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Questions and Answers
All of the following could own group life insurance EXCEPT
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?
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
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
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
Which of the following is called a 'second-to-die' policy?
Which of the following is called a 'second-to-die' policy?
Which of the following statements about group life is correct?
Which of the following statements about group life is correct?
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value?
A Straight Life policy has what type of premium?
A Straight Life policy has what type of premium?
Concerning Juvenile Life insurance, which of the following statements is INCORRECT?
Concerning Juvenile Life insurance, which of the following statements is INCORRECT?
What is the purpose of establishing the target premium for a universal life policy?
What is the purpose of establishing the target premium for a universal life policy?
What type of life insurance policy offers pure death protection?
What type of life insurance policy offers pure death protection?
What elements of an adjustable life policy can be changed by the policyowners?
What elements of an adjustable life policy can be changed by the policyowners?
What type of policy pays a specified face amount if the insured dies during the 20-year premium-paying period?
What type of policy pays a specified face amount if the insured dies during the 20-year premium-paying period?
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
When would a 20-pay whole life policy endow?
When would a 20-pay whole life policy endow?
What happens to the premium in an annually renewable term life policy?
What happens to the premium in an annually renewable term life policy?
What age must the insured attain in order to receive the whole life policy's face amount?
What age must the insured attain in order to receive the whole life policy's face amount?
What type of life insurance policy is Life Paid-up at age 65?
What type of life insurance policy is Life Paid-up at age 65?
What is the main advantage of converting from group life insurance to individual coverage?
What is the main advantage of converting from group life insurance to individual coverage?
What is the major difference between the most common types of whole life policies?
What is the major difference between the most common types of whole life policies?
What type of life insurance is best suited to cover a mortgage?
What type of life insurance is best suited to cover a mortgage?
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Who is entitled to the cash values in a life insurance policy?
Who is entitled to the cash values in a life insurance policy?
In variable universal life insurance, to what policy component does the term variable refer?
In variable universal life insurance, to what policy component does the term variable refer?
What are the two types of interest rates in universal life policies?
What are the two types of interest rates in universal life policies?
How is the premium determined in a joint life insurance policy?
How is the premium determined in a joint life insurance policy?
Under a 20-pay whole life policy, how long must premiums be paid to ensure the death benefit?
Under a 20-pay whole life policy, how long must premiums be paid to ensure the death benefit?
What characteristics will underwriters consider before issuing a group life policy?
What characteristics will underwriters consider before issuing a group life policy?
What type of life insurance policy does an insured have if the cash value is significantly lower this month than last month?
What type of life insurance policy does an insured have if the cash value is significantly lower this month than last month?
What type of life insurance policy would suit a borrower of $10,000 on a 5-year note?
What type of life insurance policy would suit a borrower of $10,000 on a 5-year note?
What are the living benefits of whole life insurance?
What are the living benefits of whole life insurance?
What does 'level' refer to in level term insurance?
What does 'level' refer to in level term insurance?
What must an employee provide to join group life insurance coverage outside of the open enrollment period?
What must an employee provide to join group life insurance coverage outside of the open enrollment period?
What universal life option has a gradually increasing cash value and a level death benefit?
What universal life option has a gradually increasing cash value and a level death benefit?
Whole life policies provide protection until the insured reaches what age?
Whole life policies provide protection until the insured reaches what age?
Why are policy loans not available on term insurance?
Why are policy loans not available on term insurance?
Group life insurance policies are written as what type of insurance?
Group life insurance policies are written as what type of insurance?
Who is insured under a juvenile life policy?
Who is insured under a juvenile life policy?
In annually renewable term policies, what is the annual premium based upon?
In annually renewable term policies, what is the annual premium based upon?
Who owns a group life insurance contract?
Who owns a group life insurance contract?
What type of whole life insurance policy generates immediate cash value?
What type of whole life insurance policy generates immediate cash value?
What type of life insurance policy provides permanent protection?
What type of life insurance policy provides permanent protection?
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
What type of policy issues certificates of insurance to the insureds?
What type of policy issues certificates of insurance to the insureds?
Regarding taxation, how does the cash value of a universal life policy accumulate?
Regarding taxation, how does the cash value of a universal life policy accumulate?
What type of policy is typically issued without proof of insurability from the insured?
What type of policy is typically issued without proof of insurability from the insured?
What type of premium is charged on a straight life policy?
What type of premium is charged on a straight life policy?
What is the death protection component of a universal life policy expressed as?
What is the death protection component of a universal life policy expressed as?
In term policies, what happens to the premium throughout the term of the policy?
In term policies, what happens to the premium throughout the term of the policy?
When does an adjustable life policy accumulate cash value?
When does an adjustable life policy accumulate cash value?
What happens to the cash value when a whole life insurance policy matures?
