chapter 2

Question 1

In an annuity, the accumulation money is converted into a stream of income during which phase?

Answer 1

Annuitization

Question 2

What are the 2 phases of an annuity?

Answer 2

Accumulation and annuitization (pay-in and pay-out)

Question 3

What is the main reason for purchasing an annuity?

Answer 3

To provide income that the annuitant cannot outlive.

Question 4

What type pf annuity can be purchased with a single premium?

Answer 4

Immediate annuity

Question 5

In a joint life policy, when is the death benefit paid?

Answer 5

Upon the first death.

Question 6

What policy component must decrease in decreasing term insurance?

Answer 6

Face Amount

Question 7

Why are policy loans not available on term insurance?

Answer 7

There is no cash value to borrow against.

Question 8

What type of annuity credits its interest based upon an index such as S&P 500?

Answer 8

Equity Indexed Annuity

Question 9

Under Option B in a universal life policy, what happens to the death?

Answer 9

Under option B, the death benefit increase each year by the amount of the cash value increases.

Question 10

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 for what time period?

Answer 10

For 20 years or until the insured’s death, whichever occurs first.

Question 11

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

Answer 11

20-year level term

Question 12

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

Answer 12

Limited-Pay whole life

Question 13

Who is entitled to the cash values in a life insurance policy?

Answer 13

The policyowner

Question 14

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

Answer 14

Universal Life

Question 15

What type of annuity requires an agent to have a securities license?

Answer 15

Variable annuity

Question 16

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

Answer 16

Decreasing Term

Question 17

With a single premium deferred annuity, when will the annuity payments become available?

Answer 17

No sooner than 1 year after the annuity purchase.

Question 18

What elements of an adjustable life policy can be changed by the policyowners?

Answer 18

The amount and payment period of the premium, the face amount, and the period of protection.

Question 19

What type of premium is charged on a straight life policy?

Answer 19

a level premium for the life of the insured

Question 20

Whole life policies provide protection until the insured reaches what age?

Answer 20

100

Question 21

During partial withdrawal from a universal life policy, what portion, if any, will be taxed?

Answer 21

interest earned on the withdrawn cash value

Question 22

What is the purpose of establishing the target premium for a universal life policy?

Answer 22

to prevent the policy from lapsing

Question 23

An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?

Answer 23

Flexible premium deferred annuity

Question 24

In flexible premium payment annuities, the term flexible refers to what?

Answer 24

Amount of the premium

Question 25

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 25

Life income with period certain

Question 26

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

Answer 26

Single premium whole life

Question 27

What type of whole life insurance policies only requires a payment premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at he insureds age 100?

Answer 27

Single premium Whole Life

Question 28

What are the two classifications of annuities according to the time when annuity payments begin?

Answer 28

Immediate and deferred

Question 29

How long will a life annuity with a 15-year period certain pay?

Answer 29

For the life of the annuitant unless they die within the first 15 years of the annuitization period; then the payments will last for 15 years.

Question 30

An individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy? What type of contact does this person have?

Answer 30

Annuity

Question 32

What type of an 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 32

Straight Life

Question 33

Who receives income payments from an annuity?

Answer 33

Annuitant

Question 34

Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?

Answer 34

The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death.

Question 35

Can a business or a corporation be an annuitant?

Answer 35

No, an annuitant must always be a natural person.

Question 36

What type of life insurance policy provides permanent protection?

Answer 36

Whole Life

Question 37

What type of license(s) is/are required to sell variable annuities?

Answer 37

A life insurance license and a securities license

Question 38

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

Answer 38

Annually renewable term

Question 39

If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

Answer 39

Joint life activity

Question 40

What are the death benefit options and universal life policies?

Answer 40

Option A level death benefit, and option B in increasing death benefit

Question 41

Who bears the investment risk in a fixed annuity?

Answer 41

The insurer

Question 42

What type of life insurance policy offers pure death protection?

Answer 42

Term

Question 43

What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

Answer 43

The number of payments that purchased the annuity.

Question 44

In annually, renewable term policies what is the annual premium based upon?

Answer 44

The insured's attained age.

Question 45

When would a 20-pay whole life policy endow?

Answer 45

When the insured reaches age 100.

Question 46

If there is no named beneficiary for the annuity benefits to which entity will the benefits be paid?

Answer 46

The annuitant's estate.

Question 47

If the annuitant dies before the annuitization starts, what will the beneficiary receive?

Answer 47

Either the amount paid into the annuity or the cash value, whichever is greater.

Question 48

What type of insurance would perform the function of cash accumulation?

Answer 48

Whole life insurance

Question 49

What type of insurance would perform the function of cash accumulation?

Answer 49

Whole life insurance

Question 50

How is the premium determined in a joint life insurance policy?

Answer 50

The premium is based on the average age of the insureds.

Question 51

When does an adjustable life policy accumulate cash value?

Answer 51

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

Question 52

What happens to the premium in an annually renewable term life policy?

Answer 52

The premium increases with each renewal.

Question 53

Whose life expectancy is taken into consideration in an annuity contract?

Answer 53

Annuitant

Question 54

How soon can income payments begin in an immediate annuity?

Answer 54

No later than one year from the time of annuity purchase.

Question 55

What happens to the cash value on a whole life insurance policy matures?

Answer 55

Cash value is paid to the policy owner.

Question 56

If the annuity dies during the accumulation period, who will receive the annuity funds?

Answer 56

Beneficiary

Question 57

Variable universal life insurance, to what policy component does the term "variable" refer?

Answer 57

Cash value, and death benefit

Question 58

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

Answer 58

Limited-pay whole life

Question 59

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

Answer 59

Option A

Question 60

What type of life insurance offers an applicant a cash value element?

Answer 60

Permanent insurance, usually whole life

Question 61

What type of life insurance offers an applicant a cash value element?

Answer 61

Permanent insurance, usually whole life

Question 62

What type of life insurance is best suited to cover a mortgage?

Answer 62

Decreasing term

Question 63

What does the term "level" refer to in level term insurance?

Answer 63

Face amount

Question 64

A death protection component of universal life insurance is always ______

Answer 64

Annually renewable term

Question 65

You're lucky individual one 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?

Answer 65

Immediate annuity

Question 66

Which type of life insurance policy allows the policy owner to pay more or less than the planned premium?

Answer 66

Universal life

Question 67

What form of the annuity settlement options provides payments to an annuity for the rest of the annuitants life and ceases at the annuitants death?

Answer 67

Pure life

Question 68

Which universal life option has a gradually increasing cash value in a level death benefit?

Answer 68

Option A 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.

Question 69

The type of policy that can be changed from one that does not accumulate cash value to the one that does is a ________.

Answer 69

Convertible term policy