Life Insurance Policies Flashcards

Questions and Answers

All of the following could own group life insurance EXCEPT

An alumni group

A group needing low-cost life insurance (correct)

A debtor group

A group sponsored by an employer

Which of the following Life Insurance policies would be considered interest sensitive?

Whole life

Adjustable life

Increasing term

Universal life (correct)

All of the following are characteristics of a group life insurance plan EXCEPT

The cost of the plan is determined by the average age of the group

The participants receive a Certificate of Insurance as their proof of insurance

A minimum number of participants is required in order to underwrite the plan

There is a requirement to prove insurability on the part of the participants (correct)

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first Signup and view all the answers

Which of the following is called a 'second-to-die' policy?

Survivorship life Signup and view all the answers

Which of the following statements about group life is correct?

The cost of coverage is based on the ratio of men and women in the group Signup and view all the answers

Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?

Variable universal life Signup and view all the answers

A Straight Life policy has what type of premium?

A level annual premium for the life of the insured Signup and view all the answers

Concerning Juvenile Life insurance, which of the following statements is INCORRECT?

Juvenile Life is classified as any life insurance purchased by a minor Signup and view all the answers

What is the purpose of establishing the target premium for a universal life policy?

To prevent the policy from lapsing. Signup and view all the answers

What type of life insurance policy offers pure death protection?

Term. Signup and view all the answers

What elements of an adjustable life policy can be changed by the policyowners?

The amount and payment period of the premium, the face amount, and the period for protection. Signup and view all the answers

What type of policy pays a specified face amount if the insured dies during the 20-year premium-paying period?

20-year level term. Signup and view all the answers

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Universal life. Signup and view all the answers

When would a 20-pay whole life policy endow?

When the insured reaches age 100. Signup and view all the answers

What happens to the premium in an annually renewable term life policy?

The premium increases with each renewal. Signup and view all the answers

What age must the insured attain in order to receive the whole life policy's face amount?

Age 100. Signup and view all the answers

What type of life insurance policy is Life Paid-up at age 65?

Limited-pay whole life. Signup and view all the answers

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability is not required. Signup and view all the answers

What is the major difference between the most common types of whole life policies?

Premium payment mode. Signup and view all the answers

What type of life insurance is best suited to cover a mortgage?

Decreasing term. Signup and view all the answers

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

Evidence of insurability. Signup and view all the answers

Who is entitled to the cash values in a life insurance policy?

The policyowner. Signup and view all the answers

In variable universal life insurance, to what policy component does the term variable refer?

Cash value and death benefit. Signup and view all the answers

What are the two types of interest rates in universal life policies?

Guaranteed and current. Signup and view all the answers

How is the premium determined in a joint life insurance policy?

The premium is based on the average age of the insureds. Signup and view all the answers

Under a 20-pay whole life policy, how long must premiums be paid to ensure the death benefit?

For 20 years or until the insured's death, whichever occurs first. Signup and view all the answers

What characteristics will underwriters consider before issuing a group life policy?

Group's purpose, size, financial strength, and turnover. Signup and view all the answers

What type of life insurance policy does an insured have if the cash value is significantly lower this month than last month?

Variable. Signup and view all the answers

What type of life insurance policy would suit a borrower of $10,000 on a 5-year note?

Decreasing term. Signup and view all the answers

What are the living benefits of whole life insurance?

Loan values. Signup and view all the answers

What does 'level' refer to in level term insurance?

Face amount. Signup and view all the answers

What must an employee provide to join group life insurance coverage outside of the open enrollment period?

Evidence of insurability. Signup and view all the answers

What universal life option has a gradually increasing cash value and a level death benefit?

Option A. Signup and view all the answers

Whole life policies provide protection until the insured reaches what age?

Age 100. Signup and view all the answers

Why are policy loans not available on term insurance?

There is no cash value to borrow against. Signup and view all the answers

Group life insurance policies are written as what type of insurance?

Annually renewable term. Signup and view all the answers

Who is insured under a juvenile life policy?

A minor. Signup and view all the answers

In annually renewable term policies, what is the annual premium based upon?

The insured's attained age. Signup and view all the answers

Who owns a group life insurance contract?

The employer. Signup and view all the answers

What type of whole life insurance policy generates immediate cash value?

Single premium whole life. Signup and view all the answers

What type of life insurance policy provides permanent protection?

Whole life. Signup and view all the answers

Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?

