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Questions and Answers
All of the following are true about variable products except?
All of the following are true about variable products except?
- The cash value is not guaranteed
- The minimum death benefit is guaranteed
- The premiums are invested in the insurer's general account (correct)
- Policy owners bear the investment risk
Which of the following is another term for the accumulation period of an annuity?
Which of the following is another term for the accumulation period of an annuity?
- Premium period
- Liquidation period
- Pay in period (correct)
- Annuity period
Your client wants both protection and savings from the insurance and is willing to pay premiums until retirement at 65. What would be the right policy for this client?
Your client wants both protection and savings from the insurance and is willing to pay premiums until retirement at 65. What would be the right policy for this client?
- Life annuity with period certain
- Interest sensitive whole life
- Increasing term
- Limited pay whole life (correct)
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a?
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a?
All other factors being equal, the least expensive first year premium payment is found in?
All other factors being equal, the least expensive first year premium payment is found in?
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?
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?
To sell variable life insurance policies, an agent must receive all of the following except?
To sell variable life insurance policies, an agent must receive all of the following except?
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
When an annuity is written, whose life expectancy is taken into account?
When an annuity is written, whose life expectancy is taken into account?
A man purchased a $90,000 annuity with a single premium and began receiving payments 2 months after that. What type of annuity is it?
A man purchased a $90,000 annuity with a single premium and began receiving payments 2 months after that. What type of annuity is it?
In a survivorship life policy, when does the insurer pay the death benefit?
In a survivorship life policy, when does the insurer pay the death benefit?
Which of the following determines the cash value of a variable life policy?
Which of the following determines the cash value of a variable life policy?
Which of the following is TRUE regarding variable annuities?
Which of the following is TRUE regarding variable annuities?
Which of the following is an example of a limited-pay life policy?
Which of the following is an example of a limited-pay life policy?
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that this policy?
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that this policy?
Which of the following in NOT true regarding Equity Indexed Annuities?
Which of the following in NOT true regarding Equity Indexed Annuities?
Why is an equity indexed annuity considered to be a fixed annuity?
Why is an equity indexed annuity considered to be a fixed annuity?
Which of the following is TRUE regarding the annuity period?
Which of the following is TRUE regarding the annuity period?
All of the following entities regulate variable life policies except?
All of the following entities regulate variable life policies except?
An insured purchased a life insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an?
An insured purchased a life insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an?
Which of the following is a feature of a variable annuity?
Which of the following is a feature of a variable annuity?
All of the following are true regarding a decreasing term policy EXCEPT?
All of the following are true regarding a decreasing term policy EXCEPT?
Equity indexed annuities?
Equity indexed annuities?
An individual has just borrowed $10,000 from his bank for a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
An individual has just borrowed $10,000 from his bank for a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
The term 'fixed' in a fixed annuity refers to all of the following EXCEPT?
The term 'fixed' in a fixed annuity refers to all of the following EXCEPT?
A Return of Premium term life policy is written as what type of term coverage?
A Return of Premium term life policy is written as what type of term coverage?
Which of the following is NOT true regarding Equity Indexed Annuities?
Which of the following is NOT true regarding Equity Indexed Annuities?
Which of the following is NOT true regarding the accumulation period of an annuity?
Which of the following is NOT true regarding the accumulation period of an annuity?
Who bears all of the investment risk in a fixed annuity?
Who bears all of the investment risk in a fixed annuity?
An agent selling variable annuities must be registered with?
An agent selling variable annuities must be registered with?
Which two terms are associated directly with the way an annuity is funded?
Which two terms are associated directly with the way an annuity is funded?
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
Both Universal Life and Variable Universal Life have a?
Both Universal Life and Variable Universal Life have a?
Which of the following is NOT true regarding the accumulation period of an annuity?
Which of the following is NOT true regarding the accumulation period of an annuity?
A Return of Premium term life policy is written as what type of term coverage?
A Return of Premium term life policy is written as what type of term coverage?
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT?
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT?
The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
Which statement is NOT true regarding a Straight Life policy?
Which statement is NOT true regarding a Straight Life policy?
Which of the following best describes what the annuity period is?
Which of the following best describes what the annuity period is?
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
The equity in an equity index annuity is linked to?
The equity in an equity index annuity is linked to?
A Straight Life policy has what type of premium?
A Straight Life policy has what type of premium?
Which of the following is NOT true regarding Equity Indexed Annuities?
Which of the following is NOT true regarding Equity Indexed Annuities?
Which of the following is a feature of a variable annuity?
Which of the following is a feature of a variable annuity?
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
Which of the following best describes annually renewable term insurance?
Which of the following best describes annually renewable term insurance?
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Study Notes
Variable Products
- Variable products have uncertain cash values; policy owners assume investment risks.
- Premiums are not placed in the insurer's general account, contradicting common assumptions.
- Minimum death benefits are guaranteed despite variable nature.
Annuity Period Terminology
- Accumulation period of an annuity is also referred to as the pay-in period.
- This encompasses the time during which premium payments are made.
Policy Selections and Features
- Limited pay whole life policies suit clients seeking protection with savings until retirement.
- Convertible term policies can adapt from non-cash value to policies with cash value accumulation.
- Annually renewable term policies typically have the lowest first-year premiums but increase with renewal.
Payment Structures in Life Policies
- For a 20 pay whole life policy, premiums must be paid for 20 years or until death, whichever comes first.
- Survivorship life policies pay benefits upon the last insured's death, making them distinct from joint life policies.
Licensing and Regulation
- Agents selling variable life insurance must have a life insurance license, FINRA registration, and a securities license, but SEC registration is unnecessary.
- Variable life and annuities investments rely on subsidiary account performance, differing from fixed products.
Equity Indexed Annuities
- These products offer guaranteed minimum interest rates, preserving a baseline return despite market conditions.
- They seek higher returns compared to fixed annuities and are less risky than variable annuities.
Policy Characteristics
- Decreasing term policies cover death benefits that decline throughout the policy term with no cash value.
- Fixed annuities are characterized by guaranteed interest rates and fixed payment structures, with risk assumed by the insurance company.
General Annuity Insights
- Immediate annuities provide payments shortly after purchase, unlike deferred counterparts.
- The annuity period involves converting accumulated funds into income payments, highlighting its function in retirement planning.
Capital Accumulation and Risk
- Equity indexed annuities tie their returns to performance indices like the S&P 500 while maintaining conservative investment profiles.
- A straight life policy ensures level premiums, distinguishing it from competing whole life products that may fluctuate.
Important Considerations for Agents
- Agents need to ensure compliance with FINRA for variable annuity sales.
- When upgrading insurance coverage, evidence of insurability is often required to increase benefits in adjustable policies.
Annuity Ownership and Beneficiary Designations
- Annuities cannot be owned by corporations if the annuitant is not a natural person, ensuring regulatory adherence.
Key Distinctions in Coverage
- A return of premium term policy is considered increasing term coverage, reflecting its payout structure upon death.
- The death benefit of a term policy does not reduce after conversion to a permanent policy, dispelling misconceptions around this feature.
Summary of Fixed Annuity Attributes
- Benefit amounts in variable annuities are not guaranteed, contrasting with fixed annuities where predictable payments are standard.
- Both types of annuities affirm a guaranteed minimum interest rate, enhancing their appeal in risk-averse investment strategies.
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