Insurance Product Types Flashcards

Which type of annuity allows the contract holder to begin receiving income payments almost immediately after a lump-sum purchase?

Answer: Single premium immediate annuity (SPIA)

A single premium immediate annuity (SPIA) converts a lump-sum payment into income that begins within one month to one year of purchase.

A graded death benefit life insurance policy is designed primarily for:

Answer: Individuals who cannot qualify for standard life insurance due to health issues

Graded death benefit policies provide guaranteed issue coverage to individuals who cannot pass standard underwriting, but pay reduced benefits if death occurs in early policy years.

Under a variable universal life (VUL) policy, the policyholder bears the investment risk because:

Answer: Cash value is allocated to separate account sub-accounts subject to market fluctuation

In a VUL policy, cash value is invested in separate account sub-accounts, so gains and losses depend on market performance and the policyholder assumes this risk.

A life insurance policy loan against cash value is best described as:

Answer: A loan from the insurer using cash value as collateral, accruing interest

A policy loan allows the insurer to lend money to the policyholder using the policy's cash value as collateral, with interest accruing until repaid.

Which long-term care insurance policy feature protects the benefit amount against the rising cost of care over time?

Answer: Inflation protection rider

An inflation protection rider automatically increases the daily or monthly benefit amount annually (often 3-5% compound) to keep pace with rising care costs.

A key-person life insurance policy is owned and paid for by the business primarily to:

Answer: Compensate the business for financial loss caused by the death of a vital employee

Key-person insurance indemnifies the business for economic losses — such as lost revenue and replacement costs — resulting from the death of a critical employee.

Which of the following products is designed to provide income that the annuitant cannot outlive, regardless of how long they live?

Answer: Life annuity (straight life or with options)

A life annuity, in any of its forms, guarantees income payments for as long as the annuitant lives, eliminating the risk of outliving retirement assets.