Types Of Life Policies

Question 1

Why is an equity indexed annuity considered to be a fixed annuity?

Answer 1

It has a guaranteed minimum interested rate

Question 2

Variable whole life insurance is based on what type of premium?

Answer 2

Level fixed

Question 3

What is a short-term annuity that limits the amount paid to a specific fixed period or until a specified fixed amount is liquidated?

Answer 3

Annuity certain (allows the annuitant to select the time period or amount of the benefits to be paid out. Under the installments for a fixed period, distribution begins on a specific date and stop on a specific date)

Question 4

The premium of a survivorship life policy compared to join would be
A) half the amount
B) lower
C) higher
D) as high

Answer 4

B) Lower -( since the benefit is not paid until the last death, the joint life expectancy is “extended” resulting in a lower premium)

Question 5

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity. She wants to select the benefit option that will pay the most monthly as long as she lives. What should you recommend?

Answer 5

Straight life (annuity payments cease at death but because there are no other guarantees that might incur additional charges, she will receive the most monthly)

Question 6

Under straight life annuity, if the annuitant dies before the principal is paid off the beneficiary will receive ____________?

Answer 6

Nothing; the payments will cease

Question 7

The death protection component of universal life policy is expressed as what type of coverage?

Answer 7

Annually renewable term

Question 8

In what type of life insurance policy can the policy owner skip premium payments without the policy lapsing?

Answer 8

Universal life

Question 9

A policy states it will pay a specified face amount if the insured dies during the 20 year premium paying period and nothing if the death occurs after the 20 year period. What type of policy is this?

Answer 9

20 year level term

Question 10

A whole life policy that requires the policy owner only pays premiums for a specified number of years is know as what kind of policy?

Answer 10

Limited pay whole life

Question 11

What annuity settlement option provides income payments to the annuitant for the duration of their life and also guarantees payment for a specified number of years?

Answer 11

Life income with period certain

Question 12

What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

Answer 12

Straight life

Question 13

What type of life policy is Life paid up at age 65?

Answer 13

Limited pay whole life

Question 14

What type of whole life insurance policy generates immediate cash value?

Answer 14

Single premium whole life

Question 15

When does an adjustable life policy accumulate cash value?

Answer 15

When the premiums paid are more than the cost of the policy

Question 16

An individual has just borrowed $10,000 on a 5 year loan from the bank. That note is due in installments. What type of life insurance policy would be best suited for this situation?

Answer 16

Decreasing Term

Question 17

What universal life option has a gradually increasing cash value and a level death benefit?

Answer 17

Option A

Question 18

What time of insurance is best suited to cover a mortgage?

Answer 18

Decreasing Term

Question 19

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?

Answer 19

Level term

Question 20

Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money?

Answer 20

An annuity

Question 21

Which of the following policies should have an IRS required corridor or gap between the cash value and the death benefit?
A) equity indexed universal life
B) variable universal life
C) universal life option A
D) universal life option B

Answer 21

C) universal life option A

Question 22

An insured purchases 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?
A) $10,000
B) $40,009
C) $50,000
D) $60,000

Answer 22

C) $50,000
The cash value of a variable life policy is not guaranteed. However, even if investments devalue significantly they cannot be lower than the initial guaranteed benefit amount.

Question 23

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?

A) adjustable life
B) term life
C) limited pay
D) universal life

Answer 23

D) universal life

Universal Life policies allow for policyholders to withdraw a limited portion of the policy’s cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.