Life Insurance Policies Overview
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Questions and Answers

What happens if an insured skips a premium payment on a universal life policy?

  • The insurance coverage is terminated.
  • The policy lapses immediately.
  • The insured must pay a penalty fee.
  • The missing premium is deducted from the cash value. (correct)

    • How is the minimum premium related to the performance of a universal life policy?

  • It guarantees a higher death benefit.
  • It functions like a whole life insurance policy.
  • It makes the policy perform as an annually renewable term product. (correct)
  • It ensures maximum cash value accumulation.

    • What determines the premium amount for a universal life policy?

  • The desired cash value and death benefit. (correct)
  • Estimated market interest rates.
  • The insured's income level.
  • The insurer's cost of claims.

    • What is true about the interest rate in a universal life policy?

    <p>It is guaranteed but may vary by market conditions.</p> Signup and view all the answers

    Which death benefit option allows for the death benefit to remain level while cash value increases?

    <p>Option A (Level Death Benefit option).</p> Signup and view all the answers

    How does zero cash value targeted for age 100 affect the universal life policy?

    <p>It makes the policy act like a level term policy to age 100.</p> Signup and view all the answers

    What characterizes the insurance component of a universal life policy?

    <p>It is always annually renewable term insurance.</p> Signup and view all the answers

    Which of the following best describes the role of the target premium?

    <p>It is a recommended amount to cover insurance protection costs.</p> Signup and view all the answers

    What is the purpose of maintaining a corridor between cash value and death benefit in a life insurance policy?

    <p>To comply with the IRS definition of life insurance</p> Signup and view all the answers

    What is the consequence of failing to maintain the required corridor in a life insurance policy?

    <p>The policy may no longer be considered life insurance for tax purposes</p> Signup and view all the answers

    How does the Increasing Death Benefit option affect the death benefit over time?

    <p>It increases each year according to the cash value growth</p> Signup and view all the answers

    What is a distinguishing feature of variable life insurance compared to fixed life insurance?

    <p>Investment risk is borne by the policyowner</p> Signup and view all the answers

    Which option typically results in greater expenses for the policyholder?

    <p>Increasing Death Benefit options</p> Signup and view all the answers

    What happens to the cash value in variable life insurance policies?

    <p>It varies based on the performance of an investment portfolio</p> Signup and view all the answers

    What is required for a policy to retain tax advantages as life insurance?

    <p>A corridor between cash value and death benefit must be maintained</p> Signup and view all the answers

    Which statement best describes variable life insurance?

    <p>The cash value is linked to the performance of selected investments</p> Signup and view all the answers

    Which whole life policy typically has the highest annual premium?

    <p>Limited-Payment Life</p> Signup and view all the answers

    What is a key feature of Single Premium Whole Life (SPWL)?

    <p>A lump-sum payment guarantees lifetime coverage.</p> Signup and view all the answers

    What distinguishes Indexed Whole Life insurance from other types of whole life policies?

    <p>Cash value depends on the stock market performance.</p> Signup and view all the answers

    What is the primary benefit of limited-pay whole life insurance policies?

    <p>They ensure complete premium payment by a chosen age.</p> Signup and view all the answers

    Which of the following is NOT a characteristic of term life insurance?

    <p>Has a cash value component</p> Signup and view all the answers

    How does the premium structure of Indexed Whole Life improve protection against inflation?

    <p>The face amount increases annually based on CPI.</p> Signup and view all the answers

    What is a common characteristic of all types of whole life policies mentioned?

    <p>They accumulate cash value.</p> Signup and view all the answers

    What is a characteristic shared by Straight Life and Indexed Whole Life policies regarding death benefits?

    <p>Both offer level death benefits.</p> Signup and view all the answers

    What must a separate account established by a domestic insurer issuing variable contracts maintain?

    <p>Assets equal to the reserves and other contract liabilities</p> Signup and view all the answers

    What distinguishes variable universal life insurance from standard universal life insurance?

    <p>Inclusion of an investment component</p> Signup and view all the answers

    What is a key distinguishing feature of group insurance compared to individual insurance?

    <p>Control over the policy lies with the group sponsor.</p> Signup and view all the answers

    Which statement accurately reflects the dual regulation of variable life insurance products?

    <p>They fall under both insurance regulations and securities regulations</p> Signup and view all the answers

    What is NOT a requirement for agents selling variable life insurance products?

    <p>Registration with the SEC</p> Signup and view all the answers

    Which aspect is NOT typically considered by group underwriters?

    <p>The age of individual insureds.</p> Signup and view all the answers

    What happens to the policy in a group insurance arrangement?

