Life 3

Question 1

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor’s 500 Index. She would likely purchase a(n)

Answer 1

Equity Indexed Annuity.

The interest rates of Equity Indexed Annuities are tied to the Standard and Poor’s Index.

Question 2

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Answer 2

Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value

Question 3

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

Answer 3

The insured may renew the policy for another 10 years, but at a higher premium rate

Policies that are guaranteed renewable and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability.

Question 4

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Answer 4

Universal Life – Option A

Universal Life Option A (Level Death Benefit option) policy must maintain a specified “corridor” or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.

Question 5

A domestic insurer issuing variable contracts must establish one or more

Answer 5

Separate accounts.

Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.
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Question 6

Which of the following policies would be classified as a traditional level premium contract

Answer 6

Straight life

Question 7

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Answer 7

Joint life

Because it’s the least expensive for two ppl