FL 2-15 Chapter 2 Practice Questions
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.
The current interest rate on an equity indexed annuity is often based on
An index like Standard & Poor's 500.
When an annuity is written, whose life expectancy is taken into account?
Annuitant
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
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
What license or licenses are required to sell variable annuities?
Both a life insurance license and a securities license
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
What does "level" refer to in level term insurance?
Face amount
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed 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.
Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?
Greatest amount of coverage for the lowest premium
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
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.
A Return of Premium term life policy is written as what type of term coverage?
Increasing
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
What are the two components of a universal policy?
Insurance and cash account
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest
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.
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.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
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 TRUE regarding the accumulation period of an annuity?
It is a period during which the payments into the annuity grow tax deferred.
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.
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity.
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
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
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.
Variable Whole Life insurance is based on what type of premium?
Level fixed
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?
Level term
Which of the following is NOT a type of whole life insurance?
Level term
Which of the following is an example of a limited-pay life policy?
Life Paid-up at Age 65
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.
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
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
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
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.
Under a pure life annuity, an income is payable by the company
Only for the life of the annuitant.
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
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
Which of the following is another term for the accumulation period of an annuity?
Pay-in period
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 following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive.
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
A domestic insurer issuing variable contracts must establish one or more
Separate accounts.
Which of the following types of annuities will generally provide the highest monthly income?
Straight life
Which of the following would help prevent a universal life policy from lapsing?
Target premium
Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?
Term
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association.
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.
Who bears all of the investment risk in a fixed annuity?
The insurance company
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits.
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 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
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
Which of the following products requires a securities license?
Variable annuity
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Variable universal life
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
Required a premium increase each renewal.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration.
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
Which of the following policies would be classified as a traditional level premium contract?
Straight Life
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 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.
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return.
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
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.
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.
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities.
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance
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.
The main difference between immediate and deferred annuities is
When the income payments begin.
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Which of the following types of policies will provide permanent protection?
Whole Life
The death protection component of Universal Life Insurance is always
Annually Renewable Term
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 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 is NOT true regarding an annuity certain?
Benefits stop at the annuitant's 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?
$50,000
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
The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
A full death benefit
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
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, face amount decreases as the amount of debt is reduced
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?
Deferred
An agent selling variable annuities must be registered with
FINRA
