Questions and Answers
The least expensive option to pay off a 30-year mortgage balance would be:
What is a Modified Endowment Contract (MEC)?
A life insurance contract which accumulates cash values higher than the IRS will allow.
What makes a universal life policy different from a whole life policy?
A flexible premium schedule.
Index whole life insurance contains a securities component that acts as a:
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What is the advantage of adding a children's term rider to a life insurance policy?
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Which of the following policies does NOT build cash value?
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All of these are characteristics of a universal life insurance policy EXCEPT:
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What are some characteristics of a universal life insurance policy?
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What is considered the best example of a limited pay life insurance policy?
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What describes the result of a modified endowment contract that failed to meet the seven-pay test?
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What kind of policy has a face amount of $300,000, a cash value of $50,000, and a total face amount of $350,000?
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What type of life insurance is usually used for key employee indemnification?
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What is a life insurance policy written on one contract for two people in which it is payable upon the first death?
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A Renewable Term Life insurance policy can be renewed:
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How are survivorship life insurance policies helpful in estate planning?
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What is a corridor in relation to a Universal Life Insurance policy?
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What type of life insurance allows a policyowner to change two policy features?
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What type of multiple protection coverage pays on the death of the last person?
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Which type of multiple protection policy pays on the death of the last person?
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All of these are valid options for an Adjustable Life Policy EXCEPT:
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Which type of life insurance is normally associated with Payor Benefit rider?
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What does a renewable Term Life insurance policy allow the policyowner?
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Which of these riders will pay a death benefit if the insured's spouse dies?
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What does a limited payment whole life policy provide?
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Study Notes
Life Insurance Types and Features
- Decreasing Term Life is the most cost-effective option for paying off a 30-year mortgage balance.
- Modified Endowment Contracts (MEC) accumulate cash values exceeding IRS limits.
- Universal life policies offer a flexible premium schedule, unlike whole life policies.
- Index whole life insurance functions as a hedge against inflation due to its securities component.
- Term policies are the only type of life insurance that does not build cash value.
Riders and Conversions
- Children's term riders can be converted to permanent coverage without evidence of insurability.
- Family Term Insurance Rider provides a death benefit upon the death of the insured's spouse.
Policy Characteristics
- Universal life insurance characteristics include flexible death benefits, flexible premiums, and cash value accumulation, but do not offer a fixed surrender value.
- Limited payment whole life policies provide lifetime protection with premiums paid for a specified period, often 20 years.
Special Policy Types
- Survivorship life policies provide funds to help pay estate taxes and pay on the death of the last insured.
- Adjustable Life policies allow changes to premium and face amount, but non-forfeiture options cannot be used to increase death benefits.
Additional Policy Details
- The corridor in Universal Life Insurance refers to the gap between the total death benefit and cash value.
- Renewable Term Life insurance can be renewed on predetermined dates regardless of the insured's health, without proof of insurability.
- Juvenile Insurance is typically associated with a Payor Benefit rider that waives premiums if the premium payer becomes incapacitated.
Tax Implications
- Modified Endowment Contracts that fail the seven-pay test result in pre-death distributions being taxable.
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Test your knowledge of life insurance policies with these flashcards. Each card provides a key term related to life insurance, along with a concise definition to help you understand the concepts better. Perfect for students and professionals alike.