Types of Insurance Policies Flashcards

Questions and Answers

Which statement is true regarding a variable whole life policy?

True

Which of the following life insurance policies combine term insurance with an investment element?

Universal Life (correct)

Term Life

Whole Life

Endowment Policy

Which of the following types of policies pays a benefit if the insured goes blind?

Health Insurance

Life Insurance

Accidental Death and Dismemberment (AD&D) (correct)

Whole Life

What kind of life policy is best to protect a 15-year mortgage?

15 year decreasing term Signup and view all the answers

What type of term coverage allows coverage after the initial policy period?

Renewable Signup and view all the answers

What kind of life insurance policy provides a cash value along with a level face amount?

Whole Life Signup and view all the answers

What is the term for a policy where the premium stays fixed for the first 5 years and increases thereafter?

Modified Whole Life Signup and view all the answers

What type of insurance policy supplies an income stream over a set time after the insured dies?

Family Maintenance Policy Signup and view all the answers

What does Stranger-Owned Life Insurance (STOLI) involve?

A third-party with no insurable interest Signup and view all the answers

What will an insurance company pay the beneficiary of a $20,000 20-Year Endowment policy if the insured dies after 10 years?

20,000 death benefit Signup and view all the answers

The amount of coverage on a group credit life policy is limited to what?

The insured's total loan value Signup and view all the answers

Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?

Policyowner Signup and view all the answers

What has limited premium payments to a specified number of years?

Limited-Pay Life Policy Signup and view all the answers

Premiums may be applied as a credit against income tax with a Universal Life policy.

False Signup and view all the answers

Under a graded premium policy, how are the premiums structured?

Are lower during the policy's early years Signup and view all the answers

Modified Whole Life is considered interest-sensitive.

False Signup and view all the answers

Premiums for whole life policies are payable throughout the insured's lifetime.

True Signup and view all the answers

A life policy with a fluctuating death benefit based on underlying investments is known as?

Variable Life Signup and view all the answers

Premiums for a Straight Life policy are payable for as long as there is coverage in force.

True Signup and view all the answers

What advantage does the renewability feature give to a term policy?

The insured may extend the coverage period Signup and view all the answers

Which information is NOT required in a Whole Life policy?

Policy guaranteed dividend table Signup and view all the answers

What defines a Modified Endowment Contract (MEC)?

Exceeds the maximum premium amount allowed for life insurance recognition Signup and view all the answers

All of these are characteristics of an Adjustable Life policy EXCEPT?

Policy dividends Signup and view all the answers

What type of policy did Y purchase that includes an other insured rider?

Whole Life Signup and view all the answers

Credit Life insurance is issued in an amount not to exceed what?

The amount of the loan Signup and view all the answers

F needs a life insurance policy that covers a limited time with changing death benefits. What kind of policy does he need?

Decreasing term policy Signup and view all the answers

What need is satisfied by adjustable life insurance?

Insured's need for flexible premiums Signup and view all the answers

A policy that becomes a Modified Endowment Contract (MEC) will lose many tax advantages.

True Signup and view all the answers

Which policy requires an agent to register with NASD before selling?

Variable Life Signup and view all the answers

Which of these types of life insurance allows the policy owner to choose from a selection of investment options?

Variable Life Signup and view all the answers

Which type of life policy contains both a monthly mortality charge and self-directed investment choices?

Variable Universal Life Signup and view all the answers

Credit life insurance is typically issued with which type of coverage?

Decreasing Term Signup and view all the answers

Which of these would be considered a Limited Pay Life policy?

Life Paid Up at Age 70 Signup and view all the answers

Cash value in a whole life policy may be borrowed against.

True Signup and view all the answers

How long does coverage normally remain on a limited pay life policy?

Age 100 Signup and view all the answers

What kind of life insurance starts as temporary coverage but can be modified to permanent coverage?

Convertible Term Signup and view all the answers

What kind of life insurance provides the greatest protection for a temporary time period?

Term Life Signup and view all the answers

What type of policy does P own if the face amount is paid if he lives to age 70?

Endowment at age 70 Signup and view all the answers

What type of rider can cover S's children under a whole life policy?

Child term rider Signup and view all the answers

Which type of policy allows control over the investment aspect and has adjustable death benefits?

Universal Life Signup and view all the answers

The investment gains from a Universal Life Policy usually go toward what?

The cash value Signup and view all the answers

What does a Face Amount Plus Cash Value policy pay at the insured's death?

Face amount plus the policy's cash value Signup and view all the answers

What type of life insurance are credit policies issued as?

Term Signup and view all the answers

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date Signup and view all the answers

What kind of policy accumulates cash value faster in the early years?

20 Pay Life Signup and view all the answers

What kind of term life policy is used for covering an insured's mortgage balance?

Decreasing Signup and view all the answers

What type of policy should N purchase for level premiums, permanent protection, and paid-up at retirement?

30 Pay Life Signup and view all the answers

What is true concerning a Variable Universal Life policy?

