Types of Life Policies Flashcards
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Questions and Answers

What is the description of cash value growth?

Cash value growth

What type of premium do both Universal Life and Variable Universal Life policies have?

  • Flexible (correct)
  • Decreasing
  • Increasing
  • Level fixed

    • Which of the following best describes annually renewable term insurance?

  • Neither the premium nor the death benefit is affected by the insured's age.
  • It is level term insurance. (correct)
  • It requires proof of insurability at each renewal.
  • It provides an annually increasing death benefit.

    • Which type of policy would be best for someone who is financially limited until a car is paid off?

    <p>Modified Life</p> Signup and view all the answers

    What is the purpose of a suicide provision within a life insurance policy?

    <p>To protect the insurer from persons who purchase life insurance with the intention of committing suicide</p> Signup and view all the answers

    The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the?

    <p>Entire contract</p> Signup and view all the answers

    Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period?

    <p>Life income with period certain</p> Signup and view all the answers

    What provision in an insurance policy extends coverage beyond the premium due date?

    <p>Grace period</p> Signup and view all the answers

    All of the following are true regarding a decreasing term policy EXCEPT?

    <p>The payable premium amount steadily declines throughout the duration of the contract.</p> Signup and view all the answers

    Which of the following life insurance policies does NOT build cash value?

    <p>Guaranteed universal life</p> Signup and view all the answers

    Which option for Universal Life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

    <p>Option B</p> Signup and view all the answers

    Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be?

    <p>Adjusted to the insured's age at the time of renewal.</p> Signup and view all the answers

    Which statement is NOT true regarding a Straight Life policy?

    <p>Its premium steadily decreases over time, in response to its growing cash value.</p> Signup and view all the answers

    An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

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

    Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase, the premiums will?

    <p>Be level thereafter.</p> Signup and view all the answers

    Which of the following life insurance policies is designed to cover two people and pay benefits after both insureds have died?

    <p>Survivorship Universal Life</p> Signup and view all the answers

    All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT?

    <p>Upon conversion, the death benefit of the permanent policy will be reduced by 50%.</p> Signup and view all the answers

    Annually renewable term policies provide a level death benefit for a premium that?

    <p>Increases annually.</p> Signup and view all the answers

    Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

    <p>Limited pay whole life</p> Signup and view all the answers

    In a survivorship life policy, when does the insurer pay the death benefit?

    <p>Upon the last death</p> Signup and view all the answers

    The initial amount of credit life insurance may NOT exceed?

    <p>The amount to be repaid under the contract.</p> Signup and view all the answers

    What do Modified Life and Straight Life policies have in common?

    <p>Accumulation of cash value</p> Signup and view all the answers

    Which component increases in the increasing term insurance?

    <p>Death benefit</p> Signup and view all the answers

    An insured buys a 5-year level premium term policy with a face amount of $10,000. When the insured renews the policy in 5 years, what will happen to the premium?

    <p>It will increase because the insured will be 5 years older than when the policy was originally purchased.</p> Signup and view all the answers

    An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called?

    <p>Single premium whole life.</p> Signup and view all the answers

    Which of the following policies would be classified as a traditional level premium contract?

    <p>Straight Life</p> Signup and view all the answers

    Variable Whole Life insurance is based on what type of premium?

    <p>Level fixed</p> Signup and view all the answers

    An insured purchased a Life Insurance policy with changing cash values. The policy is a/an?

    <p>Interest-sensitive Whole Life.</p> Signup and view all the answers

    Which of the following has the right to convert the existing term coverage to permanent insurance?

    <p>Policyowner</p> Signup and view all the answers

    Which of the following policies is characterized by a provision where the premiums are lower in the early years and increase over time?

    <p>Graded premium whole life</p> Signup and view all the answers

    Which of the following is TRUE about credit life insurance?

    <p>Creditor is the policyowner.</p> Signup and view all the answers

    When would a 20-pay whole life policy endow?

    <p>When the insured reaches age 100</p> Signup and view all the answers

    The policyowner of an adjustable life policy wants to increase the death benefit. Which statement is correct regarding this change?

    <p>The death benefit can be increased by providing evidence of insurability.</p> Signup and view all the answers

    Which of the following is an example of a limited-pay life policy?