Universal life. Signup and view all the answers

What type of policy issues certificates of insurance to the insureds?

Group policy. Signup and view all the answers

Regarding taxation, how does the cash value of a universal life policy accumulate?

Tax deferred. Signup and view all the answers

What type of policy is typically issued without proof of insurability from the insured?

Group policy. Signup and view all the answers

What type of premium is charged on a straight life policy?

A level premium for the life of the insured. Signup and view all the answers

What is the death protection component of a universal life policy expressed as?

Annually renewable term. Signup and view all the answers

In term policies, what happens to the premium throughout the term of the policy?

The premium remains level. Signup and view all the answers

When does an adjustable life policy accumulate cash value?

When the premiums paid are more than the cost of the policy. Signup and view all the answers

What happens to the cash value when a whole life insurance policy matures?

Cash value is paid to the policyowner. Signup and view all the answers

What are the death benefit options in universal life policies?

Option A - level death benefit; Option B - increasing death benefit. Signup and view all the answers

What policy component must decrease in decreasing term insurance?

Face amount. Signup and view all the answers

What type of whole life insurance policies only requires a payment of premium at its inception?

Single premium whole life. Signup and view all the answers

What portion of the death benefit will be paid to the beneficiary if the owner of a whole life policy dies at age 80?

The full death benefit. Signup and view all the answers

What kind of policy requires that the policyowner only pays premiums for a specified number of years?

Limited-pay whole life. Signup and view all the answers

Under Option B in a universal life policy, what happens to the death benefit?

The death benefit increases each year by the amount of the cash value increases. Signup and view all the answers

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

Whole life. Signup and view all the answers

In a joint life policy, when is the death benefit paid?

Upon the first death. Signup and view all the answers

What is the insured's age at the time the policy is renewed or replaced?

Attained age. Signup and view all the answers

What is a policy's savings element or living benefit called?

Cash value. Signup and view all the answers

What does it mean when something is withheld or postponed until a specified time or event in the future?

Deferred. Signup and view all the answers

What does it mean to have the cash value of a whole life policy reach the contractual face amount?

Endow. Signup and view all the answers

What is the amount of benefit stated in the life insurance policy?

Face amount. Signup and view all the answers

What are contracts that offer guaranteed minimum or fixed benefits called?

Fixed life insurance products. Signup and view all the answers

What is policy termination due to nonpayment of premium called?

Lapse. Signup and view all the answers

What is the premium that does not change throughout the life of a policy?

Level premium. Signup and view all the answers

What are benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses?

Nonforfeiture values. Signup and view all the answers

What is the time when the face value is paid out in life policies?

Policy maturity. Signup and view all the answers

What are financial instruments that may trade for value?

Securities. Signup and view all the answers

What are contracts in which the cash values accumulate based upon a specific portfolio of stocks?

Variable life insurance products. Signup and view all the answers

What type of insurance provides financial protection from losses resulting from a death during a definite period?

Term life insurance. Signup and view all the answers

What provides the greatest amount of coverage for the lowest premium?

Term insurance. Signup and view all the answers

_______ insurance has no cash value.

Term. Signup and view all the answers

What are the three basic types of term coverage available, based on how the face amount changes during the policy term?

Level, increasing, decreasing. Signup and view all the answers

What is the most common type of temporary protection purchased?

Level term insurance. Signup and view all the answers

What type of term insurance has a constant annual premium but a face amount that declines each year?

Decreasing term insurance. Signup and view all the answers

What type of term policy has a death benefit of $0 at the end of the policy term?

Decreasing term. Signup and view all the answers

What type of term insurance has level premiums and a death benefit that increases each year?

Increasing term. Signup and view all the answers

What type of insurance provides lifetime (permanent) protection and accumulates cash value?

Whole life insurance. Signup and view all the answers

What life insurance allows changes in face amount, premium amount, and duration?

Adjustable life. Signup and view all the answers

What refers to a flexible premium policy that provides lifetime protection?

Universal life insurance. Signup and view all the answers

What is also known as flexible premium adjustable life?

Universal life insurance. Signup and view all the answers

If an insured skips a premium payment on a universal life policy, where may the missing premium be deducted from?

The policy's cash value. Signup and view all the answers

What are the two options for death benefits in universal life insurance?

Option A: level death benefit; Option B: increasing death benefit. Signup and view all the answers

What type of life insurance product has a fixed premium and a guaranteed minimum death benefit?

