Life Insurance Policies Flashcards

Questions and Answers

The least expensive option to pay off a 30-year mortgage balance would be:

Whole Life Insurance

Term Life Insurance

Universal Life Insurance

Decreasing Term Life (correct)

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:

Hedge against inflation. Signup and view all the answers

What is the advantage of adding a children's term rider to a life insurance policy?

Can be converted to permanent coverage without evidence of insurability. Signup and view all the answers

Which of the following policies does NOT build cash value?

Term Life Insurance Signup and view all the answers

All of these are characteristics of a universal life insurance policy EXCEPT:

Fixed Surrender Value. Signup and view all the answers

What are some characteristics of a universal life insurance policy?

Flexible death benefit, flexible premiums, builds cash value. Signup and view all the answers

What is considered the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years. Signup and view all the answers

What describes the result of a modified endowment contract that failed to meet the seven-pay test?

Pre-death distributions are typically taxable. Signup and view all the answers

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?

Universal Life Policy. Signup and view all the answers

What type of life insurance is usually used for key employee indemnification?

Term, whole, and universal life insurance. Signup and view all the answers

What is a life insurance policy written on one contract for two people in which it is payable upon the first death?

Joint. Signup and view all the answers

A Renewable Term Life insurance policy can be renewed:

At a predetermined date or age, regardless of the insured's health. Signup and view all the answers

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes on assets. Signup and view all the answers

What is a corridor in relation to a Universal Life Insurance policy?

The gap between the total death benefit and the policy's cash value. Signup and view all the answers

What type of life insurance allows a policyowner to change two policy features?

Adjustable Life. Signup and view all the answers

What type of multiple protection coverage pays on the death of the last person?

Survivorship life policy. Signup and view all the answers

Which type of multiple protection policy pays on the death of the last person?

Survivorship Life Policy Signup and view all the answers

All of these are valid options for an Adjustable Life Policy EXCEPT:

A non-forfeiture option can be used to increase the death benefit. Signup and view all the answers

Which type of life insurance is normally associated with Payor Benefit rider?

Juvenile Insurance. Signup and view all the answers

What does a renewable Term Life insurance policy allow the policyowner?

To renew the policy without producing proof of insurability. Signup and view all the answers

Which of these riders will pay a death benefit if the insured's spouse dies?

Family Term Insurance Rider. Signup and view all the answers

What does a limited payment whole life policy provide?

Lifetime Protection. Signup and view all the answers

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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Description

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.