    <p>A master policy is maintained by the sponsor.</p> Signup and view all the answers

    Which of the following is a key feature of variable universal life insurance?

    <p>Ability to increase or decrease the amount of insurance</p> Signup and view all the answers

    What factor is important for group underwriting to reduce adverse selection?

    <p>Minimum number of participants in the group.</p> Signup and view all the answers

    Which of the following is NOT a characteristic the group underwriter considers?

    <p>Sexual orientation of participants.</p> Signup and view all the answers

    Group insurance is often structured as which type of insurance?

    <p>Annually renewable term insurance.</p> Signup and view all the answers

    Who typically holds the master policy in a group insurance arrangement?

    <p>The group sponsor, often the employer.</p> Signup and view all the answers

    Which of the following groups can sponsor a group insurance policy?

    <p>Any organization formed for a purpose other than obtaining insurance.</p> Signup and view all the answers

    What is the minimum coverage amount for an individual life insurance policy after the termination of a group policy?

    <p>$1,000</p> Signup and view all the answers

    What is the maximum coverage amount for an individual life insurance policy issued after group policy termination?

    <p>The original policy amount</p> Signup and view all the answers

    Under what condition is an individual entitled to an individual life insurance policy upon termination of the group policy?

    <p>If they have been insured for at least 5 years</p> Signup and view all the answers

    What happens if a person dies before applying for an individual policy after their group policy terminates?

    <p>The individual policy amount is paid under the group policy</p> Signup and view all the answers

    Who is the owner of the master policy in a group credit life insurance plan?

    <p>The creditor</p> Signup and view all the answers

    What type of insurance is credit life insurance commonly written as?

    <p>Decreasing term insurance</p> Signup and view all the answers

    What is the primary purpose of credit life insurance?

    <p>To pay off the balance of a loan upon the debtor's death</p> Signup and view all the answers

    Which statement is true regarding credit life insurance payouts?

    <p>It cannot exceed the balance of the debt</p> Signup and view all the answers

    Study Notes

    Life Insurance Policies

    • Life insurance provides financial protection for beneficiaries upon the insured's death.
    • Different policies cater to varying needs and circumstances.

    Types of Life Insurance

    • Term Insurance: Temporary life insurance coverage for a specific period. It offers the lowest premiums for the highest coverage compared to other types.
    • Level Term Insurance: Provides a fixed death benefit throughout the policy term. Premiums remain constant.
    • Annually Renewable Term: Pure form of term insurance. Death benefit remains fixed. The premium increases annually without proof of insurability.
    • Decreasing Term Insurance: Death benefit decreases over time. Premiums are constant. Suitable for debt protection (e.g., mortgage)
    • Increasing Term Insurance: Death benefit increases each year. Premiums are constant. Ideal for rising living costs.
    • Return of Premium (ROP): Pays back premiums to beneficiaries if the insured lives beyond the policy term.
    • Whole Life Insurance: Provides lifetime protection and builds a cash value (savings element).
    • Continuous Premium/Straight Life: Premiums paid throughout the insured's life.
    • Limited Payment Whole Life: Premiums paid for a specified timeframe (typically 20 or 30 years) until the policy matures.
    • Single Premium Whole Life: One-time premium payment covers the entire policy term.
    • Indexed Whole Life: Cash value is linked to an index, such as the S&P 500, and the face amount adjusts accordingly.
    • Variable Life Insurance: Cash value fluctuates based on the performance of a portfolio (e.g., stocks, bonds). Risk borne by policyholder.
    • Flexible Premium Policies/Adjustable Life: Adjustable level of coverage, premiums, and /or payment periods (allows policy adjustments to account for needs and lifestyle changes).
    • Universal Life Insurance: Flexible, adjustable premium policies. Also known as "flexible premium adjustable life."
    • Group Life Insurance: Covers multiple people, often employees of an organization. The main contract is typically held by the employer and participants have certificates of insurance.
    • Juvenile Life Insurance: Insurance for minors.
    • Joint Life/First-to-die: Multiple lives covered. Pays out on the first death.
    • Survivorship/Second-to-die: Multiple lives covered. Pays out on the last death.

    Credit Life Insurance

    • Coverage specifically for debt repayment. Pays off the balance of a loan/debt upon the debtor's passing.

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    Related Documents

    Types Of Life Insurance Policies PDF

    Description

    This quiz explores the various types of life insurance policies, including term insurance and their unique features. Test your understanding of how these policies provide financial protection and meet different needs. Gain insight into the pros and cons of each insurance type.

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