIt is a period during which the payments into the annuity grow tax deferred. DIt is also referred to as the annuity period.
C.)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.
Which of the following is TRUE regarding variable annuities? AThe company guarantees a minimum interest rate. BA person selling variable annuities is required to have only a life agent's license. CThe annuitant assumes the risks on investment. DThe funds are invested in the company's general account.
C.)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.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT AThe payments are not guaranteed for life. BThe insurer determines the amount for each payment. CIt is a life contingency option. DIt will pay the benefit only for a designated period of time.
C.)Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
Variable Whole Life insurance is based on what type of premium? AFlexible BGraded CLevel fixed DIncreasing
C.)Variable Whole Life insurance is a level fixed premium investment-based product.
Which of the following is NOT true regarding the annuitant? AThe annuitant receives the annuity benefits. BThe annuitant must be a natural person. CThe annuitant cannot be the same person as the annuity owner. DThe annuitant's life expectancy is taken into consideration for the annuity.
C.)While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
Under a pure life annuity, an income is payable by the company AFor a guaranteed period of time, whether or not the annuitant survives to the end of that period. BFor as long as either the annuitant or a named beneficiary is alive. COnly for the life of the annuitant. DUntil the principal and interest are exhausted.
C.)With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life.
All of the following are true regarding a decreasing term policy EXCEPT AThe death benefit is $0 at the end of the policy term. BThe contract pays only in the event of death during the term and there is no cash value. CThe face amount steadily declines throughout the duration of the contract. DThe payable premium amount steadily declines throughout the duration of the contract.
D.) Premiums remain level with a decreasing term policy; only the face amount decreases.
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? AVariable life BUniversal life CWhole life DDecreasing term
D.)A decreasing term policy's face amount decreases as the amount of debt is reduced.
When would a 20-pay whole life policy endow? AAt the insured's age 65 BAfter 20 payments CIn 20 years DWhen the insured reaches age 100
D.)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 of the following products requires a securities license? AFixed annuity BEquity Indexed annuity CDeferred annuity DVariable annuity
D.)A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.
Which of the following best describes annually renewable term insurance? AIt requires proof of insurability at each renewal. BNeither the premium nor the death benefit is affected by the insured's age. CIt provides an annually increasing death benefit. DIt is level term insurance.
D.)Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.
a domestic insurer issuing variable contracts must establish one or more ALiability accounts. BAnnuity accounts. CGeneral accounts. DSeparate accounts.
D.)Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.
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 ACredit Life. BAnnual Renewable Term. CAdjustable Life. DInterest-sensitive Whole Life.
D.)Because the cash values are generated by investments, interest rates will affect the amount of the cash value.
Which policy component decreases in decreasing term insurance? ACash value BDividend CPremium DFace amount
D.)Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? AJoint and survivor BLife with period certain CJoint limited annuity DJoint life
D.)Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.
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? ASurvivorship Life Policy BSecond-to-Die CFamily Income Policy DJoint Life Policy
D.)Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.
Which of the following is an example of a limited-pay life policy? ARenewable Term to Age 70 BLevel Term Life CStraight Life DLife Paid-up at Age 65
D.)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.
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? AThe insured must provide evidence of insurability to renew the policy. BThe insured may only convert the policy to another term policy. CThe insured may renew the policy for another 10 years at the same premium rate. DThe insured may renew the policy for another 10 years, but at a higher premium rate.
D.)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.
A Return of Premium term life policy is written as what type of term coverage? ADecreasing BRenewable CLevel DIncreasing
D.)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.
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 AModified Endowment Contract (MEC). BLevel term life. CGraded premium whole life. DSingle premium whole life.
D.)Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.
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) AVariable Annuity. BFlexible Annuity. CImmediate Annuity. DEquity Indexed Annuity.
D.)The interest rates of Equity Indexed Annuities are tied to the Standard and Poor's Index.
If an agent wishes to sell variable life policies, what license must the agent obtain? AAdjuster BSurplus Lines CPersonal Lines DSecurities
D.)Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.
Which of the following is a key distinction between variable whole life and variable universal life products? AVariable universal life is regulated solely through FINRA. BVariable whole life allows policy loans from the cash value. CVariable universal life has a fixed premium. DVariable whole life has a guaranteed death benefit.
D.)Variable universal life insurance may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit.
Which of the following determines the cash value of a variable life policy? AThe performance of the policy portfolio BThe company's general account CThe policy's guarantees. DThe premium mode
a.)The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.
Which of the following is NOT true regarding Equity Indexed Annuities? AThe insurance company keeps a percentage of the returns. BThey have guaranteed minimum interest rates. CThey are less risky than variable annuities. DThey earn lower interest rates than fixed annuities.
d.)Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.