Questions and Answers
What does 'level' refer to in level term insurance?
Which of the following is an example of a limited-pay life policy?
Graded-premium whole life policy premiums are typically lower initially, but gradually increase for a period of 5-10 years. After this period, the premiums will:
What type of life insurance policy would be best suited for an individual who has just borrowed $10,000 on a 5-year installment loan requiring monthly payments?
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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:
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All other factors being equal, the least expensive first-year premium payment is found in:
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An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called:
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All of the following are true about variable products EXCEPT:
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A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
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The death benefit under the Universal Life Option B:
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Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
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If an agent wishes to sell variable life policies, what license must the agent obtain?
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Study Notes
Level Term Insurance
- "Level" refers to the face amount of the policy, which remains consistent throughout the policy term.
- Premiums in level term insurance remain stable over the years, unlike some policies where costs increase with age.
Limited-Pay Life Policy
- An example of a limited-pay life policy is "Life paid-up at age 65."
- In a limited-pay whole life policy, premiums are fully paid by age 65, with the policy endowing at age 100.
Graded-Premium Whole Life Policy
- Initial premiums are lower and gradually increase for 5-10 years, then remain level thereafter.
- Typically, first-year premiums for graded-premium whole life policies can be about 50% lower than those for straight life policies.
Decreasing Term Policy
- Best suited for individuals with a loan, like a $10,000 installment loan, as its face amount decreases as the debt is reduced.
20-Pay Whole Life Policy
- Premiums must be paid for 20 years or until death, whichever comes first, to qualify for the death benefit.
- Policies are designed to endow by age 100 but provide a death benefit if the insured dies before all premiums are paid.
First-Year Premium Payments
- The least expensive first-year premium payment is found in annual renewable term policies.
- Annual renewable term insurance has a level death benefit but increases premiums annually with the insured's age.
Single Premium Whole Life
- This policy requires a one-time premium payment at the policy's inception, providing insurance coverage for the insured's lifetime and maturing at age 100.
Variable Life Products
- Minimum death benefits are guaranteed, but cash values are not.
- Policyowners assume investment risks, and premiums are invested in a separate account, not the insurer's general account.
Second-to-Die Policy
- Covers two lives but pays the death benefit only upon the death of the first insured.
- Known as survivorship life insurance, rates can be blended for both individuals.
Universal Life Option B
- Death benefit gradually increases each year by the amount that the cash value increases, ensuring higher potential payouts over time.
20-Year Level Term Policy
- If the insured dies within the 20-year period, the beneficiary receives a $100,000 death benefit.
- Policies do not develop cash values, contrary to some incorrect beliefs about cash accumulation.
Licensing for Selling Variable Life Policies
- Agents wishing to sell variable life policies must obtain a securities license due to regulation by the Securities and Exchange Commission.
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Description
Test your knowledge on various types of life insurance policies with these flashcards. This quiz will cover critical concepts such as level term insurance, including definitions and key terms. Perfect for anyone preparing for insurance exams or wanting to solidify their understanding of life policies.
