Chapter 2 - Types of Policies
A Straight Life policy has what type of premium? AA variable annual premium for the life of the insured BA level annual premium for the life of the insured CAn increasing annual premium for the life of the insured DA decreasing annual premium for the life of the insured
A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.
An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? AFixed BFlexible premium CImmediate DDeferred
Deferred Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.
The death benefit under the Universal Life Option B AIncreases for the first few years of the policy, and then levels off. BRemains level. CGradually increases each year by the amount that the cash value increases. DDecreases by the amount that the cash value increases.
Gradually increases each year by the amount that the cash value increases Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
The death benefit under the Universal Life Option B AGradually increases each year by the amount that the cash value increases. BDecreases by the amount that the cash value increases. CIncreases for the first few years of the policy, and then levels off. DRemains level.
Gradually increases each year by the amount that the cash value increases. Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
Return of Premium term life policy is written as what type of term coverage? ADecreasing BRenewable CLevel DIncreasing
Increasing 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.
What are the two components of a universal policy? AInsurance and investments BMortality cost and interest CSeparate account and policy loans DInsurance and cash account
Insurance and cash account A universal policy has two components: an insurance component and a cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher.
It has the lowest annual premium of the three types of Whole Life policies. BIts premium steadily decreases over time, in response to its growing cash value. CThe face value of the policy is paid to the insured at age 100. DIt usually develops cash value by the end of the third policy year.
Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
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? AWhole Life BOrdinary Life CJoint Life DDecreasing Term
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.
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? ALevel term BTerm to specified age COrdinary life policy DLimited pay whole life
Level term A 20-year term policy is written to provide a level death benefit for 20 years.
Which of the following is NOT a type of whole life insurance? ASingle premium BStraight life CLimited payment DLevel term
Level term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Level term is a type of term insurance.
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? ALife annuity with period certain BIncreasing term CLimited pay whole life DInterest-sensitive whole life
Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
Which type of life insurance policy generates immediate cash value? AContinuous Premium BSingle Premium CLevel Term DDecreasing Term
Single Premium 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.
Which of the following policies would be classified as a traditional level premium contract? AUniversal Life BVariable Universal Life CStraight Life DAdjustable Life
Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.
Who bears all of the investment risk in a fixed annuity? AThe annuitant BThe insurance company CThe owner DThe beneficiary
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.
Which of the following determines the cash value of a variable life policy? AThe policy's guarantees. BThe premium mode CThe performance of the policy portfolio DThe company's general account
The performance of the policy portfolio 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 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? AFlexible life BVariable life CAdjustable life DUniversal life
Universal life With universal life policies, the policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium, and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
The main difference between immediate and deferred annuities is AHow the annuity is purchased. BThe number of insureds. CThe amount of each payment. DWhen the income payments begin.
When the income payments begin. The main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.
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
When the insured reaches age 100 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.
A Universal Life Insurance policy is best described as a/an AVariable Life with a cash value account. BWhole Life policy with two premiums: target and minimum. CFlexible Premium Variable Life policy. DAnnually Renewable Term policy with a cash value account.
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.
Annually renewable term policies provide a level death benefit for a premium that AFluctuates. BIncreases annually. CDecreases annually. DRemains level.
Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? AVariable period BVariable amount CFixed period DFixed amount
Fixed amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies.
A Return of Premium term life policy is written as what type of term coverage? AIncreasing BDecreasing CRenewable DLevel
Increasing 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.
essential questions while choosing a type of life insurance policy
1. how much insurance does the person need?
What type of premium do both Universal Life and Variable Universal Life policies have? AIncreasing BFlexible CLevel fixed DDecreasing
Flexible Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, as long as there is enough value in the policy to fund the death benefit.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? AOption A BOption B CCorridor option DVariable option
Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT AFINRA registration. BA securities license. CA life insurance license. DSEC 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.
Which of the following is called a "second-to-die" policy? ASurvivorship life BFamily income CJuvenile life DJoint life
Survivorship life 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.
