FL LIFE INSURANCE SAMPLE QUIZ

A STRAIGHT LIFE POLICY HAS WHAT TYPE OF PREMIUM?

ANSWER: A LEVEL ANNUAL PREMIUM FOR THE LIFE OF THE INSURED. EXPLANATION: STRAIGHT LIFE POLICIES CHARGE A LEVEL ANNUAL PREMIUM FOR THE LIFETIME OF THE INSURED AND PROVIDE A LEVEL, GUARANTEED DEATH BENEFIT.

WHICH OF THE FOLLOWING TYPES OF POLICIES ALLOWS FOR A FLEXIBLE PREMIUM AND A VARIABLE INVESTMENT COMPONENT?

ANSWER: VARIABLE UNIVERSAL LIFE INSURANCE EXPLANATION: A VARIABLE UNIVERSAL LIFE INSURANCE POLICY COMBINES A FLEXIBLE PREMIUM WITH AN INVESTMENT COMPONENT THAT ALLOWS FOR POTENTIALLY GREAT RETURNS.

ALL OF THE FOLLOWING ENTITIES REGULATE VARIABLE LIFE POLICIES EXCEPT?

ANSWER: THE GUARANTY ASSOCIATION EXPLANATION: VARIABLE LIFE INSURANCE IS REGULATED BY BOTH THE STATE AND THE FEDERAL GOVERNMENT, AS WELL AS THE INSURANCE DEPARTMENT, AND THE SEC.

WHAT LICENSE OR LICENSES ARE REQUIRED TO SELL VARIABLE ANNUITIES?

ANSWER: BOTH A LIFE INSURANCE LICENSE AND A SECURITIES LICENSE. EXPLANATION: AGENTS ARE REQUIRED TO HAVE BOTH A LIFE INSURANCE LICENSE AND A SECURITIES LICENSE TO SELL VARIABLE ANNUITIES.

WHICH OF THE FOLLOWING IS TRUE REGARDDING THE PREMIUM IN TERM POLICIES?

ANSWER: THE PREMIUM IS LEVEL EXPLANATION: REGARDLESS OF THE TYPE OF TERM INSURANCE PURCHASED, THE PREMIUM IS LEVEL THROUGHOUT THE TERM OF THE POLICY. ONLY THE AMOUNT OF THE DEATH BENEFIT MAY CHANGE.

WHICH STATEMENT IS NOT TRUE REGARDING A STRAIGHT LIFE POLICY?

ANSWER: ITS PREMIUM STEADILY DECREASES OVER TIME, IN RESPONSE TO ITS GROWING CASH VALUE. EXPLANATION: STRAIGHT LIFE POLICIES CHARGE A LEVEL ANNUAL PREMIUM THROUGHOUT THE INSURED'S LIFETIME AND PROVIDE A LEVEL, GUARANTEED DEATH BENEFIT.

WHICH UNIVERSAL LIFE OPTION HAS A GRADUALLY INCREASING CASH VALUE AND A LEVEL DEATH BENEFIT?

ANSWER: OPTION A EXPLANATION: 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.

WHICH OF THE FOLLOWING PRODUCTS REQUIRES A SECURITIES LICENSE?

ANSWER: VARIABLE ANNUITY EXPLANATION: A VARIABLE ANNUITY IS CONSIDERED TO BE A SECURITY AND IS REGULATE 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 TYPE OF LIFE INSURANCE POLICY GENERATES IMMEDIATE CASH VALUE?

ANSWER: SINGLE PREMIUM EXPLANATION: 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.

ALL OF THE FOLLOWING ARE TRUE ABOUT VARIABLE PRODUCTS EXCEPT

ANSWER: THE PREMIUMS ARE INVESTED IN THE INSURER'S GENERAL ACCOUNT. EXPLANATION: 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 TYPES OF POLICIES WILL PROVIDE PERMANENT PROTECTION?

ANSWER: WHOLE LIFE EXPLANATION: 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. BOTH THE PREMIUMS AND DEATH BENEFIT ARE GUARANTEED AND WILL REMAIN LEVEL FOR LIFE.

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?

ANSWER: THE ANNUITANT MUST BE A NATURAL PERSON. EXPLANATION: 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.

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?

ANSWER: $100,000 EXPLANATION: IN JOINT LIFE POLICIES, THE DEATH BENEFIT IS PAID UPON THE FIRST DEATH ONLY.

WHAT ARE THE TWO COMPONENTS OF A UNIVERSAL POLICY?

ANSWER: INSURANCE AND CASH ACCOUNT EXPLANATION: 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 EARN EITHER THE GUARANTEED CONTRACT RATE OR THE CURRENT RATE, WHICHEVER IS HIGHER.

THE ANNUITY OWNER DIES WILE THE ANNUITY IS STILL IN THE ACCUMULATION STAGE. WHICH OF THE FOLLOWING IS TRUE?

ANSWER: THE BENEFICIARY WILL RECEIVE THE GREATER OF THE MONEY PAID INTO THE ANNUITY OF THE CASH VALUE. EXPLANATION: 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.