Life 3

Question 1

Which of the following explains the policyowner’s right
to change beneficiaries, choose options, and receive
proceeds of a policy?
a) Assignment Rights
b) Owner’s Rights
c) The Entire Contract Provision
d) The Consideration Clause

Answer 1

Owners rights

Policyowners can learn about their ownership rights by
referring to the policy.

Question 2

The premium of a survivorship life policy compared with
that of a joint life policy would be
a) Half the amount.
b) Lower.
c) Higher.
d) As high.

Answer 2

Lower

Survivorship Life is much the same as joint life in that it
insures two or more lives for a premium that is based on
a joint age. The major difference is that survivorship life
pays on the last death rather than upon the first death.
Since the death benefit is not paid until the last death,
the joint life expectancy in a sense is extended,
resulting in a lower premium than that which is typically
charged for joint life.

Question 3

All of the following are true regarding a decreasing term
policy EXCEPT
a) The death benefit is $0 at the end of the policy
term.
b) The contract pays only in the event of death during the
term and there is no cash value.
c) The face amount steadily declines throughout the
duration of the contract.
d) The payable premium amount steadily declines
throughout the duration of the contract.

Answer 3

The payable premium amount steadily declines
throughout the duration of the contract.

Premiums remain level with a decreasing term policy;
only the face amount decreases,

Question 4

Which of the following is NOT true regarding Equity
Indexed Annuities?
a) The insurance company keeps a percentage of the
returns.
b) They have guaranteed minimum interest rates.
c) They are less risky than variable annuities.
d) They earn lower interest rates than fixed annuities.

Answer 4

They earn lower interest rates than fixed annuities.

Question 5

All of the following are true about variable products
EXCEPT
a) The minimum death benefit is guaranteed.
b) The cash value is not guaranteed.
C)
Policyowners bear the investment risk.
d) The premiums are invested in the insurer’s general
account.

Answer 5

The premiums are invested in the insurer’s general
account.

Insurers
selling variable products
invest their
customer’s monies in a separate account, which is very
similar to a mutual fund. Since there is no guaranteed
rate of return, customers must bear the investment risk

Question 6

The rider in a whole life policy that allows the company
to forgo collecting the premium if the insured is
disabled is called
a)
Waiver of premium.
b) Guaranteed insurability.
c) Waiver of cost of insurance.
d) Payor benefit.

Answer 6

Waiver of premium

Waiver of premium rider waives the premium if the
insured owner has been totally disabled for a
predetermined period. The payor benefit provides for
an owner other than the insured and the waiver of cost
of insurance is found in Universal Life.

Question 7

An individual has been making periodic premium
payments on an annuity. The annuity income payments
are scheduled to begin after 1 year since the annuity
was purchased. What type of annuity is it?
a) Deferred
b) Fixed
c) Flexible premium
d) Immediate

Answer 7

Deferred annuities may be purchased with either a
single lump sum or periodic payments, but they do not
begin the income payments until sometime after 1 year
from the date of purchase.

Question 8

An individual has been making periodic premium
payments on an annuity. The annuity income payments
are scheduled to begin after 1 year since the annuity
was purchased. What type of annuity is it?
a) Deferred
b) Fixed
c) Flexible premium
d) Immediate

Answer 8

Deferred

Deferred annuities may be purchased with either a
single lump sum or periodic payments, but they do not
begin the income payments until sometime after 1 year
from the date of purchase.

Question 9

Which of the following is NOT true regarding the
annuitant?
a) The annuitant must be a natural person.
b) The annuitant cannot be the same person as the
annuity owner.
c) The annuitant’s life expectancy is taken into
consideration for the annuity.
d) The annuitant receives the annuity benefits.

Answer 9

The annuitant cannot be the same person as the
annuity owner.

While they don’t have to be, the annuitant and annuity
owner are often the same person. The annuitant is the
person who receives benefits or payments from the
annuity and for whom the annuity is written. Since the
annuitant’s life expectancy is taken into consideration,

Question 10

Which of the following describes the tax advantage of a
qualified retirement plan?
a) Employer contributions are not taxed when paid out to
the employee.
b) The earnings in the plan accumulate tax deferred.
c) Distributions prior to age 59½ are tax deductible.
d) Employer contributions are deductible as a
business expense when the employee receives
benefits.

Answer 10

The earnings in the plan accumulate tax deferred.

Contributions are tax deferred, and earnings on the
money in the plan accrue on a tax-deferred basis.