Life and Health Insurance Policies Flashcards

Questions and Answers

What are the 3 basic types of coverage for life insurance?

Group (correct)

Ordinary (correct)

Industrial (correct)

Universal

What is Ordinary Life Insurance?

Individual life insurance that includes many types of temporary and permanent insurance protection plans

What characterizes Industrial Life Insurance?

Characterized by comparatively small issue amounts with premiums collected on a weekly or monthly basis

What is Group Insurance?

Written for employer, employee groups, associations, unions, and creditors. Signup and view all the answers

What does Term Life Insurance provide?

Low-cost insurance protection for a specified period and pays a benefit only if the insured dies during that period. Signup and view all the answers

What are the 3 basic forms of Term Life?

Decreasing term Signup and view all the answers

What is Level Term Insurance?

Provides policy with level amount of protection over the entire term of the policy with level premiums. Signup and view all the answers

What is Decreasing Term Insurance?

Policies characterized by benefit amounts that decrease gradually over the term of protection. Signup and view all the answers

Credit life insurance is based on decreasing term insurance.

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Decreasing term insurance is commonly used to protect an insured's mortgage.

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What is Increasing Term Insurance?

Term insurance that provides a death benefit that increases at periodic intervals over the policy's term. Signup and view all the answers

What are the two options on a term life policy to extend the coverage period?

Renewal Signup and view all the answers

What does the option to Renew in a term policy allow?

To renew the term policy before its expiration date without evidence of insurability. Signup and view all the answers

What is Annually Renewable Term (ART)?

Provides coverage for one year with an option to renew each year without proof of insurability. Signup and view all the answers

What is the Option to Convert in a term policy?

Gives the right to convert the term policy for a whole life plan without evidence of insurability. Signup and view all the answers

Can the option to renew and convert be combined in the same policy?

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Study Notes

Types of Life Insurance Coverage

Three basic types of coverage: ordinary, industrial, and group insurance.

Ordinary Life Insurance

Individual life insurance encompassing various temporary and permanent protection plans.
Premiums can be paid monthly, quarterly, semiannually, or annually.
Includes types such as whole, term, universal, variable life, and endowment policies.

Industrial Life Insurance

Features small issue amounts (e.g., $1,000) with weekly or monthly premium collections.
Designed for industrial workers or those unable to afford larger coverage amounts.
Often marketed as burial insurance.

Group Insurance

Coverage provided under one contract for employer-employee groups, associations, unions, and creditors.
Underwriting based on the group as opposed to individual assessments.

Term Life Insurance

Low-cost insurance providing coverage for a specified period (term).
Benefits payable only if the insured dies during the term; there is no cash value.
Example: A $50k 20-year plan pays $50k if the insured dies within the term; otherwise, there is no payout.

Basic Forms of Term Life

Three main forms: level term, decreasing term, and increasing term insurance.

Level Term Insurance

Maintains a fixed (level) amount of protection throughout the policy term.
Features level premiums throughout the policy duration.

Decreasing Term Insurance

Death benefits gradually decrease over the policy term.
Premiums are level, as illustrated by policies declining in benefit from $50k to $0 over 20 years.

Credit Life Insurance

Based on decreasing term insurance; sold to cover outstanding loan balances.

Increasing Term Insurance

Provides a death benefit that increases at specific intervals during the policy term.
Benefits may increase by specific amounts or percentages, often linked to a cost of living index.
Typically purchased as a cost of living rider to a policy.

Options to Extend Term Life Coverage

Two options available: renewal and conversion.

Option to Renew

Allows for policy renewal before expiration without new proof of insurability.
Renewed premiums will be higher due to increased risk; policies usually offer several renewal periods until a specified age.

Annually Renewable Term (ART)

Provides one-year coverage, renewable each year without proof of insurability.
Represents the most basic form of life insurance.

Option to Convert

Permits exchange of a term policy for a whole life plan without evidence of insurability.
Conversion may be based on either the insured's age at conversion or the original age at policy issuance.
Specific limits on conversion timeframes can apply.

Combination of Renewal and Conversion Options

Policies can combine both options, such as a 10-year convertible renewable policy allowing renewals until age 65 and conversion until age 55.

Re-entry Term Insurance

Initially offers low premium rates for a set period, but renewal requires passing a medical examination at the re-entry date.

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Description

Explore essential concepts of life and health insurance through these flashcards. Learn about various types of coverage, including ordinary, industrial, and group life insurance policies. This resource is ideal for anyone studying life insurance fundamentals.