Types of Policies
An equity-indexed policy has an 80% participation rate and a 10% cap. If the underlying index grows by 15% in a policy year, what interest rate is credited?
Answer and explanation
Answer: B. Calculated raw growth is 15% x 80% = 12%. However, the policy cap is 10%, so credited interest is limited to the maximum cap of 10%.Source: NAIC Indexed Life Insurance Guide — PDF page 5, Caps and Participation Rates
More types of policies questions
- A policyowner’s income varies and the owner wants to adjust premium timing within policy limits while keeping permanent coverage. Which product feature most directly addresses that need?
- A prospect wants permanent insurance with adjustable policy elements and cash value allocated to insurer-managed separate-account investments. Which product is the best fit?
- A prospect wants permanent life insurance, wants to choose among stock and bond investment options, and accepts possible cash-value loss. Which product best fits?
- A renewable term policy states that renewal rights end at a specified age. The insured reaches that age and wants another term. Which statement is most accurate?
- A retiree hands an insurer a single premium and wants income payments to start about one month later. Which annuity fits?
- A retiree makes one annuity purchase payment and wants income payments to begin within the next year. Which classification applies?
590 Texas questions like this one.
Every answer explained, the ones you miss come back on a spaced schedule, and a plan built from your exam date.