Types of Life Insurance Flashcards
As a broker, how would you describe the payout option for a Variable Annuity Life Only policy?
A. Fixed monthly payments
B. Guaranteed payment count
C. Set interest rate
D. Guaranteed annuity units monthly
Guaranteed annuity units monthly
A Variable Annuity Life Only payout option is expressed as a guaranteed number of annuity units each month for life, with the actual payments amounts varying due to the fluctuating value of the annuity units.
Which type of life insurance policy is designed to minimize premiums in the early years, similar to a Graded Premium Whole Life policy?
A. Limited Payments
B. Adjustable Life
C. Variable Whole Life
D. Modified Life
Modified Life
Both Graded Premium Whole Life and Modified Life policies are designed to keep the premium paid in the early years as low as possible while ultimately providing permanent insurance coverage, making Modified Life the correct answer for the question.
What is true about coverage during the 31-day Group Life conversion period?
A. COBRA applies to Group Life
B. Death coverage is guranteed
C. Only term insurance is offered
D. Premium must be individually paid.
Death coverage is guaranteed
The Group Life conversion privilege covers a departing employee during the conversion period even if they choose not to convert their policy.
In an increasing term life policy, what happens to the insurance protection?
A. Remains constant
B. Decreases over time
C. Increase over time
D. Becomes nonexistent
Increase over time
An increasing term life policy is a type of term life insurance where the coverage amount starts low and increases over the term of the policy. This provides a growing amount of protection for the policyholder.
As an insurance broker, you have a client who wants a life insurance policy with the flexibility to adjust the face value, premium coverage duration, and type of coverage with switching policies. What type of policy should you recommend?
A. Universal life
B. Adjustable life
C. Variable life
D. Survivorship life
Adjustable Life
Adjustable life insurance is the most suitable policy to clients seeking flexibility in adjusting the face value, premium, coverage duration, and type of coverage without switching policies.
Which type of life insurance policy requires a broker to provide a prospectus to the potential policyholder?
A. Adjustable life
B. Universal Life
C. Interest Sensitive Whole Life
D. Variable Life
Variable Life
A prospectus must be delivered to a insured when selling a Variable Life policy, as it contains important information about the investment components of the policy.
What scenario does NOT result in the maturity of a Whole Life policy?
A. Insured’s death at age 65
B. Payment of all required premiums
C. Insured’s attainment of age 100
D. Cash value equating the face amount
Payment of all required premiums.
A Whole Life policy matures upon the insured’s death or attainment of age 100, or when the cash value equals the face amount, but not simply by paying all required premiums.
When adding a Return of Premium rider to a Whole Life Insurance policy, which term insurance is used to cover the premium paid up to the time of death?
A. Decreasing Term
B. Convertible Term
C. Level Term
D. Increasing Term
Increasing Term
When writing a Return of Premium rider on a Whole Life Insurance policy. Increasing Term Insurance is utilized, as if increases the value of the Term to cover the premium paid up to the time of death.
In an Adjustable Life insurance policy, which aspect does not offer flexibility to the policy owner?
A. Death benefit
B. Premium payable
C. Insurance type
D. Cash value investment vehicle
Cash value investment vehicle.
Adjustable Life insurance offers flexibility in several aspects of the policy, such as death benefit and premium payable, but does not provide flexibility in the cash value investment vehicle.
Which of the following is a characteristic of indexed universal life insurance?
A. The cash value in invested in a separate account, requiring a producer to have a securities license before selling the policy.
B. A fixed and level premium is required to maintain the policy.
C. A portion of the cash value is tied to an equity index account linked to a stipulated stock index.
D. The policyowner risks losing everything if the stock market drops.
A portion of the cash value is tied to an equity index account linked to a stipulated stock index.
Indexed universal life insurance is characterized by having a portion of the cash value tied to an equity index account linked to a stipulated stock index, allowing for potential growth based on market performance while still providing a guaranteed minimum interest rate.
Which is NOT true concerning Universal Life Insurance?
A. Partial surrenders are available
B. The target premium option cannot be changed to the minimum premium option.
C. The policy can pay the death benefit plus the cash value.
D. The insuring element is Term insurance.
The target premium option cannot be changed to the minimum premium option.
Universal Life insurance offer flexible premium options, allowing policyholders to switch between minimum and targeted premiums with restrictions. Other features include partial surrenders, combined death benefits and cash value payouts, and term insurance as the insuring element.
Which of the following insurance contracts is NOT also a security?
A. Variable Whole Life
B. Variable Universal Life
C. Equity Indexed Life
D. Variable Annuity
Equity Indexed Life
Remember the insurance contracts with investment components, such as those containing the term “Variable” are considered securities, while Equity Indexed Life insurance is not a security.
Why do equity-indexed life insurance policies have an increased premium?
A. For additional set-up and maintenance costs
B. To pay for the regulatory taxes
C. For increased amount of protection
D. For the commission paid to the broker
For increased amount of protection
Equity-indexed life insurance policies have an increased mainly because they offer an increased amount of protection and investment potential compared to traditional life insurance policies. The performance of these policies is tied to a stock market index and is not guaranteed.
As a broker, you recommend a life insurance policy that allows the policyholder to transition from term coverage to permanent coverage, resulting in higher premiums. Which policy best suits the scenario?
A. Decreasing Term
B. 20-Pay Life
C. Straight Life
D. Convertible Term
Convertible Term
Convertible Term life insurance is the policy that would have an increased premium after a given period of time due to the conversion from a term policy to a permanent life insurance policy.
In a Joint and Survivor Life Annuity scenario, a 65-year old husband and his 55-year old wife start receiving benefit payments. Which factor is considered the least important in calculating the payment amount?
A. Guaranteed interest rate
B. Wife’s age
C. Initial annuity value
D. Husband’s age
Husband’s age
In a Joint and Survivor Life Annuity scenario, the husband’s age is considered the least important factor in calculating payment amount since the payments are base on the Joint life expectancy of the couple the younger spouse’s age had more influence in this calculation. Other factors like the initial annuity value, the guaranteed interest rate, and the wife’s age play more critical roles in determining the payment amount.
