Types of Life Policies

Question 1

Regarding the length of coverage, all life insurance policies fall into 2 categories:

Answer 1

Temporary Protection

Permanent Protection

Question 2

______ is temporary protection because it provides coverage for a specific period of time. It is also known as pure life insurance

Answer 2

Term Insurance

Question 3

Term policies provide the _____ amount of coverage for the lowest premium as compared to any other form of protection

Answer 3

greatest

Question 4

Term insurance provides what is known as

Answer 4

pure death protection

Question 5

Term insurance has no ___ value

Answer 5

Cash

Question 6

3 basic types of TERM coverage available, based on how the face amount (death benefit) changes during the policy term:

Answer 6

1) Level
2) Increasing
3) Decreasing

Question 7

Regardless of the type of term insurance purchased, the premium is ____ throughout the term of the policy; only the death benefit may fluctuate, depending on the type of term insurance

Answer 7

Level

Question 8

Upon selling, renewing, or converting the term policy, the premium is figured at

Answer 8

attained age (insureds age at the time of transaction

Question 9

_______ is the most common type of temporary protection purchased. The word ____ refers to the death benefit that does not change throughout the life of a policy.

Answer 9

Level Term Insurance

Level

Question 10

_______ is the purest form of term insurance

Answer 10

Annually Renewable Term

Question 11

______ policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

Answer 11

Decreasing term

Question 12

Decreasing term coverage is commonly purchased to insure the payment of a

Answer 12

mortgage or other debts

Question 13

A decreasing term policy is usually _____; however, it is usually not renewable since the death benefit is $0 at the end of the policy term

Answer 13

Convertible

Question 14

_____ features level premiums and a death benefit that increases each year over the duration of the policy term

Answer 14

Increasing term

Question 15

Increasing term is often used by insurance companies to fund certain riders that provide a _______ or a gradual increase in total coverage, such as the cost of living or return of premium riders

Answer 15

refund of premiums

Question 16

Increasing term would be ideal to handle _____ and the increasing cost of living. It is also added to another policy as a rider, such as with return of premium policies

Answer 16

inflation

Question 17

Most term insurance policies are

Answer 17

1) Renewable
2) Convertible
3) Renewable & Convertible

Question 18

The _____ provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability

Answer 18

Renewable

Question 19

The _____ provision provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability. Premium will be based on the insureds attained age at the time of conversion

Answer 19

Convertible

Question 20

________ insurance is a general term used to refer to various forms of life insurance policies that build CASH value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid. Most common is WHOLE life insurance

Answer 20

Permanent life

Question 21

_______ provides lifetime protection, and includes a savings element (cash value)

Answer 21

Whole life insurance

Question 22

Whole life policies endow at the insureds age ___, which means the cash value created by the accumulation if premium is scheduled to equal the face amount of the policy at age __

Answer 22

100

Question 23

Premiums for whole life policies are usually ___ than for term insurance

Answer 23

higher

Question 24

The three basic forms of whole life insurance are

Answer 24

1) straight whole life
2) limited-pay whole life
3) Single premium whole life

Question 25

_____ (also referred to as ordinary life or continuous whole life) is the basic whole life policy . The policyowner pays the premium from the time the policy is issued until the insured's death or age 100. Has the lowest annual premium

Answer 25

Straight Life

Question 26

______ is designed so that the premiums for coverage will be completely paid-up well before age 100. This type of policy has a shorter premium-paying period than straight life insurance, so that annual premium will be higher. Cash value builds up faster for the limited-pay policies

Answer 26

Limited-pay whole life

Question 27

_______ is designed to provide a level death benefit to the insureds age 100 fore a one-time, lump-sum payment. The policy is completely paid-up after one premium and generates immediate cash

Answer 27

Single premium whole life

Question 28

_______ can assume the form of either term insurance or permanent insurance. The insured typically determines how much coverage is needed and the affordable amount of premium

Answer 28

Adjustable life policy

Question 29

Policyowner has the following options under Adjustable life insurance

Answer 29

1) Increase or decrease the premium or the premium-paying period 2) Increase or decrease the face amount 3) Change the period of protection

Question 30

The policyowner also has the option of _______ from term to whole life or vice versa.

Answer 30

Converting

Question 31

Although adjustable life policies contain most of the common features of other whole life policies, the _____ of an adjustable life policy only develops when the premiums paid are more than the cost of the policy

Answer 31

cash value

Question 32

______ insurance is also known by the generic name of flexible premium adjustable life. That implies that the policyowner has the flexibility to increase the amount of premium paid into the policy and to later decease it again

Answer 32

Universal life

Question 33

In Universal Life, the premium can be adjusted, the insurance companies may give the policyowner a choice to pay either of the two types of premiums:

Answer 33

1) Minimum premium | 2) Target premium

Question 34

The _________ is the amount needed to keep the policy in force for the current year. Paying the _______ will make the policy perform as an annually renewable term product

Answer 34

minimum premium

Question 35

The _____ is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime

Answer 35

Target premium

Question 36

A universal life policy has two components: an _______ and a _____

Answer 36

insurance component and a cash account

Question 37

The insurance component of a universal life policy is always _______

Answer 37

annually renewable term insurance

Question 38

Universal life offers one of two death benefit options to the policyowner. ____ is a level death benefit option. and ______ is the increasing death benefit option

Answer 38

Option A | Option B

Question 39

_________ insurance is a level, fixed premium, investment based product. These policies have fixed premiums and a guaranteed minimum death benefit. Cash value of the policy, however is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

Answer 39

Variable Life

Question 40

Policyowner bears the ________ in variable contracts

Answer 40

investment risk

Question 41

Because the insurance company is not sustaining the investment risk of the contract, the underlying assets of the contract cannot be kept in the insurance company's general account. These assets must be held in a _____, which invests in stocks, bonds, and other securities investment options

Answer 41

separate account

Question 42

________ is a type of insurance that combines many features of the whole life with the flexible premium of universal life and the investment component of variable life, making it a securities version of the universal life insurance

Answer 42

Variable universal life insurance

Question 43

Features of variable universal life insurance

Answer 43

1) Flexible premium that can be increased, decreased, or skipped as long as there is enough value in the policy to fund the death benefit 2) Increasing and decreasing the amount of the insurance 3) Cash withdrawals or policy loans

Question 44

Unlike universal life, most of the investment vehicles in variable universal life policies do not guarantee

Answer 44

return

Question 45

Variable life insurance products are _______ by the State and Federal Government

Answer 45

dually regulated

Question 46

Due to the element of investment risk, the federal government has decaled that variable contracts are _____, and are thus regulated by the SEC and FINRA

Answer 46

securities

Question 47

Agents selling variable life insurance products must:

Answer 47

1) Be registered with FINRA 2) Be licensed by the state to sell life insurance 3) Have received securities license

Question 48

_____ is a single policy that is designed to insure two or more lives. Can be in the form of term insurance or permanent insurance

Answer 48

Joint Life

Question 49

Two major exceptions to Joint Life

Answer 49

1) The premium is based on a joint average age that is between the ages of the insureds 2) Death benefit is paid upon the first death only

Question 50

______ 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. Major difference is it pays on the last death rather than first death. Also referred to as a "second-to-die" or "last survivor"

Answer 50

Survivorship Life

Question 51

Endowment policies are another type of whole life insurance that have all the same features as regular whole life policies with a slight variation in the maturity date. Primary difference between whole life policy and an endowment is that an endowment matures at an ______

Answer 51

earlier age

Question 52

Because the cash value in an endowment has to build up faster since the funds are intended to be used while the insured is alive, the premium for an endowment is considerably _____ than an ordinary straight policy.

Answer 52

higher

Question 53

An _______ is a contract that provides income for a specified period of years, or for life.

Answer 53

Annuity

Question 54

Annuities are not life insurance, but rather a vehicle for the accumulation of money and the ___________

Answer 54

Liquidation of an estate

Question 55

Annuities do not pay a face amount upon the death of the ______

Answer 55

Annuitant

Question 56

_____ is the purchaser of the annuity contract, but not necessarily the one who receives the benefits. The _____ of the annuity has all of the rights, such as naming the beneficiary and surrendering the annuity

Answer 56

Owner

Question 57

The ____ of an annuity may be a corp, trust, or other legal entity.

