Chapter 2 - Life Insurance and Annuities

Question 1

What does period certain mean?

Answer 1

A set number of years payments are RECEIVED

Question 2

Universal Life (x5)

Answer 2

• Variable premium
• Cash value NOT guaranteed
• Death benefit NOT guaranteed for all types (e.g. Traditional Universal)
• Less expensive
• Annually renewable term death protection

Question 3

Whole or Straight Life INSURANCE (x4)

Answer 3

• Fixed premium
• Guaranteed cash value that grows
• Guaranteed death benefit
• More expensive

Question 4

Universal Life - Option A (x2)

Answer 4

• Level death benefit
• Cash value is accessible only to the policyowner while they are alive

Question 5

Universal Life - Option B (x2)

Answer 5

• Increasing death benefit
• Both the face value and cash value are paid to the beneficiary upon the death of the insured

Question 6

Term Life (x3)

Answer 6

• Pure death benefit; no cash value
• No benefit to policy owner
• Level premium for the full term

Question 7

Variable annuity (x2)

Answer 7

• Separate account
• Annuitant assumes the risks on investment

Question 8

Fixed annuity

Answer 8

• Insurer’s general account
• Insurer assumes the risks on investment

Question 9

Immediate

Answer 9

Starts paying within a year

Question 10

Deferred

Answer 10

Starts paying no sooner than after one year

Question 11

Joint

Answer 11

Pays out on first death

Question 12

Survivorship

Answer 12

Pays out on last death

Question 13

Face amount

Answer 13

Death benefit

Question 14

Cash value

Answer 14

Savings that can withdrawn or borrowed against

Question 15

What is adjustable on an adjustable life insurance policy (x3)?

Answer 15

• Premium
• Death benefit
• Coverage period (sometimes)

Question 16

The death protection component of Universal Life Insurance is always:

Answer 16

Annually renewable term

Question 17

Convertibility option of term life insurance (x3)

Answer 17

• Most term policies include a convertibility option
• Upon conversion, the premium will be based on attained age
• Evidence of insurability is not required

Question 18

Pure or Straight Life ANNUITY pay-out (x3)

Answer 18

• Guaranteed income for the life of the annuitant
• No cash value
• No death benefit

Question 19

What must the policyowner of an Adjustable Life Insurance policy provide to increase the death benefit?

Answer 19

Evidence of insurability

Question 20

With Variable Life Insurance, who benefits from the cash value?

Answer 20

Only the policyowner. Upon the death of the insured, only the death benefit is paid to the beneficiary.

Question 21

What is another name for interest-sensitive whole life insurance?

Answer 21

Current assumption whole life insurance

Question 22

What is the annuity period?

Answer 22

It is the same as the annuitization or pay-out phase

Question 23

A Return of Premium term life policy is written as what type of term coverage?

Answer 23

Increasing

Question 24

What are the three ways cash value is treated in Return of Premium Term Life Insurance?

Answer 24

• Cash value returned to insured if they outlive the term
• Cash value returned to beneficiary if insured dies during term
• Cash value lost if insured dies after term

Question 25

With the Life with Guaranteed Minimum annuity settlement option, what happens to the principle amount if the annuitant dies?

Answer 25

The beneficiary is refunded the remainder of the principle

Question 26

What is an annuity certain (x2)?

Answer 26

- It is a short-term annuity which limits the amount paid out to a certain fixed period or until a certain fixed amount is liquidated - There is no life contingency (i.e. death benefit).

Question 27

What happens if an annuitant dies before an annuity with the fixed installment option is exhausted?

Answer 27

The beneficiary receives the remainder. **Annuities (including fixed installment options) do NOT have a life contingency (i.e. death benefit)

Question 28

What happens if the annuitant dies while the annuity is still in the accumulation stage?

Answer 28

The beneficiary will receive the greater of the money paid into the annuity or the cash value

Question 29

What is a key distinction between variable whole life and variable universal life products?

Answer 29

Variable whole life has a guaranteed death benefit

Question 30

What characteristic makes whole life permanent protection?

Answer 30

Coverage until death or age 100

Question 31

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

Answer 31

Both the amount you pay and the benefit paid to your beneficiaries remain the same throughout the policy term