    <p>Life Paid-up at Age 65</p> Signup and view all the answers

    An Adjustable Life policyowner can change which of the following policy features?

    <p>The coverage period</p> Signup and view all the answers

    At age 30, an applicant wants to start an insurance program that can be modified. Which of the following policies would most likely fit his needs?

    <p>Adjustable Life</p> Signup and view all the answers

    If an agent wishes to sell variable life policies, what license must the agent obtain?

    <p>Securities</p> Signup and view all the answers

    The following are features of the Indexed Universal Life EXCEPT?

    <p>Sale of this product requires a securities license.</p> Signup and view all the answers

    Which of the following is TRUE regarding an indeterminate premium whole life policy?

    <p>The premium can be raised up to a guaranteed maximum rate.</p> Signup and view all the answers

    Which of the following riders would NOT cause the Death Benefit to increase?

    <p>Payor Benefit Rider</p> Signup and view all the answers

    All of the following are true about variable products EXCEPT

    <p>The premiums are invested in the insurer's general account.</p> Signup and view all the answers

    Which of the following types of policies allows for a flexible premium and a variable investment component?

    <p>Variable universal life insurance</p> Signup and view all the answers

    In which of the following scenarios will the Payor Benefit rider waive the payment of premium?

    <p>If the father is disabled for more than 6 months</p> Signup and view all the answers

    A domestic insurer issuing variable contracts must establish one or more

    <p>Separate accounts</p> Signup and view all the answers

    What type of insurance would be the most affordable and still provide a death benefit should one of the twin brothers die?

    <p>Joint Life</p> Signup and view all the answers

    What rights are provided to family members under a Family Policy when the breadwinner dies?

    <p>They can convert their coverage to permanent life insurance without evidence of insurability.</p> Signup and view all the answers

    The following are features of the Indexed Universal Life EXCEPT

    <p>Sale of this product requires a securities license</p> Signup and view all the answers

    All of the following statements are correct regarding credit life insurance EXCEPT

    <p>Benefits are paid to the borrower's beneficiary.</p> Signup and view all the answers

    The type of insurance sold to a debtor to pay the amount due on a loan if the debtor dies is called

    <p>Credit life</p> Signup and view all the answers

    Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

    <p>Payor Benefit</p> Signup and view all the answers

    All of the following entities regulate variable life policies EXCEPT

    <p>The Guaranty Association</p> Signup and view all the answers

    What kind of policy issues certificates of insurance to insureds?

    <p>Group insurance</p> Signup and view all the answers

    Which of the following is a key distinction between variable whole life and variable universal life products?

    <p>Variable whole life has a guaranteed death benefit.</p> Signup and view all the answers

    To sell variable life insurance policies, an agent must receive all of the following EXCEPT

    <p>SEC registration</p> Signup and view all the answers

    If the father becomes disabled, what will happen to the life insurance premiums on a policy with a Payor Benefit rider?

    <p>The insured's premiums will be waived until she is 21.</p> Signup and view all the answers

    An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called

    <p>Single premium whole life</p> Signup and view all the answers

    Which of the following determines the cash value of a variable life policy?

    <p>The performance of the policy portfolio</p> Signup and view all the answers

    Which of the following would be the beneficiary in credit life insurance?

    <p>Creditor</p> Signup and view all the answers

    A married couple owns a permanent policy which covers both their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

    <p>Survivorship Life Policy</p> Signup and view all the answers

    When the breadwinner that is insured by a Family Policy dies, what rights are provided to the other family members covered under the policy?

    <p>They can convert their coverage to permanent life insurance without evidence of insurability.</p> Signup and view all the answers

    A Return of Premium term life policy is written as what type of term coverage?

    <p>Increasing</p> Signup and view all the answers

    An individual has just borrowed $10,000 from a bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

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

    Which of the following riders would NOT cause the Death Benefit to increase?

    <p>Payor Benefit Rider</p> Signup and view all the answers

    An insured and his spouse own a home. When the insured dies, the insurer pays the remaining balance on his home loan. Which type of life insurance provision/rider does this describe?

    <p>Mortgage Redemption</p> Signup and view all the answers

    An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?

    <p>$50,000</p> Signup and view all the answers

    Which Universal Life option has a gradually increasing cash value and a level death benefit?

    <p>Option A</p> Signup and view all the answers

    If an agent wishes to sell variable life policies, what license must the agent obtain?

    <p>Securities</p> Signup and view all the answers

    For variable products, underlying assets must be kept in

    <p>A separate account</p> Signup and view all the answers

    Which of the following is NOT allowed in credit life insurance?

    <p>Creditor requiring that a debtor buys insurance from a certain insurer</p> Signup and view all the answers

    Which policy component decreases in decreasing term insurance?

    <p>Face amount</p> Signup and view all the answers

    A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy?

    <p>Family Protection Policy</p> Signup and view all the answers

    Which of the following policies would have an IRS-required corridor or gap between the cash value and the death benefit?

    <p>Universal Life - Option A</p> Signup and view all the answers

    Which of the following is correct regarding credit life insurance?

    <p>It insures the life of a debtor.</p> 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?

    <p>Variable universal life</p> Signup and view all the answers

    Which of the following types of insurance policies is most commonly used in credit life insurance?

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

    Which of the following is TRUE regarding the insurance amount in a credit life policy?

    <p>The creditor can only insure the debtor for the amount owed.</p> Signup and view all the answers

    An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

    <p>The insured may renew the policy for another 10 years, but at a higher premium rate.</p> Signup and view all the answers

    What type of insurance would be used for a Return of Premium rider?

    <p>Increasing Term</p> Signup and view all the answers

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

    <p>Survivorship life</p> Signup and view all the answers

    A Straight Life policy has what type of premium?

    <p>A level annual premium for the life of the insured</p> Signup and view all the answers

    The premium of a survivorship life policy compared with that of a joint life policy would be

    <p>Lower</p> Signup and view all the answers

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

    <p>Juvenile Life is classified as any life insurance purchased by a minor.</p> Signup and view all the answers

    Which of the following types of insurance covers the whole family in a single contract?

    <p>Family Policy</p> Signup and view all the answers

    If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?

    <p>Jumping juvenile policy</p> Signup and view all the answers

    Which type of life insurance policy generates immediate cash value?

    <p>Single Premium</p> Signup and view all the answers

    The death benefit under the Universal Life Option B

    <p>Gradually increases each year by the amount that the cash value increases.</p> Signup and view all the answers

    One of the advantages of a family life insurance policy that provides coverage for children is that it

    <p>May be converted to permanent insurance for the children without requiring evidence of insurability.</p> Signup and view all the answers

    When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?

    <p>Return of premium</p> Signup and view all the answers

    A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

    <p>Required a premium increase each renewal.</p> Signup and view all the answers

    The LEAST expensive first-year premium is found in which of the following policies?

    <p>Annually Renewable Term</p> Signup and view all the answers

    An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?

    <p>The cost of coverage is a deductible expense by the employer.</p> Signup and view all the answers

    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

    <p>For 20 years or until death, whichever occurs first.</p> Signup and view all the answers

    In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

    <p>The type of investment.</p> Signup and view all the answers

    An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

    <p>$100,000</p> Signup and view all the answers

    The type of policy that can be changed from one that does not accumulate cash value to the one that does is a

    <p>Convertible Term Policy</p> Signup and view all the answers

    Study Notes

    Variable Life Insurance

    • Cash value is not guaranteed in variable products.
    • Policyowners bear investment risks, ensuring potential fluctuations in value.
    • Premiums are held in separate accounts rather than the insurer's general account.
    • Separate accounts must be established for variable contracts.

    Universal Life Insurance

    • Allows flexibility in premium payments and investment components; specifically variable universal life has a variable investment component.
    • Universal Life Option A offers a level death benefit and gradually increasing cash value.

    Family and Joint Life Policies

    • Payor Benefit rider waives premiums if the policyholder is disabled, typically for longer than six months.
    • Joint Life policies cover two individuals, paying the death benefit upon the first insured's death.

    Indexed and Credit Life Insurance

    • Indexed Universal Life's cash value is tied to equity index performance; it does not require a securities license for sale.
    • Credit life insurance pays the creditor directly; insurance is limited to the amount owed on loans.

