Types of Individual Life Insurance
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Questions and Answers

What is a key feature that differentiates whole life insurance from term life insurance?

  • It offers lower premiums than term life insurance.
  • It has a cash value component. (correct)
  • It provides coverage for a limited time period.
  • It does not guarantee a death benefit.

    • How do premiums for whole life insurance typically behave as the insured ages?

  • They decrease over time.
  • They remain fixed. (correct)
  • They vary based on market conditions.
  • They increase gradually.

    • What happens to the death benefit if there are any unpaid loans or withdrawals from a whole life insurance policy?

  • The death benefit is eliminated.
  • The death benefit becomes a cash payment.
  • The death benefit decreases. (correct)
  • The death benefit is unaffected.

    • What is a characteristic of participating whole life policies?

    <p>They pay dividends based on the insurer's performance. (A)</p> Signup and view all the answers

    What is one advantage of the cash value accumulation in whole life insurance?

    <p>It grows at a guaranteed or variable interest rate. (D)</p> Signup and view all the answers

    Which aspect makes whole life insurance a long-term financial commitment?

    <p>It is designed to provide coverage for life. (A)</p> Signup and view all the answers

    What does an endowment policy primarily combine?

    <p>Life insurance and savings/investment elements. (D)</p> Signup and view all the answers

    What is one potential downside of whole life insurance when compared to term life insurance?

    <p>It typically comes with higher premiums. (A)</p> Signup and view all the answers

    What is a key feature of guaranteed values in universal life policies?

    <p>They often have guaranteed minimum interest rates. (D)</p> Signup and view all the answers

    What does the corridor of insurance refer to in a life insurance policy?

    <p>The difference between the total death benefit and cash value of the policy. (B)</p> Signup and view all the answers

    Which of the following describes interest-sensitive whole life insurance?

    <p>It offers a guaranteed death benefit and cash value that varies with interest rates. (C)</p> Signup and view all the answers

    What is a common use of annuities?

    <p>To convert a lump sum into a series of payments for retirement income. (C)</p> Signup and view all the answers

    What flexibility does interest-sensitive whole life insurance offer to policyholders?

    <p>Adjustable premium payments based on current market conditions. (C)</p> Signup and view all the answers

    Which feature is often associated with interest-sensitive whole life insurance policies?

    <p>Participation in dividends, though not guaranteed. (A)</p> Signup and view all the answers

    What role does the annuity principle play in the agreement between an individual and an insurance company?

    <p>Involves payment in exchange for a series of future payments. (C)</p> Signup and view all the answers

    What security feature do universal life policies provide alongside cash value accumulation?

    <p>Guaranteed minimum death benefit. (B)</p> Signup and view all the answers

    What is the purpose of the Insurance Information & Privacy Protection Act?

    <p>To protect private information in the insurance industry (B)</p> Signup and view all the answers

    What regulatory body oversees the licensing of agents and brokers in North Carolina?

    <p>The Commissioner of Insurance (C)</p> Signup and view all the answers

    Which article specifically addresses general regulations for insurance?

    <p>Article 3 (B)</p> Signup and view all the answers

    What is the focus of the Unfair Trade Practices article?

    <p>To identify unfair practices in insurance transactions (C)</p> Signup and view all the answers

    What does Article 62 pertain to in North Carolina insurance regulations?

    <p>Life and health insurance guaranty associations (C)</p> Signup and view all the answers

    Which article is concerned with the solicitation of life insurance products?

    <p>Article 60 (B)</p> Signup and view all the answers

    What is required for continuing education as outlined in the North Carolina regulations?

    <p>Regularly scheduled educational courses (A)</p> Signup and view all the answers

    Which article defines penalties for misleading acts, such as false pretenses in the insurance sector?

    <p>Article 19 (C)</p> Signup and view all the answers

    What is a feature of a single premium annuity?

    <p>A one-time lump sum payment is made to purchase the annuity. (B)</p> Signup and view all the answers

    Which type of annuity offers benefits that fluctuate based on chosen investments?

    <p>Variable Annuity (D)</p> Signup and view all the answers

    When do payments start in an immediate annuity?

    <p>Right after the premium payment. (C)</p> Signup and view all the answers

    What is the characteristic of a joint life annuity?

    <p>Payments continue for the lives of both individuals but may reduce after one dies. (B)</p> Signup and view all the answers

    Which type of annuity guarantees a minimum return based on an equity index?

