Types of Life Insurance Policies
Level term insurance provides a level DB and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy will be A. Discounted B. Adjusted to the insured's age at the time of the renewal C. Determined by the health of insured D. Based on the issue age of the insured
B. 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 which of the following cases will the insured be able to receive the full face amount from a whole life policy? A. At age 65 B. If the insured lives to age 100 C. As soon as the cash value exceeds the face amount D. If there are no named beneficiaries when the policy is paid up
B. If the insured lives to age 100 Whole life insurance provides protection for the entire lifetime of the insured. If the insured lives to the age of 100, the company pays the face amount of the policy to the policyowner (usually the insured)
Which of the following is TRUE regarding the accumulation period of an annuity? A. It is limited to 10 years B. It is a period during which the payments into the annuity grow tax deferred C. It is also referred to as the annuity period D. It is a period of time during the beneficiary receives income
B. It is a period during which the payments into the annuity grow tax deferred The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred
When an annuity is written, whose life expectancy is take into account? A. Life expectancy is not a factor when writing an annuity B. Owner C. Annuitant D. Beneficiary
C. Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be
Which of the following best describes annually renewable term insurance? A. Neither the premium nor the DB is affected by the insured's age B. It provides an annually increasing DB C. It is a level term insurance D. It requires proof of insurability at each renewal
C. It is level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost
Which of the following is an example of a limited-pay life policy? A. Level Term Life B. Straight Life C. Life Paid-up at Age 65 D. Renewable Term to Age 70
C. Life 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.
All of the following are true regarding a decreasing term policy EXCEPT A. The contract pays only in the event of death during the term and there is no cash value B. The face amount steadily declines throughout the duration of the contract C. The payable premium amount steadily declines throughout the duration of the contract D. The DB is $0 at the end of the policy term
C. The payable premium amount steadily declines throughout the duration of the contract Premiums remain level with a decreasing term policy; only the face amount decreases
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as A. The policyowner cannot skip premiums without the policy lapsing B. The next month's premium is sufficient to cover bot the current premium amount and the skipped amount C. The policy contains sufficient cash value to cover the cost of insurance D. The previous premium payments were high enough to create an excess of premiums
C. 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 the premium period
What characteristic makes whole life permanent protection? A. Coverage until death or age 100 B. Guaranteed DB C. Guaranteed level premium D. Living benefits
A. 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
What does "level" refer to in level term insurance? A. Face Amount B. Premium C. Cash Value D. Interest rate
A. Face Amount Level term policies maintain level DB (or face amount) throughout the term of the policy. In the term insurance, the premium also remains consistent over the years, unlike premiums of of many policies, which increase as the policyholder ages
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? A. Term B. Whole Life C. Annuity D. Variable Life
A. Term Term insurance provides a DB only; cost per $1,000 of coverage is less than other types of policies that create cash values
The policyowner of an adjustable life policy wants to increase the DB. Which of the following statements is correct regarding this change? A. The DB can be increased by providing evidence of insurability B. The DB cannot be increased C. The DB can be increase only when the policy has developed a cash value D. The DB can be increased only by exchanging the existing policy for a new one
A. The DB can be increased by providing evidence of of insurability The policyowner (insured) would need to prove insurability for the amount of the increase
What license or licenses are required to sell variable annuities? A. No license is required B. Both a life insurance license and a securities license C. Only a life insurance license D. Only a securities license
B. 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
Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection? A. Longest B. Greatest C. Least D. Most comprehensive
B. Greatest Term policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection
An agent selling variable annuities must be registered with A. The Guaranty Association B. SEC C. FINRA D. Department of Insurance
C. FINRA Because variable annuities are considered to be securities, a person must be registered with the FINRA and hold a securities license in addition to a life agent's license in order to sell variable annuities
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A. Annuitization period B. Pay-out period C. Liquidation period D. Depreciation period
D. Depreciation period The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation, or pay-out period
Which of the following is TRUE regarding the premium in term policies? A. Only level term policy has a level premium B. The premium in term policies is not based on the insured's age C. Decreasing term policy will have a decreasing premium D. The premium is level for the term of the policy
D. 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 DB may change. This does not apply to annual renewable term insurance, in which the premium increases annually according to the attained age.
What is the purpose of establishing the target premium for a universal life policy? A. To accumulate cash value faster B. To pay up the policy faster C. To cover all policy expenses D. To keep the policy in force
D. To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime
