Life Insurance Basics

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Questions and Answers

What is one primary role of life insurance agents?

To determine government regulations for insurance

To underwrite policies without client interaction

To manage policyholder investments

To assist clients and accurately assess risks (correct)

Which of the following is NOT a necessary element of a legal contract in life insurance?

Signature from a government official (correct)

Consideration or a tangible exchange

Clear terms regarding coverage and benefits

Mutual consent between parties

What factor is crucial for maximizing death benefits in life insurance?

Using an unfamiliar insurance provider

Selecting a policy with low coverage

High premium payments

Accurate death certificate information (correct)

What is the significance of the underwriting process in life insurance?

It assesses risk factors and ensures transparency Signup and view all the answers

Which legislation must life insurance agents comply with to ensure proper client support?

The U.S. Patriot Act Signup and view all the answers

What is a defining characteristic of term life insurance?

It provides coverage for a specific period of time. Signup and view all the answers

How does term life insurance generally compare to other types in terms of coverage and premium costs?

It offers the greatest coverage for the lowest premium. Signup and view all the answers

What happens when a term insurance policy reaches its maximum age limit?

Coverage cannot be renewed. Signup and view all the answers

Which of the following policies is most likely to have a cash value accumulation feature?

Both B and C. Signup and view all the answers

Which term best describes a life insurance policy that builds up value over time and can be utilized by the policyholder during their lifetime?

Permanent life insurance. Signup and view all the answers

What does the term 'fixed life insurance products' refer to?

Policies that offer guaranteed minimum or fixed benefits. Signup and view all the answers

Which feature is unique to variable life insurance compared to other types of life insurance?

It allows cash values to grow based on a specific portfolio of stocks. Signup and view all the answers

What defines the 'cash value' in a life insurance policy?

The savings element or living benefit that can accumulate over time. Signup and view all the answers

What is a key characteristic of whole life insurance?

The cash value accumulates and is paid out at age 100. Signup and view all the answers

Which statement accurately describes the premium structure of whole life insurance?

Premiums remain constant throughout the life of the policy. Signup and view all the answers

What is a key advantage of limited payment whole life insurance compared to straight life insurance?

It provides coverage until a certain age. Signup and view all the answers

What happens to the cash value in a whole life insurance policy after the third policy year?

It grows tax-deferred and accumulates regularly. Signup and view all the answers

What distinguishes single premium whole life insurance from other whole life policies?

It requires a lump-sum payment. Signup and view all the answers

What distinguishes straight whole life insurance from limited-pay whole life insurance?

Straight life insurance has lifelong premium payments. Signup and view all the answers

Which type of whole life policy allows for cash value accumulation that is tied to equity market performance?

Indexed Whole Life Signup and view all the answers

How does the premium structure of limited payment whole life policies typically compare to straight life policies?

It is higher due to a shorter premium-paying period. Signup and view all the answers

Which form of whole life insurance allows for a one-time premium payment?

Single Premium Whole Life Signup and view all the answers

What is the primary benefit of the cash value in whole life insurance?

It can serve as collateral for loans while the policy is active. Signup and view all the answers

What is a distinguishing feature of term life insurance compared to whole life insurance?

It provides temporary protection. Signup and view all the answers

What is true about the death benefit of whole life insurance policies?

It remains guaranteed and level throughout the policy's duration. Signup and view all the answers

In an indexed whole life policy, which entity may assume the inflation risk?

The policyholder Signup and view all the answers

What kind of premiums does flexible premium whole life insurance typically feature?

Adjustable payment amounts Signup and view all the answers

What main factor differentiates permanent life insurance from term life insurance?

Permanent life insurance provides coverage for the insured's entire life. Signup and view all the answers

What happens to the death benefit of term life insurance once the policy term expires?

It ends, and no benefits are payable. Signup and view all the answers

Study Notes