Cash Amount
a policy's savings element or living benefit
nonforfeiture values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
liquidation of an estate
converting a person's net worth into a cash flow
securities
financial instruments that may trade for value (ex:stocks, bonds, options)
policy maturity
in life policies, the time when the face value is paid out
types of Life insurance Policies
term whole life variable
Face Amount
the amount of benefit stated in the life insurance policy
Endow
the cash value of a wjolr life policy has reached to the contractual face amount
Attained Age
the insureds age at the time the polcicy is issued or renewed
What is another name for interest-sensitive whole life insurance? ACurrent assumption life BVariable life CTerm life DAdjustable 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.
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
$100,000 In joint life policies, the death benefit is paid upon the first death only.
Level premium
the premium that does not change throughout the life of a policy
What characteristic makes whole life permanent protection? ACoverage until death or age 100 BGuaranteed death benefit CGuaranteed level premium DLiving benefits
Coverage until death or age 100 Whole Life policies are referred to as permanent protection, since as long as the premium is paid coverage will continue for the life of the insured or till the insured's age 100.
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 AInterest-sensitive Whole Life. BCredit Life. CAnnual Renewable Term. DAdjustable Life.
AInterest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.
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 ADetermined by the health of the insured. BBased on the issue age of the insured. CDiscounted. DAdjusted to the insured's age at the time of renewal.
Adjusted to the insured's age at the time of renewal. If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured.
In an annuity, the accumulated money is converted into a stream of income during which time period? APayment period BAmortization period CConversion period DAnnuitization period
Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream.
Which of the following is a feature of a variable annuity? ASecurities license is not required. BBenefit payment amounts are not guaranteed. CPayments into the annuity are kept in the company's general account. DInterest rate is guaranteed.
Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.
If an annuitant dies before annuitization occurs, what will the beneficiary receive? AEither the amount paid into the plan or the cash value of the plan, whichever is the greater amount BEither the amount paid into the plan or the cash value of the plan, whichever is the lesser amount CAmount paid into the plan DCash value of the plan
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.
Which of the following is NOT a type of whole life insurance? ALevel term BSingle premium CStraight life DLimited payment
Level Term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Level term is a type of term insurance.
he premium of a survivorship life policy compared with that of a joint life policy would be AHalf the amount. BLower. CHigher. DAs high.
Lower. 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 type of life insurance policy allows the policyowner to pay more or less than the planned premium? AStraight whole life BUniversal life CVariable whole life DDecreasing term
Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT AMost term policies contain a convertibility option. BUpon conversion, the premium for the permanent policy will be based upon attained age. CUpon conversion, the death benefit of the permanent policy will be reduced by 50%. DEvidence of insurability is not required.
Upon conversion, the death benefit of the permanent policy will be reduced by 50%. 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.
Variable Whole Life insurance is based on what type of premium? AFlexible BGraded CLevel fixed DIncreasing
Level fixed Variable Whole Life insurance is a level fixed premium investment-based product.
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? AGraded Premium Life BLimited-pay Life CVariable Life DAdjustable Life
Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
The main difference between immediate and deferred annuities is AThe amount of each payment. BWhen the income payments begin. CHow the annuity is purchased. DThe number of insureds.
The amount of each payment. BWhen the income payments begin. CHow the annuity is purchased. DThe number of insureds. The main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.
Deffered
withheld or postponed until aspecific time or event in the future
Which policy component decreases in decreasing term insurance? ADividend BPremium CFace amount DCash value
Face amount Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
Which of the following determines the cash value of a variable life policy? AThe company's general account BThe policy's guarantees. CThe premium mode DThe performance of the policy portfolio
The performance of the policy portfolio 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 statements is correct regarding a whole life policy? ACash values are not guaranteed. BThe policy premium is based on the attained age. CThe death benefit may increase or decrease during the policy period. DThe policyowner is entitled to policy loans.
