LLQP Insurance Product Types 4 — Questions and Answers
Question 1: Which annuity payout option provides the highest monthly income but stops payments upon the annuitant's death with no further benefit to beneficiaries?
- Joint and survivor annuity
- Life annuity with period certain
- Straight life annuity (Correct answer)
- Installment refund annuity
Correct answer: Straight life annuity
A straight life (life only) annuity pays the highest monthly benefit because payments cease at the annuitant's death with no refund or continuation to beneficiaries.
Question 2: Accidental death and dismemberment (AD&D) insurance pays the principal sum for:
- Death from any cause
- Death or specified injuries caused solely by accident (Correct answer)
- Disability due to illness
- Hospitalization following an accident
Correct answer: Death or specified injuries caused solely by accident
AD&D insurance pays the principal sum only for accidental death or specified losses (such as limbs or eyesight) caused solely by accident.
Question 3: A group life insurance plan typically uses which underwriting approach?
- Individual medical underwriting for each member
- Experience rating without any underwriting
- Master policy underwriting based on group characteristics (Correct answer)
- Guaranteed issue for all employees regardless of group size
Correct answer: Master policy underwriting based on group characteristics
Group life insurance uses a master policy approach where the group as a whole is underwritten, avoiding individual medical exams for most members.
Question 4: The primary purpose of credit life insurance is to:
- Provide retirement income to the borrower
- Pay off a loan balance if the borrower dies before the debt is repaid (Correct answer)
- Insure the lender against default due to market conditions
- Fund a savings plan for the borrower's dependents
Correct answer: Pay off a loan balance if the borrower dies before the debt is repaid
Credit life insurance pays the outstanding loan balance to the lender if the borrower dies, protecting both the borrower's estate and the creditor.
Question 5: A deferred annuity differs from an immediate annuity because the deferred annuity:
- Never accumulates interest
- Has an accumulation phase before income payments begin (Correct answer)
- Begins income payments within one year of purchase
- Pays a lump sum death benefit only
Correct answer: Has an accumulation phase before income payments begin
A deferred annuity has an accumulation phase where funds grow on a tax-deferred basis before the payout phase begins.
Question 6: Which of the following best describes a modified premium whole life policy?
- Premiums decrease each year as the policy ages
- Premiums are lower in the early years and higher in later years (Correct answer)
- The death benefit increases annually with inflation
- Premiums are waived after age 65
Correct answer: Premiums are lower in the early years and higher in later years
A modified premium whole life policy charges lower premiums in the early years (typically the first 3-5 years) and higher premiums thereafter, making it more affordable initially.
Question 7: Which life insurance policy type builds cash value at a guaranteed rate and also pays non-guaranteed dividends?
- Term life insurance
- Variable universal life insurance
- Participating whole life insurance (Correct answer)
- Level term with return of premium
Correct answer: Participating whole life insurance
Participating whole life insurance guarantees cash value growth at a set rate and may pay dividends when the insurer's actual experience is better than expected.
LLQP Insurance Product Types 4
Which annuity payout option provides the highest monthly income but stops payments upon the annuitant's death with no further benefit to beneficiaries?