Life & Health Insurance Flashcards

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Questions and Answers

What happens to a policy that becomes a Modified Endowment Contract (MEC)?

It gains more tax advantages

It becomes invalid

It loses many of its tax advantages (correct)

It provides more coverage

All of these are characteristics of an Adjustable Life policy, EXCEPT:

It can change premiums

Face amount can be adjusted

Coverage can be increased or decreased

Face amount can be adjusted using policy dividends (correct)

What is the most important factor to consider when determining whether to convert term insurance?

The cost

What kind of policy does F need for coverage that changes regularly according to a schedule?

Decreasing term policy Signup and view all the answers

Under a Renewable Term policy, how is the renewal premium calculated?

On the basis of the insured's attained age Signup and view all the answers

Which statement is correct about a Whole Life policy that accumulates cash value faster?

20-Pay Life accumulates cash value faster than Straight Life Signup and view all the answers

What describes a Modified Endowment Contract (MEC)?

Falls below the minimum amount of premium required Signup and view all the answers

What type of life insurance are credit policies issued as?

Term Signup and view all the answers

What type of policy has a premium increasing after the first five years?

Modified Premiums Life Signup and view all the answers

Under which provision can a father have policy premiums waived if he dies within 3 years after purchasing a policy for his daughter?

Payor provision Signup and view all the answers

What type of insurance offers permanent life coverage with premiums that are payable for life?

Whole Life Signup and view all the answers

Which type of life insurance allows the policyowner level premiums and investment options?

Variable Life Signup and view all the answers

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

Age 100 Signup and view all the answers

Term insurance expires at the end of the policy.

True Signup and view all the answers

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

Whole Life Signup and view all the answers

What does the word 'straight' denote when applied to Whole Life insurance?

The duration of premium payments Signup and view all the answers

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date Signup and view all the answers

What kind of policy does K buy with a fixed premium for 5 years then increasing?

Modified Whole Life Signup and view all the answers

Which type of whole life insurance policy will provide the most rapid growth of cash value for a 35-year-old?

20-Pay Life Signup and view all the answers

All of these statements about Equity Indexed Life Insurance are correct, EXCEPT:

The premiums can be raised based on investment performance Signup and view all the answers

What feature limits the insurer's obligation for N, a student pilot, if he dies while flying?

Exclusion Signup and view all the answers

What will the insurer pay to P's beneficiary if she dies in a scuba-related accident after previously stating she does not dive?

$50,000 minus any outstanding policy loans Signup and view all the answers

How much will the insurer pay the beneficiary of S's whole life policy if S dies of natural causes?

$50,000 Signup and view all the answers

What will an insurer do if an interest payment on a policy loan is not made on time?

Automatically add the amount of interest due to the loan balance Signup and view all the answers

Which provision of a life insurance policy pays a stated benefit amount if an insured is blinded?

Accidental Death and Dismemberment clause Signup and view all the answers

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

At future dates specified in the contract Signup and view all the answers

How much will the insurer pay if T commits suicide with an Accidental Death and Dismemberment rider?

$50,000 Signup and view all the answers

What action is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Collateral Assignment Signup and view all the answers

What action will the insurer take if N dies after failing to make a required premium payment?

Claim will be denied Signup and view all the answers

What will happen to M's policy with an outstanding loan at the time of death?

Outstanding loan balance will be deducted from the policy proceeds Signup and view all the answers

What will the beneficiary receive if the insured dies during the Grace Period?

Full face amount minus any past due premiums Signup and view all the answers

All of these statements concerning Settlement Options are true, EXCEPT:

Only the beneficiary may select. Signup and view all the answers

Which of the following statements is CORRECT about accelerated death benefits?

Must have a terminal illness to qualify. Signup and view all the answers

Which provision guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor Clause Signup and view all the answers

What type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life Signup and view all the answers

How can Variable Whole Life Insurance be described?

Both an insurance and securities product Signup and view all the answers

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:

Interest Only Signup and view all the answers

What is the option called that provides an additional death benefit for a limited amount of time at the lowest possible cost?

Accidental Death and Dismemberment rider (AD & D) Signup and view all the answers

What action may an insurance company take upon discovering a misrepresentation on a life insurance policy application?

Void the policy during the Contestable period if proven to be material Signup and view all the answers

A Return of Premium life insurance policy is:

Both Whole Life and Increasing Term Signup and view all the answers

Study Notes

Life Insurance Fundamentals

Modified Endowment Contracts (MEC) lose tax advantages when policy becomes MEC.
Adjustable Life policies allow adjustments to face amount, but face amount changes can't be made using policy dividends.
Cost is the primary factor when converting term insurance based on the insured's age.

Policy Types and Characteristics

Limited-term life insurance with changing death benefits is a Decreasing term policy.
Renewable Term policies calculate renewal premiums based on the insured's attained age.
Whole Life policies accumulate cash value faster in early years if structured as 20-Pay Life.

Key Features of Insurance Policies

Credit life insurance is issued as Term insurance.
Modified Premiums Life involves initial lower premiums that increase after five years.
Payor provision waives premiums if a parent dies shortly after purchasing a policy for their child.

Additional Policy Information

Whole Life insurance provides lifelong coverage with premiums payable for life.
Variable Life insurance lets policyowners choose from various investment options while maintaining level premiums.
Coverage on limited-pay life policies generally lasts until the insured reaches age 100.

Policy Expiration and Benefits

Term insurance expires at the end of the policy term.
Whole Life combines cash value accumulation with a level face amount.

Payment and Exclusions

The face amount of Whole Life is paid upon the insured's death or policy maturity.
Modified Whole Life has fixed premiums for an initial period, after which they increase.
Exclusions may limit insurer obligations, such as in the event of death during risky activities like flying.

Policy Claims and Loans

Insurers will pay the full benefit minus outstanding loans if a policyholder dies with policy loans.
During the Grace Period, if a premium is overdue, beneficiaries receive the full face amount minus past due premiums.

Settlement Options and Provisions

Settlement options allow for systematic liquidation of death proceeds, but beneficiaries can also choose from options.
Accelerated death benefits require the insured to have a terminal illness to qualify.
The Payor Clause waives premiums if the juvenile policyholder becomes disabled.

Additional Considerations

Collateral Assignment occurs when a life insurance policy is used as collateral for loans.
Insurers may void policies for misrepresentations made during the contestable period if proven material.
Return of Premium policies combine Whole Life with Increasing Term benefits.

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Description

Test your knowledge on life and health insurance concepts with these flashcards. Each card presents key terms and definitions relevant to modified endowment contracts, adjustable life policies, and term insurance conversion. Ideal for those preparing for life and health insurance examinations.