Chapter 2
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
What are the two components of a universal policy?
Insurance and cash account
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.
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease.
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance
A Universal Life Insurance policy is best described as a/an
annually renewable term policy with a cash value account
Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated
annuity certain
The premium of a survivorship life policy compared with that of a joint life policy would be
lower
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
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
What license or licenses are required to sell variable annuities?
Both a life insurance license and a securities license
What characteristic makes whole life permanent protection?
Coverage until death or age 100
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
What does "level" refer to in level term insurance?
Face amount
Which policy component decreases in decreasing term insurance?
Face amount
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.
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
Annually renewable term policies provide a level death benefit for a premium that
Increases annually
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
Installments for a fixed period
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
It does not guarantee that the entire principal amount will be paid out.
Which of the following best describes annually renewable term insurance?
It is level term insurance
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally purchased.
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?
Joint and survivor
Variable Whole Life insurance is based on what type of premium?
Level fixed
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
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
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?
Payments for 15 years
Which of the follow has the right to convert the existing term coverage to permanent insurance?
Policyowner
Which of the following best describes a pure life annuity settlement option
Pure life provides payments for as long as the annuitant is alive.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
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
Which of the following policies would be classified as a traditional level premium contract?
Straight life
Which of the following types of annuities will generally provide the highest monthly income?
Straight life
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association
Which of the following is TRUE regarding variable annuities?
The annuitant assumes the risks on investment
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner.
The annuitant 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.
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadly declines throughout the duration of the contract.
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies.
Which of the following is TRUE regarding the premium in term policies?
The premium is level for the term of the policy
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account.
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%
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Variable Universal Life
Which of the following products requires a securities license?
Variable annuity
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money?
an annuity
The LEAST expensive first-year premium is found in which of the following policies?
annually renewable term
What type of premium do both Universal Life and Variable Universal Life policies have?
flexible
A Return of Premium term life policy is written as what type of term coverage?
increasing
Who bears all of the investment risk in a fixed annuity?
insurance company
During partial withdrawal from a universal life policy, which portion will be taxed?
interest
Which of the following is another term for the accumulation period of an annuity?
pay period
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
$50,000
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
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
Joint life annuity
Which of the following is NOT a type of whole life insurance?
Level term
The term "fixed" in a fixed annuity refers to all of the following EXCEPT
Death Benefit
The death benefit under the Universal Life Option B
Gradually increases each year by the amount that the cash value increases
Which of the following is an example of a limited-pay life policy?
Life Paid-up at Age 65
Which of the following is an example of limited pay life policy?
Life Paid-up at Age 65
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 death protection component of Universal Life Insurance is always
annually renewable term
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
What kind of policy allows withdrawals or partial surrenders?
Universal Life
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
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
Universal Life
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
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
Life income with period certain
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
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return
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 statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans
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
Which of the following is NOT true about a joint and survivor annuity benefit option
Payments stop after the first death among the annuitants.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities.
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal Life
If an agent wishes to sell variable life policies, what license must the agent obtain?
securities
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
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?
pure life
Which of the following is NOT one of the three types of term coverage based on what happens to the face amount during the policy term?
renewable
Which of the following is called a "second-to-die" policy?
survivorship life
A domestic insurer issuing variable contracts must establish one or more
separate accounts
The main difference between immediate and deferred annuities is
when the income payments begin
Which of the following types of policies will provide permanent protection?
whole life
Which of the following is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend
Straight life
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
It is a life contingency option.
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred 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
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
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.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
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