Texas Life & Health Chapter 1/ Chapter 2
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A The death benefit can be increased only when the policy has developed a cash value. B The death benefit can be increased only by exchanging the existing policy for a new one. C The death benefit can be increased by providing evidence of insurability. D The death benefit cannot be increased.
c The death benefit can be increased by providing evidence of insurability.
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A Pay-out period B Liquidation period C Depreciation period D Annuitization period
C Depreciation period
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) A Equity Indexed Annuity. B Variable Annuity. C Flexible Annuity. D Immediate Annuity.
A Equity Indexed Annuity.
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium? A It will likely be higher because the applicant is a substandard risk. B It will likely be the average premium issued to standard risks. C The applicant's habits and health do not affect the premiums. D It will likely be lower because the applicant is a preferred risk.
A It will likely be higher because the applicant is a substandard risk.
Which of the following is called a "second-to-die" policy? A Survivorship life B Family income C Juvenile life D Joint life
A Survivorship life
Which of the following best describes what the annuity period is? A The period of time during which accumulated money is converted into income payments B The period of time from the accumulation period to the annuitization period C The period of time during which money is accumulated in an annuity D The period of time from the effective date of the contract to the date of its termination
A The period of time during which accumulated money is converted into income payments
When would a 20-pay whole life policy endow? A When the insured reaches age 100 B At the insured's age 65 C After 20 payments DI n 20 years
A When the insured reaches age 100
The LEAST expensive first-year premium is found in which of the following policies? A Level Term B Annually Renewable Term C Increasing Term D Decreasing Term
B Annually Renewable Term
Annually renewable term policies provide a level death benefit for a premium that A Fluctuates. B Increases annually. C Decreases annually. D Remains level.
B Increases annually.
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? A Ordinary Life B Joint Life C Decreasing Term D Whole Life
B Joint Life
Which of the following is another term for the accumulation period of an annuity? A Annuity period B Pay-in period C Premium period D Liquidation period
B Pay-in period
What describes the specific information about a policy? A Producer's report B Policy summary C Illustrations D Buyer's guide
B Policy summary
Who bears all of the investment risk in a fixed annuity? A The annuitant B The insurance company C The owner D The beneficiary
B The insurance company
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? A Nothing B $50,000 C $100,000 D $200,000
C $100,000
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? A Flexible payment annuity B Deferred interest annuity C Immediate annuity D Variable annuity
C Immediate annuity
Why is an equity indexed annuity considered to be a fixed annuity? A It has a fixed rate of return. B It is not tied to an index like the S&P 500. C It has a guaranteed minimum interest rate. D It has modest investment potential.
C It has a guaranteed minimum interest rate.
The premium of a survivorship life policy compared with that of a joint life policy would be A As high. B Half the amount. C Lower. D Higher.
C Lower.
If an agent fails to obtain an applicant's signature on the application, the agent must A Sign the application, stating it was by the agent. B Send the application to the insurer with a note explaining the absence of signature. D Sign the application for the applicant.
C Return the application to the applicant for a signature.
Which of the following is TRUE regarding variable annuities? A The company guarantees a minimum interest rate. B A person selling variable annuities is required to have only a life agent's license. C The annuitant assumes the risks on investment. D The funds are invested in the company's general account.
C The annuitant assumes the risks on investment.
All of the following statements about equity index annuities are correct EXCEPT A The interest rate is tied to an index such as the Standard & Poor's 500. B They invest on a more aggressive basis aiming for higher returns. C The annuitant receives a fixed amount of return. D They have a guaranteed minimum interest rate.
C The annuitant receives a fixed amount of return.
A Straight Life policy has what type of premium? A An increasing annual premium for the life of the insured B A decreasing annual premium for the life of the insured C A variable annual premium for the life of the insured D A level annual premium for the life of the insured
D A level annual premium for the life of the insured
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT A Explain the policy provisions, riders, and exclusions. B Collect any premium due. C Explain the rating procedures if the policy is rated differently than applied for. D Disclose commissions earned from the sale of the policy.
D Disclose commissions earned from the sale of the policy.
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 A Until the policyowner reaches age 65. B For at least 20 years. C Until the policyowner's age 100, when the policy matures. D For 20 years or until death, whichever occurs first.
D For 20 years or until death, whichever occurs first.
