Life Insurance Concepts Quiz

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Questions and Answers

What can be used as collateral for a policy assignment?

Future premiums that will be paid
Only the premiums paid into the policy
The entire policy including death benefits (correct)
The cash value of the policy only

What happens to outstanding policy loans in relation to the death benefit?

They automatically increase the death benefit amount
They must be repaid before any claims are made
They reduce the death benefit by the outstanding loan amount (correct)
They have no effect on the death benefit

Which factor is essential for calculating the death benefit of a life insurance policy?

The policyholder's age at purchase
The type of insurance policy selected (correct)
The premium payment frequency
The total number of premiums paid

In a term life insurance policy, which of the following is true about the death benefit?

It can vary between level, decreasing, or increasing term (A) Signup and view all the answers

How do universal life (UL) policies differ in terms of death benefits from whole life policies?

UL policies may include an account value affecting the death benefit (C) Signup and view all the answers

What does the median life expectancy indicate for males aged 65 in Canada?

50% of males will live until 84.5 years or longer. (A) Signup and view all the answers

How does the probability of death change as individuals age, according to the information provided?

It starts low but increases dramatically after age 40. (A) Signup and view all the answers

What is the likelihood of a male who just turned 65 dying before reaching his 66th birthday?

1.116% (B) Signup and view all the answers

What concept is used by insurance companies to determine premiums for life insurance policies?

Probability of death and past mortality experience. (A) Signup and view all the answers

What trend is observed regarding the probability of death in the early years of life?

It starts low and remains relatively low until age 40. (C) Signup and view all the answers

What is the purpose of a 'life table' as mentioned in the content?

To compile statistics on life expectancy and mortality for specific groups. (C) Signup and view all the answers

At what age does the increase in the probability of death start to accelerate significantly?

Age 40 (D) Signup and view all the answers

What statistical measure indicates that 50% of a males aged 65 will not live past?

Median life expectancy. (D) Signup and view all the answers

What is meant by using a life insurance policy as collateral?

The policyholder can borrow against the cash value of the policy. (C), The policyholder assigns their death benefit to a third party. (D) Signup and view all the answers

Which statement is true regarding outstanding policy loans?

They reduce the total cash value of the policy. (B), They must be repaid in full prior to a policy surrender. (D) Signup and view all the answers

How is the level death benefit option calculated?

It provides a fixed amount regardless of accumulated cash value. (C) Signup and view all the answers

Which of the following is not a typical factor in calculating death benefits?

The policyholder's income at the time of application. (A) Signup and view all the answers

In the context of policy loans, what happens if the loan amount exceeds the cash value?

The death benefit is reduced by the outstanding amount. (B), The policy terminates immediately. (C) Signup and view all the answers

What does a policyholder need to consider before using a life insurance policy as collateral?

Tax implications associated with the collateral use. (A), The lender’s policy on accepting life insurance as collateral. (B), Restrictions on accessing the cash value. (D) Signup and view all the answers

What is the primary disadvantage of loans against a life insurance policy?

They lead to reduced death benefits. (B), They decrease the cash value of the policy. (C) Signup and view all the answers

Which option describes a policy rider that will add benefits upon death?

Accidental death (AD) rider. (C) Signup and view all the answers

How do indexed death benefits work?

They vary based on an index's performance, such as the S&P 500. (A) Signup and view all the answers

What is a key feature of the guaranteed insurability benefit (GIB) rider?

It eliminates the need for medical exams when increased coverage is requested. (A), It guarantees the ability to purchase additional coverage regardless of health changes. (D) Signup and view all the answers

Why is tax deferral considered beneficial in life insurance policies?

It postpones tax liabilities until the funds are accessed. (D) Signup and view all the answers

What can happen to a policy if a policyholder fails to repay outstanding loans?

It may reduce the death benefit or cause the policy to lapse. (D) Signup and view all the answers

What is the impact of investment returns on a life insurance policy?

They affect the total cash value and future premium payments. (D) Signup and view all the answers

Flashcards

Term life insurance premiums

The cost of a term life insurance policy, often based on age and health.

Term insurance death benefits

The amount of money paid to beneficiaries if the insured person dies during the policy term.