Insurance Concepts Chapter Exam 1 Flashcards

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Questions and Answers

What is Credit Life Insurance?

Covers only health-related expenses

Only available to seniors

Issued in an amount not to exceed the amount of the loan (correct)

Provides coverage for an indefinite period

Term insurance expires at the end of the policy period.

True

What does a variable insurance policy not guarantee?

A return on investment accounts

What characteristic allows a Variable Universal Life policy owner to manage investments?

Policyowner controls investment allocation and premium amount Signup and view all the answers

What type of life policy has a death benefit that adjusts periodically?

Decreasing term Signup and view all the answers

What type of life policy is best for a 15-year mortgage?

15-year decreasing term Signup and view all the answers

What is an element of a Variable Life policy?

A fixed, level premium Signup and view all the answers

What does a Modified Endowment Contract (MEC) exceed?

The maximum amount of premium that can be paid into a policy Signup and view all the answers

What is life insurance that covers an insured's whole life with level premiums called?

Limited-Pay Life Signup and view all the answers

What type of life policy covers two lives and pays the face amount after the first one dies?

Joint Life Policy Signup and view all the answers

What type of policy provides coverage for 20 years after death and a lump sum?

Family Maintenance policy Signup and view all the answers

What kind of policy has a fluctuating death benefit according to its investment performance?

Variable Life Signup and view all the answers

What kind of premium does a Whole Life policy have?

Level Signup and view all the answers

Adjustable Life policies can have premiums that are raised or lowered based on performance.

False Signup and view all the answers

Which action requires proof of insurability in an Adjustable Life policy?

Increase face amount Signup and view all the answers

What policy is needed for time-limited coverage with a changing death benefit?

Decreasing term policy Signup and view all the answers

What is the coverage limit on a group credit life policy?

The insured's total loan value Signup and view all the answers

What statement about a Whole Life policy is correct?

Cash value may be borrowed against Signup and view all the answers

What type of insurance provides permanent life coverage with premiums payable for life?

Whole Life Signup and view all the answers

What does a Face Amount Plus Cash Value Policy pay at the insured's death?

Face amount plus the policy's cash value Signup and view all the answers

Which type of policy is considered overfunded according to IRS guidelines?

Modified Endowment Contract Signup and view all the answers

What insurance product can cover children under a whole life policy?

Child term rider Signup and view all the answers

What kind of life insurance product covers children under their parent's policy?

Term rider Signup and view all the answers

What feature allows an individual to continue insurance after leaving a group Term Life policy?

Conversion privilege Signup and view all the answers

What type of life insurance has flexible premiums and an adjustable death benefit?

Universal Life Signup and view all the answers

Which policy requires NASD registration before selling?

Variable Life Signup and view all the answers

What kind of life insurance starts as temporary but can be modified to permanent?

Convertible Term Signup and view all the answers

What applies when a term policy is exchanged for a whole life policy without health proof?

Conversion provision Signup and view all the answers

What is the most important factor when converting term insurance?

The cost Signup and view all the answers

What type of policy does someone need for limited time coverage with lowest premium?

Level term Signup and view all the answers

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds Signup and view all the answers

If G purchased a Family Income policy at age 40, how long would his family receive income if he dies at age 50?

10 years Signup and view all the answers

What does a Limited-Pay Life policy have?

Premium payments limited to a specified number of years Signup and view all the answers

What type of policy offers the fastest accumulation of cash value?

20-pay Life Signup and view all the answers

All insurance products require an agent to have FINRA registration.

False Signup and view all the answers

What kind of life insurance pays specified income for 30 years and then a lump sum?

Family Maintenance Policy Signup and view all the answers

What type of life policy covers two people and pays upon the death of the last insured?

Survivorship Signup and view all the answers

What characteristic is consistent with a Straight Life policy?

Premiums are payable for as long as there is insurance coverage in force Signup and view all the answers

Which would be considered a Limited-Pay Life policy?

Life Paid-Up at Age 70 Signup and view all the answers

Where do the investment gains from a Universal Life Policy typically go?

The cash value Signup and view all the answers

What kind of life policy pays the face value upon the death of the insured or at age 100?

Whole Life Signup and view all the answers

Modified Whole Life is considered interest-sensitive.

False Signup and view all the answers

What type of life insurance are credit policies issued as?

Term Signup and view all the answers

What provision allows policyowners to have premiums waived if the insured dies shortly after purchase?

Payor provision Signup and view all the answers

Which provision allows changing a term life policy to permanent without proof of health?

Conversion Signup and view all the answers

What type of life insurance gives maximum coverage for a limited period?

Term life Signup and view all the answers

When is the face amount paid under a Joint Life and Survivor policy?

Upon death of the last insured Signup and view all the answers

What kind of policy should T purchase if he wants $10,000 available in 10 years?

Ten-Year Endowment Signup and view all the answers

What kind of term policy allows continuation after the initial period expires?

Renewable Signup and view all the answers

All characteristics of Adjustable Life policies include face amounts adjusted using policy dividends.

False Signup and view all the answers

What kind of insurance policy provides an income stream after the insured dies?

Family Maintenance Policy Signup and view all the answers

What type of policy has fixed premium for the first 5 years then increases?

Modified Whole Life Signup and view all the answers

What is true about the premium payment schedule for whole life policies?

Premiums are payable throughout the insured's lifetime Signup and view all the answers

Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?

Policyowner Signup and view all the answers

What kind of special need might a policy owner have with an Adjustable Life insurance policy?