If an agent wishes to sell variable life policies, what license must the agent obtain? A Adjuster B Surplus Lines C Personal Lines D Securities
D Securities
Which of the following is TRUE regarding the annuity period? A During this period of time the annuity payments grow interest tax deferred. B It is also referred to as the accumulation period. C It is the period of time during which the annuitant makes premium payments into the annuity. D It may last for the lifetime of the annuitant.
It may last for the lifetime of the annuitant.
All of the following are true of an annuity owner EXCEPT A The owner has the right to name the beneficiary. B The owner is the party who may surrender the annuity. C The owner must be the party to receive benefits. D The owner pays the premiums on the annuity.
The owner must be the party to receive benefits.
Which statement is NOT true regarding a Straight Life policy? A Its premium steadily decreases over time, in response to its growing cash value. B The face value of the policy is paid to the insured at age 100. C It usually develops cash value by the end of the third policy year. D It has the lowest annual premium of the three types of Whole Life policies.
A Its premium steadily decreases over time, in response to its growing cash value.
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? A Joint Life Policy B Survivorship Life Policy C Second-to-Die D Family Income Policy
A Joint Life Policy
Equity indexed annuities A Seek higher returns. B Are more risky than variable annuities. C Are security instruments. D Invest conservatively.
A Seek higher returns.
If an annuitant dies before annuitization occurs, what will the beneficiary receive? A Cash value of the plan B Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount C Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount D Amount paid into the plan
B Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
Why should the producer personally deliver the policy when the first premium has already been paid? A To make sure the policy is not stolen or lost B To help the insured understand all aspects of the contract C To ensure the producer gets paid commission D To find out how the family has been doing since the initial presentation
B To help the insured understand all aspects of the contract
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A Upon conversion, the premium for the permanent policy will be based upon attained age. B Upon conversion, the death benefit of the permanent policy will be reduced by 50%. C Evidence of insurability is not required. D Most term policies contain a convertibility option.
B Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
Which two terms are associated directly with the way an annuity is funded? A Immediate or deferred B Renewable or convertible C Single payment or periodic payments D Increasing or decreasing
C Single payment or periodic payments
What is the purpose of the buyer's guide? A To list all policy riders B To provide information about the issued policy C To allow the consumer to compare the costs of different policies D To provide the name and address of the agent/producer issuing the policy
C To allow the consumer to compare the costs of different policies
Which of the following is an example of a limited-pay life policy? A Renewable Term to Age 70 B Level Term Life C Straight Life D Life Paid-up at Age 65
D Life Paid-up at Age 65
An agent selling variable annuities must be registered with A FINRA. B Department of Insurance. C The Guaranty Association. D SEC.
A FINRA
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? A Immediate B Flexible C Deferred D Variable
A Immediate
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? A Limited pay whole life B Interest-sensitive whole life C Life annuity with period certain D Increasing term
A Limited pay whole life
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? A Option B B Corridor option C Variable option D Option A
A Option B
Which of the following will be included in a policy summary? A Premium amounts and surrender values B Copies of illustrations and application C Comparisons with similar policies D Primary and secondary beneficiary designations
A Premium amounts and surrender values
In terms of parties to a contract, which of the following does NOT describe a competent party? A The person must have at least completed secondary education. B The person must not be under the influence of drugs or alcohol. C The person must be of legal age. D The person must be mentally competent to understand the contract.
A The person must have at least completed secondary education.
Which of the following is NOT true regarding Equity Indexed Annuities? A They earn lower interest rates than fixed annuities. B The insurance company keeps a percentage of the returns. C They have guaranteed minimum interest rates. D They are less risky than variable annuities.
A They earn lower interest rates than fixed annuities.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? A When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health B On the designated effective date C On the application date D When the agent submits the application to the company and the company issues a conditional receipt
A When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
Which of the following is NOT the consideration in a policy? A The application given to a prospective insured B Something of value exchanged between parties C The premium amount paid at the time of application D The promise to pay covered losses
A the application given to a prospective insured
In an annuity, the accumulated money is converted into a stream of income during which time period? A Conversion period B Annuitization period C Payment period D Amortization period
B Annuitization period
Which of the following is the basic source of information used by the company in the risk selection process? A Consumer report B Application C Agent's report D Warranty
B Application
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A Liquidation period B Depreciation period C Annuitization period D Pay-out period
B Depreciation period
What is the purpose of a conditional receipt? A It is given only to applicants who fully prepay the premium. B It is intended to provide coverage on a date prior to the policy issue. C It guarantees that a policy will be issued in the amount applied for. D It serves as proof that the applicant has been determined insurable.