What happens to the cash value when a whole life insurance policy matures?
What are the death benefit options in universal life policies?
What are the death benefit options in universal life policies?
What policy component must decrease in decreasing term insurance?
What policy component must decrease in decreasing term insurance?
What type of whole life insurance policies only requires a payment of premium at its inception?
What type of whole life insurance policies only requires a payment of premium at its inception?
What portion of the death benefit will be paid to the beneficiary if the owner of a whole life policy dies at age 80?
What portion of the death benefit will be paid to the beneficiary if the owner of a whole life policy dies at age 80?
What kind of policy requires that the policyowner only pays premiums for a specified number of years?
What kind of policy requires that the policyowner only pays premiums for a specified number of years?
Under Option B in a universal life policy, what happens to the death benefit?
Under Option B in a universal life policy, what happens to the death benefit?
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
In a joint life policy, when is the death benefit paid?
In a joint life policy, when is the death benefit paid?
What is the insured's age at the time the policy is renewed or replaced?
What is the insured's age at the time the policy is renewed or replaced?
What is a policy's savings element or living benefit called?
What is a policy's savings element or living benefit called?
What does it mean when something is withheld or postponed until a specified time or event in the future?
What does it mean when something is withheld or postponed until a specified time or event in the future?
What does it mean to have the cash value of a whole life policy reach the contractual face amount?
What does it mean to have the cash value of a whole life policy reach the contractual face amount?
What is the amount of benefit stated in the life insurance policy?
What is the amount of benefit stated in the life insurance policy?
What are contracts that offer guaranteed minimum or fixed benefits called?
What are contracts that offer guaranteed minimum or fixed benefits called?
What is policy termination due to nonpayment of premium called?
What is policy termination due to nonpayment of premium called?
What is the premium that does not change throughout the life of a policy?
What is the premium that does not change throughout the life of a policy?
What are benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses?
What are benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses?
What is the time when the face value is paid out in life policies?
What is the time when the face value is paid out in life policies?
What are financial instruments that may trade for value?
What are financial instruments that may trade for value?
What are contracts in which the cash values accumulate based upon a specific portfolio of stocks?
What are contracts in which the cash values accumulate based upon a specific portfolio of stocks?
What type of insurance provides financial protection from losses resulting from a death during a definite period?
What type of insurance provides financial protection from losses resulting from a death during a definite period?
What provides the greatest amount of coverage for the lowest premium?
What provides the greatest amount of coverage for the lowest premium?
_______ insurance has no cash value.
_______ insurance has no cash value.
What are the three basic types of term coverage available, based on how the face amount changes during the policy term?
What are the three basic types of term coverage available, based on how the face amount changes during the policy term?
What is the most common type of temporary protection purchased?
What is the most common type of temporary protection purchased?
What type of term insurance has a constant annual premium but a face amount that declines each year?
What type of term insurance has a constant annual premium but a face amount that declines each year?
What type of term policy has a death benefit of $0 at the end of the policy term?
What type of term policy has a death benefit of $0 at the end of the policy term?
What type of term insurance has level premiums and a death benefit that increases each year?
What type of term insurance has level premiums and a death benefit that increases each year?
What type of insurance provides lifetime (permanent) protection and accumulates cash value?
What type of insurance provides lifetime (permanent) protection and accumulates cash value?
What life insurance allows changes in face amount, premium amount, and duration?
What life insurance allows changes in face amount, premium amount, and duration?
What refers to a flexible premium policy that provides lifetime protection?
What refers to a flexible premium policy that provides lifetime protection?
What is also known as flexible premium adjustable life?
What is also known as flexible premium adjustable life?
If an insured skips a premium payment on a universal life policy, where may the missing premium be deducted from?
If an insured skips a premium payment on a universal life policy, where may the missing premium be deducted from?
What are the two options for death benefits in universal life insurance?
What are the two options for death benefits in universal life insurance?
What type of life insurance product has a fixed premium and a guaranteed minimum death benefit?
What type of life insurance product has a fixed premium and a guaranteed minimum death benefit?
In variable contracts, who bears the investment risk?
In variable contracts, who bears the investment risk?
What must agents selling variable life insurance products be registered with?
What must agents selling variable life insurance products be registered with?
What must an agent receive to sell variable life insurance policies?
What must an agent receive to sell variable life insurance policies?
What insurance is considered a traditional level premium contract?
What insurance is considered a traditional level premium contract?
What type of life insurance policy allows flexibility to accommodate changes in insurance needs?
What type of life insurance policy allows flexibility to accommodate changes in insurance needs?
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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
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Various types of policies cater to different insurance needs, from temporary to permanent coverage with varying cash values.
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Understanding the unique features and conditions of each policy is essential for selecting the appropriate life insurance option.### Life Insurance Policies
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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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