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ExamFx > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

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

A

Universal life

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2
Q

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

A

Single premium whole life

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3
Q

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?

A

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

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4
Q

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

A

Option A

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5
Q

In variable universal life insurance, to what policy component does the term “variable” refer?

A

Cash value and death benefit

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6
Q

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

A

Beneficiary

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7
Q

Can a business or a corporation be an annuitant?

A

No, an annuitant must always be a natural person.

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8
Q

What type of life insurance policy provides permanent protection?

A

Whole life

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9
Q

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

A

To prevent the policy from lapsing

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10
Q

What are the death benefit options in universal life policies?

A

Option A - level death benefit, and Option B - increasing death benefit

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11
Q

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

A

Interest earned on the withdrawn cash value

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12
Q

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

A

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

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13
Q

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

A

The policyowner

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14
Q

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

A

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

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15
Q

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

A

Upon the first death

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16
Q

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

A

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

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17
Q

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

A

Permanent insurance (usually, whole life)

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18
Q

Who receives income payments from an annuity?

A

Annuitant

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19
Q

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

A

Annually renewable term

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20
Q

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

A

Annuitant’s estate

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21
Q

Why are policy loans not available on term insurance?

A

There is no cash value to borrow against.

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22
Q

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

A

The number of payments that purchase the annuity

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23
Q

How soon can income payments begin in an immediate annuity?

A

No later than 1 year from the time of annuity purchase

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24
Q

When does an adjustable life policy accumulate cash value?

A

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

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25
Q

What type of life insurance policy offers pure death protection?

A

Term

26
Q

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

A

Decreasing term

27
Q

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?

A

Joint life annuity

28
Q

An individual has just borrowed $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?

A

Decreasing term

29
Q

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

A

Single premium whole life

30
Q

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 contract does this person have?

A

Annuity

31
Q

Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

A

The full death benefit

32
Q

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

A

Amount of premium

33
Q

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?

A

Straight life

34
Q

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?

A

Flexible premium deferred annuity

35
Q

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

A

Age 100

36
Q

What is the main reason for purchasing an annuity?

A

To provide income that the annuitant cannot outlive

37
Q

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

A

Limited-pay whole life

38
Q

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

A

No sooner than 1 year after the annuity purchase

39
Q

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

A

Whole life insurance

40
Q

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

A

Variable annuity

41
Q

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

A

A level premium for the life of the insured

42
Q

What type of life insurance policy is Life Paid-up at Age 65?

A

Limited-pay Whole Life

43
Q

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

A

Immediate and deferred

44
Q

What are the two phases of an annuity?

A

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

45
Q

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

A

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

46
Q

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

A

Immediate annuity

47
Q

A policy states that it will pay a specified face amount 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?

A

20-year level term

48
Q

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?

A

Life income with period certain

49
Q

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

A

Annuitant

50
Q

Who bears the investment risk in a fixed annuity?

A

The insurer

51
Q

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

A

Cash value is paid to the policyowner

52
Q

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

A

A life insurance license and a securities license

53
Q

What does the term “level” refer to in level term insurance?

A

Face amount

54
Q

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

A

The premium increases with each renewal

55
Q

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

A

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.

56
Q

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

A

Annuitization period

57
Q

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

A

The insured’s attained age

58
Q

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

A

Under Option B, the death benefit increases each year by the amount of the cash value increases

59
Q

Mortality tables are used by insurance companies to predict what?

A

Life expectancy and the death rates for specific groups of individuals

60
Q

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

A

Equity indexed annuity

61
Q

When would a 20-pay whole life policy endow?

A

When the insured reaches age 100

62
Q

What policy component must decrease in decreasing term insurance?

A

Face amount

ExamFx (3 decks)

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