B It is intended to provide coverage on a date prior to the policy issue.
The premium of a survivorship life policy compared with that of a joint life policy would be A Half the amount. B Lower. C Higher. D As high.
B Lower
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 A Decreased death benefit at each renewal. B Required a premium increase each renewal. C Built cash values. D Required proof of insurability every year.
B Required a premium increase each renewal.
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? A The insured may renew the policy for another 10 years at the same premium rate. B The insured may renew the policy for another 10 years, but at a higher premium rate. C The insured must provide evidence of insurability to renew the policy. DT he insured may only convert the policy to another term policy.
B The insured may renew the policy for another 10 years, but at a higher premium rate.
In a survivorship life policy, when does the insurer pay the death benefit? A If the insured survives to age 100 B Upon the last death C Upon the first death D Half at the first death, and half at the second death
B Upon the last death
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving his or her money? A A universal life policy B A group policy C An annuity D A survivorship life policy
C An annuity
The term "fixed" in a fixed annuity refers to all of the following EXCEPT A Equal annuity payments B Amount and length of payments C Death benefit D Guaranteed rate of interest
C Death benefit
Which of the following is NOT an example of insurable interest? A Employer in employee B Child in parent C Debtor in creditor D Business partners in each other
C Debtor in creditor
Which of the following is TRUE regarding the accumulation period of an annuity? A It is a period of time during which the beneficiary receives income B It is limited to 10 years. C It is a period during which the payments into the annuity grow tax deferred. D It is also referred to as the annuity period.
C It is a period during which the payments into the annuity grow tax deferred.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT A A securities license. B A life insurance license. C SEC registration. D FINRA registration.
C SEC registration.
Which of the following policies would be classified as a traditional level premium contract? A Universal Life B Variable Universal Life C Straight Life D Adjustable Life
C Straight Life
Which of the following would help prevent a universal life policy from lapsing? A Adjustable premium B Corridor of insurance C Target premium D Face amount
C Target premium
Which of the following is NOT true regarding a Variable Universal Life policy? A The minimum death benefit is guaranteed. B The cash values are not guaranteed. C The death benefit is fixed. D The policyowner can participate in some of the investment decisions.
C The death benefit is fixed.
When an annuity is written, whose life expectancy is taken into account? A Beneficiary B Life expectancy is not a factor when writing an annuity. C Owner D Annuitant
D Annuitant
What license or licenses are required to sell variable annuities? A Only a life insurance license B Only a securities license C No license is required D Both a life insurance license and a securities license
D Both a life insurance license and a securities license
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A Contingent B Aleatory C Unilateral D Conditional
D Conditional
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? A Variable life B Universal life C Whole life D Decreasing term
D Decreasing term
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will A Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. B Return the premium to Y's estate, since it has no obligation to pay the death claim. C Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. D Issue the policy anyway and pay the face value to the beneficiary.
D Issue the policy anyway and pay the face value to the beneficiary.
Which of the following best describes annually renewable term insurance? A It requires proof of insurability at each renewal. B Neither the premium nor the death benefit is affected by the insured's age. C It provides an annually increasing death benefit. D It is level term insurance.
D It is level term insurance.
Which of the following is TRUE regarding variable annuities? A The funds are invested in the company's general account. B The company guarantees a minimum interest rate. C A person selling variable annuities is required to have only a life agent's license. D The annuitant assumes the risks on investment.
D The annuitant assumes the risks on investment.
Which of the following is NOT true regarding the annuitant? A The annuitant's life expectancy is taken into consideration for the annuity. B The annuitant receives the annuity benefits. C The annuitant must be a natural person. D The annuitant cannot be the same person as the annuity owner.
D The annuitant cannot be the same person as the annuity owner.
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A The owner's estate will receive the money paid into the annuity. B The insurance company will retain the cash value and pay back the premiums to the owner's estate. C The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. D The beneficiary will receive the greater of the money paid into the annuity or the cash value.
D The beneficiary will receive the greater of the money paid into the annuity or the cash value.
Which of the following best defines target premium in a universal life policy? A The maximum amount the policyowner may pay on a policy B The minimum amount to make sure the policy is annually renewable C The corridor of insurance D The recommended amount to keep the policy in force throughout its lifetime
D The recommended amount to keep the policy in force throughout its lifetime
The main difference between immediate and deferred annuities is A How the annuity is purchased. B The number of insureds. C The amount of each payment. D When the income payments begin.
D When the income payments begin.