Life Insurance Policies Flashcards

Questions and Answers

What is Term Insurance?

Universal insurance with flexible premiums

Permanent protection with cash value

Insurance that pays a return of premiums

Temporary protection for a specific period of time (correct)

What does Level Term Insurance refer to?

A type of temporary protection where the death benefit remains the same throughout the policy's life.

Describe Level Premium Term.

It provides a level death benefit and a level premium during the policy term.

What is Annually Renewable Term (ART)?

A type of term insurance with a guaranteed renewable policy each year Signup and view all the answers

What characterizes Increasing Term Insurance?

It features level premiums and a death benefit that increases each year. Signup and view all the answers

What does Decreasing Term Insurance entail?

A policy with a level premium and a death benefit that decreases each year. Signup and view all the answers

What is Return of Premium Term Insurance?

Increasing term policy returning premiums if the insured survives Signup and view all the answers

What are Special Features in term insurance policies?

Most term policies are renewable, convertible, or both. Signup and view all the answers

What is a Renewable Provision?

Allows the policy owner to renew coverage without evidence of insurability. Signup and view all the answers

What does a Convertible Provision in a policy allow?

It lets the policy owner convert to a permanent insurance policy without proof of insurability. Signup and view all the answers

Define Permanent Life Insurance.

Insurance that builds cash value and remains in effect for the entire life of the insured. Signup and view all the answers

What is Whole Life Insurance?

It provides lifetime protection and includes a savings element. Signup and view all the answers

What characterizes Limited-Pay Whole Life Insurance?

Shorter premium payment period with higher premiums Signup and view all the answers

Describe Single Premium Whole Life Insurance.

Provides level death benefit for a one-time lump-sum payment until age 100. Signup and view all the answers

What is Modified Premium Whole Life Insurance?

A whole life policy with lower initial premiums for the first few years, then higher premiums. Signup and view all the answers

What does Fixed Equity Indexed Life refer to?

Insurance where cash value depends on the performance of an equity index. Signup and view all the answers

What is Universal Life Insurance?

It allows flexibility to adjust premiums over time Signup and view all the answers

What is the UL Minimum Premium?

The amount required to keep the policy in force for the current year. Signup and view all the answers

What does UL Target Premium refer to?

A recommended amount to maintain insurance protection throughout the policy's lifetime. Signup and view all the answers

What is meant by Contract Interest Rate?

The interest rate guaranteed by the insurer, usually between 3 to 6%. Signup and view all the answers

Describe Group Life Insurance.

Insurance issued to a sponsoring organization covering multiple individuals. Signup and view all the answers

What are Group Life Insurance Requirements?

Participants receive a certificate of insurance not a policy Signup and view all the answers

What are characteristics of Group Plans?

They are based on the purpose, size, turnover, and financial strength of the group. Signup and view all the answers

Explain the Conversion to Individual Policy characteristic.

Participants can convert to an individual policy without proving insurability after leaving the group. Signup and view all the answers

Study Notes

Term Insurance

Provides temporary coverage for a specified period, known for pure death protection.
Common types include level term, increasing term, and decreasing term.

Level Term Insurance

Most prevalent type of term insurance.
Features a constant death benefit throughout the policy's life.

Level Premium Term

Offers a consistent death benefit and premium during the policy term.
Premiums are averaged over the policy duration.

Annually Renewable Term (ART)

Considered the purest form of term insurance.
Death benefit remains constant while premiums increase annually based on age.

Increasing Term Insurance

Offers level premiums with an increasing death benefit each year during the policy term.

Decreasing Term Insurance

Features a level premium but a decreasing death benefit over the policy duration.

Return of Premium Term (ROP)

An increasing term policy that refunds the total premiums paid if the insured dies within a specified time or outlives the term.

Special Features of Term Insurance

Many policies are renewable and/or convertible.

Renewable Provision

Grants the policy owner the right to renew coverage without providing proof of insurability, with premiums based on current age.

Convertible Provision

Allows conversion of the policy to a permanent insurance policy without proof of insurability.

Permanent Life Insurance

Refers to policies that build cash value and remain in force for the insured's entire life or until age 100, contingent on premium payment.

Whole Life Insurance

Offers lifetime coverage, including a savings element (cash value).
Cash value equals the policy's face amount at age 100.

Characteristics of Whole Life

Includes level premiums, death benefits, cash value, and living benefits, allowing borrowing against cash value.

Basic Forms of Whole Life

Includes straight whole life, limited-pay whole life, and single premium whole life.

Straight Whole Life

Requires premium payments until death or age 100, lowest annual premium among options.

Limited-Pay Whole Life

Premiums are paid in full before age 100, resulting in higher payments but shorter duration.

Single Premium Whole Life

Provides a level death benefit with a one-time lump-sum payment, generating immediate cash.

Modified Premium Whole Life

Offers lower initial premiums that transition to higher premiums later on.

Fixed Equity Indexed Life

Relies on equity index performance (like S&P 500) to determine cash value; premiums are fixed and death benefits guaranteed.

Adjustable Life

Can function as term or permanent insurance, allowing policy owners to adjust coverage based on needs and premium affordability, with conversion options.

Universal Life (UL)

Provides flexibility in premium payments and coverage amounts.

UL Minimum Premium

The necessary amount to keep the policy active for the current year.

UL Target Premium

The recommended amount to ensure coverage is maintained throughout the policy's lifetime.

Contract Interest Rate

Guaranteed by the insurer, typically between 3-6%.

Current Interest Rate

Not guaranteed but may exceed the contract rate based on market conditions.

UL Policy Components

Comprises two parts: an insurance component (annually renewable term insurance) and a cash account.

UL Death Benefit Options

Option A: Level death benefit with increasing cash value, lowering insurer's pure insurance in later years.
Option B: Increasing death benefit that accounts for cash value growth annually.

Variable Life Insurance

Cash values are based on specific stock portfolios with no performance guarantees; they can be affected by inflation.

Variable Product Regulations

Regulated by both state and federal authorities as securities, requiring agents to be registered and licensed.

Joint Life Insurance

Insures two or more lives with premiums based on average joint age; death benefit is paid upon the first death.

Survivorship Life Insurance

Also known as second-to-die insurance, pays death benefit upon the last insured's death, often used for estate tax liabilities.

Life Insurance for Minors

In New York State, minors must be at least 14 ½, with specific beneficiary rules and limits on policy amounts based on the minor's age.

Credit Life Insurance

Covers a debtor's life to pay off loans upon death; the creditor owns and benefits from the policy.

Group Life Insurance

Issued to organizations covering multiple individuals, typically in employee-employer settings.

Group Life Insurance Requirements

Written as annually renewable insurance; evidence of insurability is usually not required. Participants receive certificates of insurance instead of policies.

Characteristics of Group Plans

Group underwriting considers purpose, size, turnover, and financial strength; costs are based on age and gender ratios.

Types of Plan Sponsors

May include employers, debtor groups, labor unions, credit unions, and other associations.

Group Underwriting Requirements

Each participant must complete an application identifying the insured and their beneficiaries.

Conversion to Individual Policy

Group insurance provides a conversion privilege to individual policies without insurability proof, typically within 31 days post-termination.

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Description

Test your knowledge of life insurance policies with these flashcards. This quiz covers various types of term insurance, including definitions and key concepts. Perfect for anyone studying insurance or preparing for exams.