Questions and Answers
An endowment life insurance policy is characterized by all of the following, EXCEPT:
The beneficiary of a credit life insurance policy is the:
Creditor
All of the following are true regarding credit life insurance, EXCEPT:
What policy is usually used for credit life insurance?
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Who is the beneficiary of a credit life policy?
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Which of the following is not a way that an endowment policy can mature?
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Which policy will pay benefits on the death of the second insured?
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Charlotte takes out a $14,000 loan. How much credit life insurance can the creditor take out on Charlotte?
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A policy with flexible premiums based on a changing current interest rate is:
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A policy known as interest-sensitive whole life is:
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Upon the death of the last person insured, the _________ policy pays a death benefit.
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Study Notes
Endowment Life Insurance
- Endowment life insurance policies mature on a specific date or when the insured reaches a certain age (e.g., 20 years or age 65).
- Cash value in endowment policies accumulates quickly, resulting in higher premiums.
- Maturation options include death of the insured or reaching the policy period end; surrender of cash value is not a maturation option.
Credit Life Insurance
- Credit life insurance policies are held by creditors and issued on the lives of debtors.
- The creditor is the beneficiary of the credit life policy.
- As debts are paid, the face amount of credit life insurance decreases, aligning with the remaining debt.
- Credit life insurance may be offered individually or through group policies but is not limited to group sales.
Policy Types in Credit Life Insurance
- Credit life insurance is typically issued as a decreasing term life policy.
- The amount of credit life insurance cannot exceed the debt balance; thus, for a $14,000 loan, coverage can be up to $14,000 plus interest.
Survivorship Life Policy
- A survivorship life policy (second-to-die policy) pays benefits only upon the death of the second insured individual.
- Policy proceeds are secured only after the last insured person passes away.
Current Assumption Whole Life Insurance
- Also referred to as interest-sensitive whole life, this policy features flexible premiums that fluctuate with the current interest rate.
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Description
Test your knowledge on endowment life insurance policies with this quiz from Chapter 4 Mod 3. Explore the characteristics of endowment contracts and identify exceptions to their features. Perfect for those studying insurance fundamentals.