The policyowner is entitled to policy loans. Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
In a survivorship life policy, when does the insurer pay the death benefit? AUpon the last death BUpon the first death CHalf at the first death, and half at the second death DIf the insured survives to age 100
Upon the last death Survivorship life pays on the last death rather than upon the first 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? A$10,000 B$40,000 C$50,000 D$60,000
$50,000 The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount.
For variable products, underlying assets must be kept in AA revenue account. BA money market account. CA general account. DA separate account.
A separate account. Under a variable life insurance policy, assets must be placed in a separate fund, used primarily for the investment of stocks, bonds, and other security investment options.
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money? AA survivorship life policy BA universal life policy CA group policy DAn annuity
An Annuity An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds.
The current interest rate on an equity indexed annuity is often based on AThe returns from the insurance company's separate account. BThe annuitant's individual stock portfolio. CThe insurance company's general account investments. DAn index like Standard & Poor's 500.
An index like Standard & Poor's 500.
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? AFlexible payment annuity BDeferred interest annuity CImmediate annuity DVariable annuity
Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? AUniversal Life - Option B BEquity Indexed Universal Life CVariable Universal Life DUniversal Life - Option A
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.
The death protection component of Universal Life Insurance is always AWhole Life BAdjustable Life CDecreasing Term DAnnually Renewable Term
Annually Renewable Term 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 of the following is INCORRECT regarding a $100,000 20-year level term policy? AThe policy will expire at the end of the 20-year period. BAt the end of 20 years, the policy's cash value will equal $100,000. CThe policy premiums will remain level for 20 years. DIf the insured dies before the policy expired, the beneficiary will receive $100,000.
At the end of 20 years, the policy's cash value will equal $100,000.
What does "level" refer to in level term insurance? ACash value BInterest rate CFace amount DPremium
Face amount Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.
Fixed annuities provide all of the following EXCEPT AMinimum guaranteed rate of interest. BFuture income payments. CHedge against inflation. DEqual monthly payments for life.
Hedge against inflation. Fixed annuities invest premium payments into a general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection against inflation.
Which statement is NOT true regarding a Straight Life policy? AIt has the lowest annual premium of the three types of Whole Life policies. BIts premium steadily decreases over time, in response to its growing cash value. CThe face value of the policy is paid to the insured at age 100. DIt usually develops cash value by the end of the third policy year.
Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
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.
Life income with period certain. If the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the 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? AOption B BCorridor option CVariable option DOption A
Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
All of the following entities regulate variable life policies EXCEPT AThe Guaranty Association. BFederal government. CThe SEC. DThe Insurance Department.
The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? ADecreasing term life BVariable universal life CIncreasing term life DCredit term life
Variable universal life Variable universal life policies have cash value, so they allow policy loans. Term insurance policies do not have cash value.
Which of the following types of policies allows for a flexible premium and a variable investment component? AGuaranteed issue variable life insurance BVariable whole life insurance CWhole life insurance DVariable universal life insurance
Variable universal life insurance A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? AIt does not guarantee that the entire principal amount will be paid out. BIt is a life contingency option. CThe beneficiary receives the remainder of the principal amount upon the annuitant's death. DPayments can be made in installments and as a single cash refund.
It does not guarantee that the entire principal amount will be paid out. With the Life with Guaranteed Minimum annuity settlement option, if the annuitant dies before the principal amount (the amount paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Pure life provides the highest monthly benefits for an individual annuitant.
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? AJoint Life Policy BSurvivorship Life Policy CSecond-to-Die DFamily Income Policy
Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.
If an agent wishes to sell variable life policies, what license must the agent obtain? AAdjuster BSurplus Lines CPersonal Lines DSecurities
Securities Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.
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? ALife with period certain BJoint limited annuity CJoint life DJoint and survivor
Joint life Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.
All of the following are true regarding a decreasing term policy EXCEPT AThe payable premium amount steadily declines throughout the duration of the contract. BThe death benefit is $0 at the end of the policy term. CThe contract pays only in the event of death during the term and there is no cash value. DThe face amount steadily declines throughout the duration of the contract.
Premiums remain level with a decreasing term policy; only the face amount decreases. The payable premium amount steadily declines throughout the duration of the contract.
