Chapter 2: Life Products Questions

Question 1

Good questions to ask:

Answer 1

1. Why do they need life insurance?
2. How much coverage?
3. How much can they afford?
4. Which type of insurance is suitable

Question 2

What are the 3 basic types of term life insurance?

Answer 2

Level, increasing, and decreasing

Question 3

When would a whole life insurance policy mature?

Answer 3

When the insured dies or turns age 100, whichever is sooner

Question 4

Who is an annuitant?

Answer 4

The person on whose life expectancy the annuity is written and who receives benefits from the annuity

Question 5

What type of life insurance policy offers pure death protection?

Answer 5

Term

Question 6

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

Answer 6

Permanent insurance (usually, whole life)

Question 7

Why are policy loans not available on term insurance?

Answer 7

There is no cash value to borrow against.

Question 8

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

Answer 8

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

Question 9

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

Answer 9

The premium increases with each renewal

Question 10

What are the two phases of an annuity?

Answer 10

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

Question 11

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 11

Joint life annuity

Question 12

What type of life insurance policy provides permanent protection?

Answer 12

Whole life

Question 13

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

Answer 13

A level premium for the life of the insured

Question 14

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

Answer 14

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

Question 15

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

Answer 15

Cash value is paid to the policyowner

Question 16

When does an adjustable life policy accumulate cash value?

Answer 16

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

Question 17

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

Answer 17

Upon the first death

Question 18

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

Answer 18

The number of payments that purchase the annuity

Question 19

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

Answer 19

Variable annuity

Question 20

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 20

Flexible premium deferred annuity

Question 21

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

Answer 21

Annuitization period

Question 22

What policy component must decrease in decreasing term insurance?

Answer 22

Face amount

Question 23

What are the death benefit options in universal life policies?

Answer 23

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

Question 24

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?

Answer 24

Annuity

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 annuity can be purchased with a single premium?

Answer 26

Immediate annuity

Question 27

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

Answer 27

The policyowner

Question 28

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

Answer 28

No sooner than 1 year after the annuity purchase

Question 29

What is the main reason for purchasing an annuity?

Answer 29

To provide income that the annuitant cannot outlive

Question 30

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?

Answer 30

20-year level term

Question 31

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?

Answer 31

Limited-pay whole life

Question 32

Can a business or a corporation be an annuitant?

Answer 32

No, an annuitant must always be a natural person.

Question 33

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

Answer 33

Option A

Question 34

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

Answer 34

Annuitant's estate

Question 35

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

Answer 35

Amount of premium

Question 36

Who receives income payments from an annuity?

Answer 36

Annuitant

Question 37

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

Answer 37

Age 100

Question 38

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

Answer 38

A life insurance license and a securities license

Question 39

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

Answer 39

Annually renewable term

Question 40

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?

Answer 40

Decreasing term

Question 41

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

Answer 41

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 42

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

Answer 42

Decreasing term

Question 43

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

Answer 43

The insured's attained age

Question 44

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

Answer 44

Cash value and death benefit

Question 45

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

Answer 45

Immediate and deferred

Question 46

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

Answer 46

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

Question 47

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

Answer 47

Universal life

Question 48

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

Answer 48

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

Question 49

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

Answer 49

Annuitant

Question 50

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

Answer 50

To prevent the policy from lapsing

Question 51

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

Answer 51

Whole life insurance

Question 52

Mortality tables are used by insurance companies to predict what?

Answer 52

Life expectancy and the death rates for specific groups of individuals

Question 53

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?

Answer 53

The full death benefit

Question 54

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

Answer 54

Limited-pay Whole Life

Question 55

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 55

Straight life

Question 56

How soon can income payments begin in an immediate annuity?

Answer 56

No later than 1 year from the time of annuity purchase

Question 57

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

Answer 57

Interest earned on the withdrawn cash value

Question 58

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

Answer 58

Single premium whole life

Question 59

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

Answer 59

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

Question 60

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

Answer 60

Equity indexed annuity

Question 61

When would a 20-pay whole life policy endow?

Answer 61

When the insured reaches age 100

Question 62

Who bears the investment risk in a fixed annuity?

Answer 62

The insurer

Question 63

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

Answer 63

Face amount

Question 64

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

Answer 64

Beneficiary

Question 65

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 65

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