    <p>Equity Indexed Annuity (C)</p> Signup and view all the answers

    What happens to the premiums paid if an annuitant passes away before receiving benefits?

    <p>A designated beneficiary may receive the remaining premiums. (D)</p> Signup and view all the answers

    What does a fixed annuity provide in terms of payment amounts?

    <p>Payments are predetermined and stable. (A)</p> Signup and view all the answers

    What is the purpose of an annuity with a period certain?

    <p>To guarantee payments for a specific period. (D)</p> Signup and view all the answers

    What does the term 'aleatory' describe in insurance contracts?

    <p>Contracts where outcomes depend on uncertain events (D)</p> Signup and view all the answers

    What makes insurance contracts conditional?

    <p>They require the insured to pay premiums and meet certain conditions (D)</p> Signup and view all the answers

    Which cost comparison method provides a clearer understanding of life insurance costs over time?

    <p>Interest Adjusted Cost (A)</p> Signup and view all the answers

    What limitation does the Traditional Net Cost method have?

    <p>It does not account for the time value of money (A)</p> Signup and view all the answers

    What is the first step in the formation of a life insurance contract?

    <p>Completion of an insurance application (D)</p> Signup and view all the answers

    What is the purpose of an initial premium receipt in the insurance application process?

    <p>To serve as proof of premium payment at application submission (B)</p> Signup and view all the answers

    Why is understanding legal concepts such as aleatory and conditional important in insurance?

    <p>They help define the framework and enforceability of contracts (C)</p> Signup and view all the answers

    Which statement best describes the outcome of aleatory contracts?

    <p>The potential benefits may greatly exceed premiums paid (D)</p> Signup and view all the answers

    What is the primary purpose of the insurable interest principle in insurance policies?

    <p>To prevent insurance from being used for speculative purposes (C)</p> Signup and view all the answers

    What does misrepresentation on an insurance application entail?

    <p>Offering false information that affects the insurer's decision (A)</p> Signup and view all the answers

    In an insurance contract, which party is primarily bound by the terms as described by the concept of unilateral?

    <p>Only the insurer is bound to pay claims (D)</p> Signup and view all the answers

    What is the result of concealment in the context of insurance?

    <p>Providing grounds for the insurer to deny a claim (C)</p> Signup and view all the answers

    How does the adhesion principle affect the insured when negotiating an insurance policy?

    <p>Insured accepts the policy on a 'take it or leave it' basis (B)</p> Signup and view all the answers

    What is the main objective of the principle of indemnity in insurance?

    <p>To restore the insured to their pre-loss financial position (C)</p> Signup and view all the answers

    What action does impersonation refer to in the insurance context?

    <p>Deliberately falsifying personal data for gain (B)</p> Signup and view all the answers

    Which of the following statements about the consequences of misrepresentation and concealment is true?

    <p>Both actions can invalidate a claim or a policy. (D)</p> Signup and view all the answers

    Study Notes

    Types of Individual Life Insurance

    • Term Life Insurance: Temporary coverage for a specific period, no cash value, affordable, simple, renewal options, and convertible. Often chosen for specific financial responsibilities.
    • Level Term Life Insurance: Constant death benefit and premiums throughout the policy term (5-30+ years).
    • Decreasing Term Life Insurance: Death benefit decreases over time (typically annually), while premiums remain the same. Often used to cover debts that decrease, like mortgages.
    • Increasing Term Life Insurance: Death benefit increases over time, usually with increasing premiums. Helpful for rising financial obligations or inflation.
    • Renewable Term Life Insurance: Allows policy renewal without a medical exam, but premiums may increase based on age.
    • Convertible Term Life Insurance: Allows converting to a permanent policy (like whole or universal life) without a medical examination within a specified period.
    • Return of Premium Term Life Insurance: Premiums refunded if the policyholder outlives the term. Tends to have higher premiums.
    • Special Features: Some policies allow renewal after the term ends, potentially with increased premiums based on age and health
    • Convertibility: Allows switching from term to permanent coverage.

    Whole Life Insurance

    • Lifetime Coverage: Coverage lasts for the entire lifetime of the insured.
    • Guaranteed Death Benefit: Provides a guaranteed payout upon the insured's death.

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    Related Documents

    Life Insurance Study Guide PDF

    Description

    This quiz covers various types of individual life insurance, including term, level, decreasing, increasing, renewable, and convertible policies. Each type has unique features and benefits, making it important to understand their differences for better financial planning.

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