A domestic insurer issuing variable contracts must establish one or more ALiability accounts. BAnnuity accounts. CGeneral accounts. DSeparate accounts.
Separate accounts. 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 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 AGraded premium whole life. BSingle premium whole life. CModified Endowment Contract (MEC). DLevel term life.
Single premium whole life. Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.
hich 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.
The annuitant assumes the risks on investment. 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.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as AThe policyowner cannot skip premiums without the policy lapsing. BThe next month's premium is sufficient to cover both the current premium amount and the skipped amount. CThe policy contains sufficient cash value to cover the cost of insurance. DThe previous premium payments were high enough to create an excess of premium.
The policy contains sufficient cash value to cover the cost of insurance. In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.
All of the following are true about variable products EXCEPT AThe cash value is not guaranteed. BPolicyowners bear the investment risk. CThe premiums are invested in the insurer's general account. DThe minimum death benefit is guaranteed.
The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
Which of the following is an example of a limited-pay life policy? ALife Paid-up at Age 65 BRenewable Term to Age 70 CLevel Term Life DStraight Life
ALife Paid-up at Age 65 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.
The LEAST expensive first-year premium is found in which of the following policies? AAnnually Renewable Term BIncreasing Term CDecreasing Term DLevel Term
Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
What license or licenses are required to sell variable annuities? AOnly a life insurance license BOnly a securities license CNo license is required DBoth a life insurance license and a securities license
Both a life insurance license and a securities license Agents are required to have both a life insurance license and a securities license to sell variable annuities.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? AThe insurance company will retain the cash value and pay back the premiums to the owner's estate. BThe money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. CThe beneficiary will receive the greater of the money paid into the annuity or the cash value. DThe owner's estate will receive the money paid into the annuity.
The beneficiary will receive the greater of the money paid into the annuity or the cash value. 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.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? AThe death benefit can be increased only when the policy has developed a cash value. BThe death benefit can be increased only by exchanging the existing policy for a new one. CThe death benefit can be increased by providing evidence of insurability. DThe death benefit cannot be increased.
The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.
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? ATerm to specified age BOrdinary life policy CLimited pay whole life DLevel term
Level term A 20-year term policy is written to provide a level death benefit for 20 years.
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? AVariable Life BAdjustable Life CGraded Premium Life DLimited-pay Life
Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.
An insured purchesed a 10-year level term life policy that is gauranteed renewable and convertible. What happens at the end of tehe 10-year term? AThe insured may renew the policy for another 10 years at the same premium rate. BThe insured may renew the policy for another 10 years, but at a higher premium rate. CThe insured must provide evidence of insurability to renew the policy. DThe insured may only convert the policy to another term policy.
The insured 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.
ll of the following are true of an annuity owner EXCEPT AThe owner has the right to name the beneficiary. BThe owner is the party who may surrender the annuity. CThe owner must be the party to receive benefits. DThe owner pays the premiums on the annuity.
The owner must be the party to receive benefits. 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.
Which of the following best describes what the annuity period is? AThe period of time during which accumulated money is converted into income payments BThe period of time from the accumulation period to the annuitization period CThe period of time during which money is accumulated in an annuity DThe period of time from the effective date of the contract to the date of its termination
The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.
Which of the following is TRUE regarding the premium in term policies? ADecreasing term policy will have a decreasing premium. BThe premium is level for the term of the policy. COnly level term policy has a level premium. DThe premium in term policies is not based on the insured's age.
The premium is level for the term of the policy The premium on a term life insurance policy is level throughout the term of the policy. Only the amount of the death benefit may change. This does not apply to annual renewable term insurance, in which the premium increases annually according to the attained age.
Which of the following is NOT true regarding Equity Indexed Annuities? AThey have guaranteed minimum interest rates. BThey are less risky than variable annuities. CThey earn lower interest rates than fixed annuities. DThe insurance company keeps a percentage of the returns.
They earn lower interest rates than fixed annuities. 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.