Types of Life Policies
What does "level" refer to in level term insurance? A) Cash value B) Interest rate C) Face amount D) Premium
C
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) variable annuity B) flexible annuity C) immediate annuity D) equity indexed annuity
D
An insured withdraws a portion of the policy's cash value. There is a limit for a withdrawal, and the insurer charges a fee. Name the policy. A) Adjustable life B) Term life C) Limited pay D) Universal life
D
Variable life insurance is based on what kind of premium? A) Graded B) Level fixed C) Increasing D) Decreasing
B
Items stipulated in the contract that the insurer will not provide coverage for are found in the A) exclusions clause B) insuring clause C) benefit payment clause D) consideration clause
A
All of the following entities regulate variable life policies EXCEPT A) the Insurance Department B) the Guaranty Association C) Federal government D) the SEC
B
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
Which Universal Life option has a gradually increasing cash value and a level death benefit? A) Juvenile life B) Term insurance C) Option B D) Option A
D
Who bears all of the investment risk in a fixed annuity? A) The insurance company B) The owner C) The beneficiary D) The annuitant
A
A universal life insurance policy is best described as A) flexible premium variable life policy B) an annually renewable term policy with a cash value account C) variable life with a cash value account D) whole life policy with two premiums: target an miminum
B
Which of the following is a feature of a variable annuity? A) Interest rate is guaranteed B) Securities license is not required C) Benefit payment amounts are not guaranteed D) Payments into the annuity are kept in the company's general account
C
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
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
All of the following are characteristics of a Universal Life policy EXCEPT A) the cash accumulates on a tax-deferred basis. B) Universal Life is a combination of term insurance and a separate savings account joined in a single contract. C) the planned premium pays for mortality charges and expenses and any excess is returned to the policyowner. D) The insurance company reserves the right to adjust the mortality charges and/or interest rate.
C
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 this policy A) built cash values. B) required proof of insurability every year. C) decreased death benefit at each renewal. D) required a premium increase at each renewal.
D
Which is true about a spouse term rider? A) Coverage is allowed for an unlimited time. B) The rider is decreasing term insurance. C) Coverage is allowed up to age 75. D) The rider is usually level term insurance.
D
When an annuity is written, whose life expectancy is taken into account? A) Beneficiary B) Life expectancy is not a factor C) Owner D) Annuitant
D
Which of the following is TRUE regarding the annuity period? A) It is also referred to as the accumulation period. B) It is the period of time during which the annuitant makes premium payments into the annuity. C) It may last for the lifetime of the annuitant. D) During this period of time, the annuity payments grow interest tax-deferred
C
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
During partial withdrawal from a universal life policy, which portion will be taxed? A) Cash value B) Principal C) Loan D) Interest
D
The main difference between immediate and deferred annuities is A) the number of insureds B) the amount of each payment C) When the income payments begin D) How the annuity is purchased
C
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 investments. D) The funds are invested in the company's general account.
C
Which of the following would help prevent a universal life policy from lapsing? A) Adjustable premium C) Corridor of insurance C) Target premium D) Face amount
C
What are the two components of a universal policy? A) Mortality cost and interest B) Separate account and policy loans C) Insurance and cash account D) Insurance and investments
C
What is the purpose of establishing the target premium for a universal life policy? A) To pay up the policy faster B) to cover all policy expenses C) to keep the policy in force D) to accumulate cash value faster
C
The equity in an equity index annuity is linked to A) the returns from the insurance company's separate account B) the annuitant's individual stock portfolio C) the insurance company's general account investments D) an index like Standard and Poor's 500
D
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 (a) A) single premium whole life B) modified endowment contract (MEC) C) level term life D) graded premium whole life
A
All other factors being equal, the least expensive first-year premium payment is found in A) Level Term B) Annually Renewable Term C) Increasing Term D) Decreasing Term
B
Which of the following products will protect an individual from outliving his or her money? A) Adjustable life policy B) Permanent life insurance C) Annuity D) Joint and survivor policy
C
Which of the following best describes fixed-period settlement option? A) Only the principal amount will be paid out within a specified period of time. B) The death benefit must be paid out in a lump sum within a certain period of time. C) Income is guaranteed for the life of the beneficiary. D) Both the principal and interest will be liquidated over a select period of time.
D
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
What is the purpose of a fixed-period settlement option? A) To provide a guaranteed income for a certain amount of time. B) To settle the insurance company's liability. C) To provide a guaranteed income for life. D) To provide a guaranteed amount of money each month.