Variable life insurance. Signup and view all the answers

In variable contracts, who bears the investment risk?

The policyowner. Signup and view all the answers

What must agents selling variable life insurance products be registered with?

FINRA. Signup and view all the answers

What must an agent receive to sell variable life insurance policies?

A securities license. Signup and view all the answers

What insurance is considered a traditional level premium contract?

Straight life. Signup and view all the answers

What type of life insurance policy allows flexibility to accommodate changes in insurance needs?

Adjustable life. Signup and view all the answers

Study Notes

Life Insurance Basics

Target Premium: Established in universal life policies to prevent lapsing.
Term Insurance: Provides pure death protection with no cash value.

Types of Policies

Adjustable Life: Policyowners can change premiums, face amounts, and protection duration.
20-Year Level Term: Pays a specified amount if the insured dies within 20 years; no payout if death occurs after the term.
Universal Life: Allows skipping of premium payments without policy lapse.
Whole Life: Protects until the insured reaches age 100, providing both a death benefit and cash value.
Decreasing Term Insurance: Suited for mortgage coverage as the face value decreases over time.

Policy Characteristics

Cash Value: The savings element or living benefit found in whole and universal life policies.
Premium Structures: Whole life with level premiums, while term policies may have increasing costs upon renewal.
Group Life Insurance: Typically annually renewable term, requires minimum participant numbers, and doesn’t need individual proof of insurability.

Death Benefits and Options

Death Benefits:
- Option A in universal life offers a level death benefit.
- Option B allows for an increasing death benefit as cash value grows.
Joint Life Policies: Death benefit is paid upon the first death.

Unique Aspects of Life Insurance Policies

Variable Life Insurance: Investment-based product with fluctuating cash value and guaranteed minimum death benefit.
Limited-Pay Whole Life: Requires limited premium payments over a specified time but offers permanent protection.
Survivorship Life: Lower premiums since the benefit is paid on the last death.

Termination and Lapsing

Lapse Definition: Termination of policy due to nonpayment of premium.
Policy Maturity: When the face value is paid out, typically at age 100 for whole life.

Important Definitions

Face Amount: The amount stated in the policy to be paid upon death.
Level Premium: The premium that remains unchanged throughout the policy's life.
Nonforfeiture Values: Benefits that cannot be lost if the policy is surrendered.
Endowment: Occurs when cash value equals face amount.

Conversion and Insurability

Conversion from Group to Individual: No evidence of insurability is required when moving from group life insurance.

Special Conditions in Policies

Evidence of Insurability: Required when increasing coverage in adjustable life policies or if joining group plans outside of open enrollment.
Variable Policies: Provide death benefits that vary with investment performance and expose the policy owner to investment risk.

Premium Payment Conditions

Joint Life vs. Survivorship Life: Joint life policies pay out upon the first death, whereas survivorship policies pay out after the second death.
Decreasing Term Premiums: Remain level despite the decreasing face amount throughout the duration of the policy.

Final Insights

Various types of policies cater to different insurance needs, from temporary to permanent coverage with varying cash values.
Understanding the unique features and conditions of each policy is essential for selecting the appropriate life insurance option.### Life Insurance Policies
20-Pay Life Policy: Premiums are paid for 20 years to ensure the policy matures when the insured reaches age 100; death before premium completion results in a death benefit for beneficiaries.

Second-to-Die Policy

Survivorship Life: Also known as "second-to-die" or "last survivor" policy; insures multiple lives with premiums determined by joint ages, pays out upon the death of the last insured.

Group Life Insurance

Cost Structure: Coverage costs depend on the ratio of men to women; typically lower than individual policies due to group pooling.
Conversion Options: Can convert to individual whole life policy, not term insurance.
Documentation: Group sponsors receive a master contract, and participants receive certificates of insurance.

Policy Loans

Variable Universal Life: Allows policyowners to borrow against the cash value of the policy; term insurance policies do not have cash value.

Straight Life Policy

Premium Type: Features a level annual premium throughout the insured's life, providing a consistent guaranteed death benefit.

Juvenile Life Insurance

Applicant: Typically a parent or guardian applies for insurance on a minor's life.
Policy Classification: Classified specifically as insurance written on a minor’s life, not merely any insurance purchased by a minor.

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Description

Explore the essential concepts of life insurance with these flashcards. Each card covers key terms and definitions related to various types of life insurance policies, including universal and term insurance. Perfect for anyone looking to deepen their knowledge of insurance fundamentals.