Answer 57

Owner

Question 58

_______ is the person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written.

Answer 58

Annuitant

Question 59

Annuitant must be a

Answer 59

natural person

Question 60

The ________ also known as the pay-in period, is the period of time over which the owner makes payments (premiums) into an annuity. Furthermore it is the period of time which the payments earn interest on a tax-deferred basis.

Answer 60

accumulation period

Question 61

The ______, also known as the annuitization period, liquidation period, or pay-out period, is the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant.

Answer 61

annuity period

Question 62

The _______ is the time when the annuity benefit payouts begin

Answer 62

annuitization date

Question 63

The annuity income amount is based upon the following:

Answer 63

1) The amount of premium paid or cash value accumulated 2) The frequency of the payment 3) The interest rate 4) The annuitant age and gender

Question 64

The first way to classify annuities can be based on how they can be funded (paid for). There are 2 options: a _____ or through _____ in which the premiums are paid in installments over a period of time

Answer 64

Single premium periodic premium

Question 65

Periodic payment annuities can be either ______, in which the annuitant/owner pays a fixed installment, or _____, in which the amount and frequency of each installment varies

Answer 65

Level Premium Flexible Premium

Question 66

Annuities can also be classified according to when the income payments from the annuity begin. An ______ is one that is purchased with a single, lump-sum payment and provides income payments that start within one year from the date of purchase.

Answer 66

Immediate annuity

Question 67

A ______ is an annuity in which the income payments begin sometime after one year from the date of purchase.

Answer 67

Deferred annuity

Question 68

Annuities may be classified as ____ or ____ based on how the premium payments are invested

Answer 68

Fixed or Variable

Question 69

A fixed annuity provides the following features:

Answer 69

1) Guaranteed minimum rate of interest to be credit to the purchase payment 2) Income (annuity) payments that do not vary from one payment to the next 3) The insurance company guarantees the specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant

Question 70

With fixed annuities, the annuitant knows the exact amount of each payment received from the annuity during the annuity period. This is called ____ ____ ____ ____

Answer 70

level benefit payment amount

Question 71

A disadvantage to fixed annuities is that the purchasing power that they afford may be eroded over time due to

Answer 71

inflation

Question 72

A ________ serves as a hedge against inflation, and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity.

Answer 72

variable annuity

Question 73

3 main characteristics of variable annuities are

Answer 73

1) Underlying Investment- payments that annuitant makes into the variable annuity are invested in the insurers separate account 2) Interest rate- issuing insurance company does not guarantee a minimum interest rate 3) License requirements- variable annuity is considered a security and is regulated by the SEC and state insurance regulations. Agents and companies must be registered with FINRA

Question 74

Variable premiums purchase _______ in the fund, which is similar to buying shares in a Mutual Fund

Answer 74

accumulation units

Question 75

Accumulation units represent _________ in the separate account

Answer 75

ownership interest

Question 76

Upon annuitization, the accumulation units are converted to

Answer 76

annuity units

Question 77

__________ are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. Has a guaranteed minimum interest rate. Current interest rate that actually credit is often tied to a familiar index like the Standard and Poor's 500

Answer 77

Indexed (or equity indexed) annuities

Question 78

In addition to providing income for retirement and estate liquidation, annuities can be used to accumulate funds for

Answer 78

college education

Question 79

Annually renewable term death benefit remains _____ and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases

Answer 79

level

Question 80

Key characteristics of whole life insurance

Answer 80

1) Level Premium- premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy 2) Death benefit- is guaranteed and also remains level for life 3) Cash value- cash value, created by the accumulation of premium is scheduled to equal the face amount of the policy when insured reached 100 and is paid out to the policyowner. Cash values credit to the policy on a regular basis and have a guaranteed interest rate 4) Living benefits- the policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. Cash value called nonforfeiture value does not usually accumulate until the third policy year and it grows tax deferred

Question 81

Under Option A (Level Death Benefit option), the death benefit remains level while the cash value gradually increases, thereby lowering the _______ with the insurer in the later years

Answer 81

pure insurance

Question 82

Under Option B (Increasing Death option), 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 _____. 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. Expenses of this option are much greater than thos eof Option A

Answer 82

increases.

Question 83

Joint life is also used to insure the lives of business partners in the funding of a

Answer 83

buy-sell agreement