Questions and Answers
Decreasing term life insurance is often used to:
Under a Modified Endowment Contract, what are the likely tax consequences?
What is the proper order of initial life insurance premiums, from lowest to highest?
If Shirley has a $500,000 10-year non-renewable level term life policy and dies 15 years after the policy's inception date, how much will her beneficiary receive?
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A Renewable Term Life insurance policy can be renewed:
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A life insurance policy which contains cash values that vary according to its investment performance of stocks is called:
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A life insurance policy that has premiums fully paid up within a stated time period is called:
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A renewable Term Life insurance policy allows the policy owner the right to renew the policy:
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A partial surrender is allowed in which of the following life policies?
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A life insurance policy's limit of liability would be:
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Tom is shopping for a policy that covers two people and would pay the face amount ONLY when the first person dies. The type of life policy he is looking for is called a:
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The least expensive option to pay off a 30-year mortgage balance would be:
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Which of the following are the premium payments for a Universal life policy NOT used for?
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Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?
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Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?
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Study Notes
Types of Life Insurance Policies
- Decreasing term life insurance is primarily utilized to cover home mortgage debts.
- Under Modified Endowment Contracts, pre-death distributions are subject to taxation.
- Life insurance premiums rank from lowest to highest as follows: modified premium, ordinary life, single premium.
Policy Specifics
- A 10-year non-renewable level term life policy provides no payout if the insured dies after the coverage period.
- Renewable Term Life insurance policies can be renewed at predetermined dates or ages without regard for the insured's health.
- Variable Whole Life insurance features cash values that fluctuate based on stock market performance.
Payment Structures
- Limited payment insurance requires the policy's premiums to be fully paid within a specified time frame.
- Renewable Term Life insurance guarantees renewal without proof of insurability.
- Universal life policies allow for partial surrenders of cash value.
Liability and Coverage
- The limit of liability for life insurance is defined by the policy's face amount.
- A Joint life policy pays out upon the death of the first insured person.
Cost-Effective Options
- The most economical option to pay off a 30-year mortgage is through decreasing term life insurance.
- Universal life policy premiums are allocated for death benefits, cash value, and loading costs, but not to separate account investments.
Investment Types
- Equity index whole life policies invest a majority of premiums in traditional fixed income securities, with a portion linked to a stock index.
- Variable universal life insurance uniquely allows policyholders to select investment strategies for greater potential returns.
Licensing Requirements
- A securities license is necessary for life insurance producers to sell certain investment-linked policies.
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Description
Test your knowledge on various types of insurance policies with these flashcards from Chapter 4. This quiz covers essential concepts such as decreasing term life insurance and the implications of Modified Endowment Contracts. Perfect for Exam I preparation!
