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Questions and Answers

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?

  • 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?

  • 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?

    <p>Convertible Term Policy</p> Signup and view all the answers

    All other factors being equal, the least expensive first year premium payment is found in?

    <p>Annually Renewable Term</p> Signup and view all the answers

    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?

    <p>For 20 years or until death, whichever occurs first</p> Signup and view all the answers

    To sell variable life insurance policies, an agent must receive all of the following except?

    <p>SEC registration</p> Signup and view all the answers

    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?

    <p>Lower</p> Signup and view all the answers

    When an annuity is written, whose life expectancy is taken into account?

    <p>Annuitant</p> Signup and view all the answers

    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?

    <p>Immediate</p> Signup and view all the answers

    In a survivorship life policy, when does the insurer pay the death benefit?

    <p>Upon the last death</p> Signup and view all the answers

    Which of the following determines the cash value of a variable life policy?

    <p>The performance of the policy portfolio</p> Signup and view all the answers

    Which of the following is TRUE regarding variable annuities?

    <p>The annuitant assumes the risks on investment</p> Signup and view all the answers

    Which of the following is an example of a limited-pay life policy?

    <p>Life Paid-up at Age 65</p> Signup and view all the answers

    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?

    <p>Required a premium increase each renewal</p> Signup and view all the answers

    Which of the following in NOT true regarding Equity Indexed Annuities?

    <p>They earn lower interest rates than fixed annuities</p> Signup and view all the answers

    Why is an equity indexed annuity considered to be a fixed annuity?

    <p>It has a guaranteed minimum interest rate</p> Signup and view all the answers

    Which of the following is TRUE regarding the annuity period?

    <p>It may last for the lifetime of the annuitant</p> Signup and view all the answers

    All of the following entities regulate variable life policies except?

    <p>The guaranty Association</p> Signup and view all the answers

    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?

    <p>Interest-sensitive Whole Life</p> Signup and view all the answers

    Which of the following is a feature of a variable annuity?

    <p>Benefit payment amounts are not guaranteed</p> Signup and view all the answers

    All of the following are true regarding a decreasing term policy EXCEPT?

    <p>The payable premium amount steadily declines throughout the duration of the contract</p> Signup and view all the answers

    Equity indexed annuities?

    <p>Seek higher returns</p> Signup and view all the answers

    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?

    <p>Decreasing term</p> Signup and view all the answers

    The term 'fixed' in a fixed annuity refers to all of the following EXCEPT?

    <p>Death benefit</p> Signup and view all the answers

    A Return of Premium term life policy is written as what type of term coverage?

    <p>Increasing</p> Signup and view all the answers

    Which of the following is NOT true regarding Equity Indexed Annuities?

    <p>They earn lower interest rates than annuities</p> Signup and view all the answers

    Which of the following is NOT true regarding the accumulation period of an annuity?

    <p>It would not occur in a deferred annuity</p> Signup and view all the answers

    Who bears all of the investment risk in a fixed annuity?

    <p>The insurance Company</p> Signup and view all the answers

    An agent selling variable annuities must be registered with?

    <p>FINRA</p> Signup and view all the answers

    Which two terms are associated directly with the way an annuity is funded?

    <p>Single payment or periodic payments</p> Signup and view all the answers

    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?

    <p>The annuitant must be a natural person</p> Signup and view all the answers

    Both Universal Life and Variable Universal Life have a?

    <p>Flexible premium</p> Signup and view all the answers

    Which of the following is NOT true regarding the accumulation period of an annuity?

    <p>It would not occur in a deferred annuity</p> Signup and view all the answers

    A Return of Premium term life policy is written as what type of term coverage?

    <p>Increasing</p> Signup and view all the answers

    All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT?

    <p>Upon conversion, the death benefit of the permanent policy will be reduced by 50%</p> Signup and view all the answers

    The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

    <p>The death benefit can be increased by providing evidence of insurability</p> Signup and view all the answers

    Which statement is NOT true regarding a Straight Life policy?

    <p>Its premium steadily decreases over time, in response to its growing cash value</p> Signup and view all the answers

    Which of the following best describes what the annuity period is?

    <p>The period of time during which accumulated money is converted into income payments</p> Signup and view all the answers

    Which of the following is TRUE for both equity indexed annuities and fixed annuities?

    <p>They have a guaranteed minimum interest rate</p> Signup and view all the answers

    The equity in an equity index annuity is linked to?

    <p>An index like Standard &amp; Poor's 500</p> Signup and view all the answers

    A Straight Life policy has what type of premium?

    <p>A level premium for the life of the insured</p> Signup and view all the answers

    Which of the following is NOT true regarding Equity Indexed Annuities?

    <p>They earn lower interest rates than fixed annuities</p> Signup and view all the answers

    Which of the following is a feature of a variable annuity?

    <p>Benefit payment amounts are not guaranteed</p> Signup and view all the answers

    Which of the following is TRUE for both equity indexed annuities and fixed annuities?

    <p>They have a guaranteed minimum interest rate</p> Signup and view all the answers

    Which of the following best describes annually renewable term insurance?

    <p>It is level term insurance</p> Signup and view all the answers

    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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