True Signup and view all the answers

Whole Life policies provide partial withdrawal features beyond a surrender charge period.

False Signup and view all the answers

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term Life Signup and view all the answers

Variable Life products require a producer to hold what?

Life insurance and security license Signup and view all the answers

Which type of permanent life insurance policy offers the highest initial cash value?

Single Premium Signup and view all the answers

What is the policy type that has a death benefit that adjusts periodically and is for a specific time?

Decreasing Term Signup and view all the answers

The Universal Life Policy is called an unbundled Life Policy because it shows costs including what?

Cost of Insurance Signup and view all the answers

What type of policy covers two lives and pays after the first one dies?

Joint Life Policy Signup and view all the answers

How does a typical Variable Life Policy investment account grow?

Through mutual funds, stocks, bonds Signup and view all the answers

Insurance that covers an insured's entire life with level premiums paid for a limited time is called?

Limited Pay Life Signup and view all the answers

Which of the following life insurance policies combines term insurance with an investment element?

Universal Life Signup and view all the answers

When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, what is that called?

Conversion provision Signup and view all the answers

Which feature in a group Term Life policy enables continuity of insurance post-group?

Conversion privilege Signup and view all the answers

Which policy type is considered overfunded according to IRS guidelines?

Modified Endowment Contract Signup and view all the answers

Variable Whole Life Insurance can accurately be described as?

Both an insurance and securities product Signup and view all the answers

When does the whole life insurance policy endow?

When cash value equals the death benefit Signup and view all the answers

What type of product requires proper FINRA securities registration for sale?

Variable Life Signup and view all the answers

What is the most important factor when deciding to convert term insurance?

The cost Signup and view all the answers

What policy best meets N's needs for insurance that allows changes as life evolves?

Universal Life Signup and view all the answers

What type of policy does D need for coverage for a limited time at the lowest premium?

Level term Signup and view all the answers

What type of life insurance policy did K purchase that paid 10% interest in the early years?

Universal Life Policy Signup and view all the answers

Study Notes

Types of Life Insurance Policies

Variable Whole Life Policy: Guarantees a minimum death benefit.
Universal Life Insurance: Combines term insurance with an investment component.
Accidental Death & Dismemberment (AD&D): Provides benefits for blindness.
Decreasing Term Insurance: Ideal for protecting a 15-year mortgage.
Renewable Term Policy: Allows continuation of coverage after the initial term.
Whole Life Insurance: Offers a cash value accumulation alongside a level death benefit.
Modified Whole Life: Features fixed premiums for initial years, increasing thereafter.
Family Maintenance Policy: Supplies an income stream upon the insured's death.
Stranger-Originated Life Insurance (STOLI): Involves purchasing life insurance solely to sell to a third party without insurable interest.

Policy Benefits and Coverage

Endowment Policies: Beneficiary receives the face amount if insured dies or upon maturity.
Credit Life Insurance: Coverage limited to the insured's total loan value, typically issued as decreasing term insurance.
Investor-Originated Life Insurance (IOLI): Benefit paid to the policy owner upon the insured's death.
Limited Pay Life Policies: Premium payments are restricted to a specific number of years.
Convertible Term Insurance: Can be converted to permanent coverage without proof of insurability.

Policy Characteristics

Universal Life Policy: Known as unbundled due to transparency in interest, insurance costs, and expenses.
Adjustable Life Policies: Provide flexibility in face amounts and premiums but do not allow adjustments using dividends.
Equity Indexed Life Insurance: Combines life insurance with equity markets but does not allow changes to premiums based on performance.
Variable Life Insurance: Includes underlying equity investments and is characterized by no guaranteed returns on investment accounts.

Premium and Benefits Structure

Graded Premium Policies: Lower premiums in early years, increasing thereafter.
Whole Life Policies: Provide level premiums throughout the insured's lifetime and may allow cash value loans.
Family Income Policies: Pay monthly income to beneficiaries for a specified period after death, with a lump sum at the end.
Joint Life Policies: Pay face amounts upon the death of the first insured.

Policy Transactions and Alterations

Automatic Premium Loan: Not available for decreasing term policies.
Conversion Privilege: Allows continuation of coverage without proof of insurability upon leaving a group policy.
Modified Endowment Contracts (MEC): Result from exceeding IRS premium limits, losing tax advantages.

Insurability and Coverage Selection

Policyowners’ Age Impact: Renewal premiums are based on the insured's ages upon renewal.
Modified Endowment Contracts: Identify policies that surpass IRS guideline limits for life insurance.
Term Life Insurance: Ideal for those seeking maximum coverage for a limited term.

Conclusion of Policies

Whole Life Policies: Endow when cash value equals the death benefit.
Universal Life Policies: Require proper securities registration for agents to sell.
Level Premiums: Generally associated with whole life and limited pay life products.

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Description

Test your knowledge of various insurance policies with these flashcards. Each card presents a question about different aspects of life insurance, including variable whole life policies and others. Perfect for anyone looking to deepen their understanding of insurance terminology.