Flexible premiums Signup and view all the answers

What type of policy should Q purchase for $100,000 of permanent protection and $50,000 of Term coverage?

Whole life policy with other insured rider Signup and view all the answers

What should N purchase for level premiums, permanent protection, and to be paid-up at retirement?

30 Pay Life Signup and view all the answers

What type of life insurance provides cash value along with a level face amount?

Whole life Signup and view all the answers

How long does coverage normally last on a limited-pay life policy?

Age 100 Signup and view all the answers

Study Notes

Credit Life Insurance

Provides coverage not exceeding the loan amount.

Term Insurance

Expires at the end of the specified policy period.

Variable Insurance Policy

Does not guarantee returns on investment accounts.

Variable Universal Life Policy

Policyowner has control over investment allocations and premium payments.

Decreasing Term Insurance

Offers a death benefit that decreases periodically for a specified time.

15-Year Mortgage Protection

Best secured by a 15-year decreasing term life policy.

Variable Life Policy

Features a fixed, level premium.

Modified Endowment Contract (MEC)

Exceeds premium limits set for life insurance recognition.

Limited-Pay Life Insurance

Whole life coverage with level premiums paid for a limited period.

Joint Life Policy

Insures two lives and pays upon the first death.

Family Maintenance Policy

Provides monthly income for 20 years post-death, with a lump sum at the end of the term.

Variable Life Insurance

Offers a fluctuating death benefit based on underlying investment performance.

Whole Life Policy Premiums

Typically consist of level premiums.

Equity Indexed Life Insurance

Premiums may not fluctuate according to investment performance.

Adjustable Life Policy

Proof of insurability is required when increasing the face amount.

Coverage Needs

A decreasing term policy meets the need for temporary coverage with changing death benefits.

Group Credit Life Policy Coverage

Limited to the insured's total loan value.

Whole Life Policy Benefits

Cash value accumulation can be borrowed against.

Permanent Life Coverage

Provided by whole life policies with premiums payable for life.

Face Amount Plus Cash Value Policy

Pays both face amount and cash value upon the insured's death.

Modified Endowment Contracts

Considered overfunded as per IRS guidelines.

Child Term Riders

Cover children under a parent’s existing policy.

Term Riders

Specific to covering a parent's children under their policy.

Conversion Privilege

Allows individuals to maintain insurance after leaving a group without proving insurability.

Universal Life Insurance

Features flexible premiums and adjustable death benefits.

Registration for Variable Life Policy Agents

Agents must register with the National Association of Securities Dealers (NASD).

Convertible Term Insurance

Initially temporary but convertible to permanent insurance without health proof.

Term Insurance Conversion

Involves using a conversion provision for switching policies.

Cost of Converting Term Insurance

The most critical factor in conversion decision-making.

Level Term Coverage

Provides limited term insurance at the lowest premium.

Variable Life Policy Growth

Investment accounts typically grow through mutual funds, stocks, and bonds.

Family Income Policy

If purchased at 40 with a 20-year rider, income continues for 10 years if the insured dies at 50.

Limited-Pay Life Policy

Payments limit to a specific number of years.

Quick Cash Value Accumulation

20-Pay Life policy offers fastest cash value growth.

FINRA Registration Exception

Modified Whole Life does not require agent registration.

Family Maintenance Policy Functionality

Provides income following the insured's death for a specified duration.

Survivorship Policy

Covers two people, paying upon the death of the last insured.

Straight Life Policy Characteristics

Premiums are paid for as long as coverage is active.

Limited-Pay Life Example

Life Paid-Up at Age 70 qualifies as a limited-pay product.

Universal Life Policy Investment Gains

Generally contribute to the cash value of the policy.

Whole Life Payment Upon Death

Either pays the face value at the insured's death or at age 100.

Interest-Sensitive Life Products

Modified Whole Life is not classified as interest-sensitive.

Credit Life Insurance Policies

Issued as term insurance products.

Payor Provision

Waives premiums if the father dies within three years of policy issuance on his child.

Conversion Provision for Term Policies

Permits term insurance conversion to a permanent policy without health proof.

Greatest Coverage for Limited Period

Provided by term life insurance products.

Joint Life and Survivor Policy Payment Timing

Face amount is paid upon the death of the last insured.

Ten-Year Endowment Insurance Needs

A policy under this type guarantees $10,000 in 10 years.

Renewable Term Coverage

Allows continuation of term insurance after the initial policy period.

Adjustable Life Policy Misconception

Face amounts cannot be adjusted through policy dividends.

Family Maintenance Policy Specifics

Supplies an income to beneficiaries for a predetermined time after the insured's death.

Modified Whole Life Policy Premium Structure

Fixed premium for the first five years, increases thereafter.

Whole Life Policy Premium Payments

Premiums continue throughout the insured's lifetime, valid until death.

Beneficiaries of IOLI

The policyowner benefits upon the insured's death.

Flexible Premiums in Adjustable Life Insurance

Offers options for premium structuring according to the policyowner's needs.

Whole Life Policy with Other Insured Rider

Allows coverage for the policyowner's spouse and children under a single policy.

30 Pay Life Insurance Option

Suitable for retirement planning with levels of premiums and permanent coverage.

Whole Life Characteristics

Combines cash value accumulation with a stable face amount.

Limited-Pay Life Policy Coverage Duration

Typically remains effective until the age of 100.

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Description

Test your knowledge on essential insurance concepts with these flashcards. This quiz covers key definitions and characteristics of various insurance policies, including credit life insurance and term insurance. Perfect for exam preparation or reinforcing your understanding of insurance fundamentals.