A
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A) The money will continue to grow tax-deferred until the liquidation period and then will be paid to the beneficiary. B) The beneficiary will receive the greater of the money paid into the annuity or the cash value. C) Because the annuitization period has not started, the owner's estate will receive the money paid into the annuity. D) The insurance company will retain the cash value and pay back the premiums to the owner's estate.
B
In an annuity, the accumulated money is converted into a stream of income during which time period? A) Payment period B) Amortization period C) Conversion period D) Annuitization period
D
The death benefit under the Universal Life Option B A) gradually increases each ear by the amount that the cash value increases B) decreases by the amount that the cash value increases C) Increases for the first few years of the policy, and then levels off D) remains level
A
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) Joint life B) Decreasing term C) Whole life D) Ordinary life
A
All of the following are true about variable products EXCEPT A) The minimum death benefit is guaranteed B) The cash value is not guaranteed C) Policyowners bear the investment risk D) The premiums are invested in the insurer's general account
D
Which of the following has the right to convert the existing term coverage to permanent insurance? A) Insurer B) Beneficiary C) Producer D) Polyowner
D
Which of the following is NOT true regarding the accumulation period of an annuity? A) It is the period during which the annuity payments earn interest B) It is the period over which the annuitant makes payments into an annuity C) It is also known as the pay-in period D) It would not occur in deferred annuity
D
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) Flexible B) Deferred C) Variable D) Immediate
D Immediate = distribution starts within 1 year of purchase
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(n) A) adjustable life B) interest-sensitive whole life C) credit life D) annual renewable term
B
Both Universal Life and Variable Universal Life have a(n) A) Increasing premium B) Flexible premium C) Level fixed premium D) Decreasing premium
B
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
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium? A) Universal life B) Variable life C) Decreasing term D) Straight whole life
A
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
A person wins the lottery, and the state will send 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) Deferred interest annuity B) Immediate annuity C) Variable annuity D) Flexible payment annuity
B
An agent selling variable annuities must be registered with A) FINRA B) Department of Insurance C) The Guaranty Association D) SEC
A
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 D) In 20 years
A
Which of the following is TRUE for both equity indexed annuities and fixed annuities? A) They have a guaranteed minimum interest rate. B) They are both tied to an equity index. C) Both are considered to be more risky than variable annuities. D) They invest on a conservative basis.
A
Which of the following is TRUE regarding the premium in term policies? A) The premium is level. B) Only level term policy has a level premium. C) The premium in term policies is not based on the insured's age. D) Decreasing term policy will have a decreasing premium.
A
Equity indexed annuities A) invest conservatively B) seek higher returns C) are more risky than variable annuities D) are security instruments
B
The death protection component of Universal Life Insurance is always A) increasing term B) annually renewable term C) whole life D) adjustable life
B
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? The death benefit... A) can be increased by exchanging the existing policy for a new one B) can be increased by providing evidence of insurability C) cannot be increased D) can be increased only when the policy has developed a cash value
B
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to the beneficiary, the premiums must be paid: A) Until the policyowner's age 100, when the policy matures B) For 20 years or until death, whichever occurs first C) Until the policyowner's age 65 D) For 20 years
B
Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. You recommend A) a whole life policy B) an endowment policy C) a term policy D) an annuity
B
In a survivorship life policy, when does the insurer pay the death benefit? A) Half at the first death and half at the second death B) If the insured survives up to age 100 C) Upon the last death D) Upon the first death
C
Which of the following is NOT true regarding Equity Indexed Annuities? A) They have guaranteed minimum interest rates B) They are less risky than variable annuities C) They earn lower interest rates than fixed annuities D) The insurance company keeps a percentage of the returns
C
Which of the following products requires a securities license? A) Equity Indexed annuity B) Deferred annuity C) Variable annuity D) Fixed annuity
C
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. She should name her husband the A) secondary beneficiary B) primary beneficiary C) irrevocable beneficiary D) revocable beneficiary
D
Both a policyowner and the primary beneficiary die in a car accident. Nobody knows who died first. Who gets the death benefit? A) The insurance company B) The insured's estate C) The primary beneficiary's estate D) The insured's contingent beneficiary
D
Which of the following must an agent receive in order to sell variable life insurance? A) Variable products license B) Certificate of authority C) SEC registration D) FINRA registration
D
Which two terms are associated directly with the way an annuity is funded? A) Increasing or decreasing B) Immediate or deferred C) Renewable or convertible D) Single payment or periodic payments
D
