Life Insurance Chapter 4.1 Flashcards
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Questions and Answers

What are the two major types of life insurance?

  • Term and whole (correct)
  • Term and universal
  • Whole and variable
  • Whole and endowment
  • Which term policy has level premiums and a level face amount?

    Level premium term

    Which of the following is not a characteristic of decreasing term life insurance?

  • Premiums are level
  • The policy face decreases to zero by the end of the policy period
  • The premium decreases to zero by the end of the policy period (correct)
  • Decreasing term policies are often called mortgage reduction insurance
  • Which of the following policies has a level face amount with level premiums?

    <p>Level premium term</p> Signup and view all the answers

    ___________ policies have premiums that fluctuate between the current rate and maximum rate, as stated in the policy.

    <p>Indeterminate premium</p> Signup and view all the answers

    Term insurance is categorized by all of the following, EXCEPT:

    <p>Accrues cash value</p> Signup and view all the answers

    Which of the following characteristics does not describe convertible term life insurance policies?

    <p>The attained age is the insured's age upon purchase</p> Signup and view all the answers

    What part of a mortgage reduction policy decreases over time?

    <p>Face amount</p> Signup and view all the answers

    All of the following characterize term life insurance, EXCEPT:

    <p>Provides living benefits</p> Signup and view all the answers

    What are the benefits of a convertible and renewable term life insurance policy?

    <p>Proof of insurability is not required to convert or renew coverage.</p> Signup and view all the answers

    Term life insurance provides ________________. Whole life insurance provides _______________.

    <p>pure death protection; death benefit and living benefits</p> Signup and view all the answers

    All of the following are drawbacks of term life insurance, EXCEPT:

    <p>Living benefits are available to the policyholder in the form of cash accrual</p> Signup and view all the answers

    All of the following statements regarding renewable term life insurance policies are false, EXCEPT:

    <p>Policies can be renewed at the insured's discretion</p> Signup and view all the answers

    What policy would you recommend to Blake, who needs insurance to cover his mortgage?

    <p>Decreasing term</p> Signup and view all the answers

    Which life insurance policy has annual increasing premiums and does not build cash value?

    <p>Annual renewable term</p> Signup and view all the answers

    Pure death protection only is provided by which life insurance policy?

    <p>Term life insurance</p> Signup and view all the answers

    All of the following term life insurance policies have level premiums, EXCEPT:

    <p>Annual renewable term (ART)</p> Signup and view all the answers

    Mortgage protection insurance uses what type of life insurance coverage?

    <p>Decreasing term</p> Signup and view all the answers

    Which type of life insurance policy allows a policyowner to renew a term policy and receive a lower premium by providing proof of insurability?

    <p>Reentry term</p> Signup and view all the answers

    Which type of life insurance coverage is used to provide mortgage protection?

    <p>Decreasing term</p> Signup and view all the answers

    All of the following statements are true regarding annual renewable term (ART) policies, EXCEPT:

    <p>ART features decreasing benefits</p> Signup and view all the answers

    All of the following are characteristics of term insurance, EXCEPT:

    <p>Term policies accrue cash value</p> Signup and view all the answers

    What policy should Kara not consider if she desires steady premiums?

    <p>Renewable and convertible term</p> Signup and view all the answers

    Which term policy has increasing premiums and a level face amount?

    <p>Annual renewable term</p> Signup and view all the answers

    Which type of life insurance provides pure death protection?

    <p>Term life insurance</p> Signup and view all the answers

    Study Notes

    Life Insurance Overview

    • Major types of life insurance: Permanent (whole) and Temporary (term).
    • Term insurance provides pure death protection, while whole life offers death benefit and living benefits (cash values).

    Term Life Insurance Characteristics

    • Level premium term: Features a level face amount and consistent level premiums.
    • Decreasing term: Often referred to as mortgage reduction insurance; face amount decreases to zero by policy expiration.
    • Annual renewable term (ART): Has a level face amount but premiums increase annually.
    • Convertible term: Allows conversion to permanent coverage without proof of insurability, affecting premium rates based on age.

    Premium Structures

    • Indeterminate premium policies: Fluctuate between current and maximum rates based on mortality and investments.
    • Reentry term: Can renew existing term coverage at a lower premium with proof of insurability.

    Cash Value Considerations

    • Term policies do not accrue cash value; they only provide death protection.
    • Whole life policies offer living benefits through cash value accumulation.

    Policy Recommendations

    • Decreasing term insurance is ideal for mortgage protection as the face amount aligns with mortgage balance.
    • Interim term coverage is suited for short-term needs, such as one year of protection before purchasing whole life.

    Special Considerations

    • Insurance policies are often customizable; however, not all term policies have conversion options.
    • As additional benefits, certain policies allow for renewal without insurability verification, encouraging long-term coverage.

    Key Exclusions and Limitations

    • Convertible term may lead to higher premiums upon conversion due to the age of the insured at that time.
    • Term life policies are limited in terms of living benefits, which can lead to misconceptions regarding their utility beyond death benefits.

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    Description

    Test your knowledge on life insurance with these flashcards. Focused on Chapter 4.1, this quiz covers the key terms and concepts related to permanent and temporary life insurance policies.

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