Life Insurance Policies Flashcards
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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:

    <p>Hedge against inflation.</p> Signup and view all the answers

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

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

    Which of the following policies does NOT build cash value?

    <p>Term Life Insurance</p> Signup and view all the answers

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

    <p>Fixed Surrender Value.</p> Signup and view all the answers

    What are some characteristics of a universal life insurance policy?

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

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

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

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

    <p>Pre-death distributions are typically taxable.</p> 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?

    <p>Universal Life Policy.</p> Signup and view all the answers

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

    <p>Term, whole, and universal life insurance.</p> 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?

    <p>Joint.</p> Signup and view all the answers

    A Renewable Term Life insurance policy can be renewed:

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

    How are survivorship life insurance policies helpful in estate planning?

    <p>Provide funds to help pay taxes on assets.</p> Signup and view all the answers

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

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

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

    <p>Adjustable Life.</p> Signup and view all the answers

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

    <p>Survivorship life policy.</p> Signup and view all the answers

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

    <p>Survivorship Life Policy</p> Signup and view all the answers

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

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

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

    <p>Juvenile Insurance.</p> Signup and view all the answers

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

    <p>To renew the policy without producing proof of insurability.</p> Signup and view all the answers

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

    <p>Family Term Insurance Rider.</p> Signup and view all the answers

    What does a limited payment whole life policy provide?

    <p>Lifetime Protection.</p> 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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    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.

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