    Benefits and Rights under Policies

    • Family members under a Family Policy can convert their coverage to permanent insurance without insurability proof when the primary insured dies.
    • Return of Premium rider allows insured beneficiaries to receive both the death benefit and total premiums paid if the insured dies.

    Insurance Types and Provisions

    • Decreasing term insurance is suitable for loans, with coverage decreasing as debt diminishes.
    • Whole Life policies accumulate cash value; Single Premium Whole Life generates immediate cash value upon inception.

    Licensing and Regulations

    • Agents need a securities license to sell variable life insurance products; SEC registration is not required but necessary for investment products.
    • Variable products must maintain underlying assets in separate accounts.

    Accidental Death and Additional Riders

    • Accidental Death rider increases death benefits if death results from an accident.
    • Payor Benefit rider is specifically for waiving premiums based on the policyholder’s disability, not affecting death benefits per se.

    Unique Policy Features

    • Survivorship Life policies pay upon the death of the last insured and usually come with lower premiums than joint life policies.
    • Jumping juvenile policies increase the death benefit at a specified age, typically beneficial for child insureds.

    Claims and Coverage Implications

    • The creditor is typically the beneficiary in credit life policies, ensuring the loan is repaid upon the borrower's death.
    • In Group insurance, certificates of insurance are issued to all insured members and the coverage amount is fixed regardless of individual health conditions.

    Policies with Special Conditions

    • A level premium on a Straight Life policy remains stable throughout the policy.
    • Decreasing Term policies have a face amount that reduces over time, directly aligned with the decreasing need for coverage as debts are paid down.

    Miscellaneous

    • Suicide provisions in life insurance limit insurer liability within a defined waiting period.
    • The Entire contract provision combines the policy and application into a binding agreement.### Life Insurance Policies
    • Joint and survivor policies cover two lives and pay benefits after both insureds' deaths.
    • Single life policies provide coverage for one individual and build cash value.
    • Fixed-amount policies pay a predetermined benefit irrespective of timing or cause of death.
    • Life income with period certain guarantees income for the insured's lifetime or a specified period.

    Grace Period and Policy Renewal

    • Grace period allows coverage to continue beyond premium due date without loss of benefits.
    • Upon renewal, level term insurance premiums adjust according to the insured's age at renewal.

    Decreasing Term Policies

    • Decreasing term policies pay only upon death, with no cash value accumulation.
    • The death benefit decreases steadily throughout the policy term, while premiums do not decline.

    Cash Value and Benefit Options

    • Guaranteed universal life policies do not build cash value.
    • In Universal Life insurance, Option B allows beneficiaries to receive both death benefit and cash value.

    Whole Life Policies

    • Straight Life policies pay the face value at the insured's age 100, developing cash value after a few years.
    • Limited-pay life policies require premiums for a set number of years, after which the policy is paid up.
    • Graded premium whole life offers lower initial premiums that increase over a specified timeframe, leveling off afterward.

    Survivorship Policies

    • Survivorship universal life policies pay benefits only upon the last insured's death.

    Term Insurance and Convertibility

    • Term policies with convertibility options allow the transition to permanent policies without proof of insurability, with premiums based on attained age.
    • Annually renewable term policies experience premiums that increase annually.

    Premium Structures

    • Specific life policies like graded premium whole life start with lower premiums that gradually increase.
    • Single premium whole life policies only require upfront payment and provide coverage until age 100.

    Adjustable Life Policies

    • Adjustable life policies allow policyowners to change features such as the death benefit and coverage period by providing evidence of insurability.

    Variable Life Policies

    • Variable life insurance relies on a fixed-level premium structure, tying cash value to investment performance without a guaranteed minimum return.
    • Agents must obtain a securities license to sell variable life policies.

    Indexed Universal Life and Indeterminate Premiums

    • Indexed Universal Life policies depend on the performance of an equity index for cash value growth.
    • Indeterminate premium whole life policies start with lower premiums, which can rise to a maximum guaranteed rate.

    Death Benefit Riders

    • Riders like Cost of Living and Accidental Death Rider increase the death benefit, while the Payor Benefit Rider does not.

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    Test your knowledge on various types of life insurance policies through this flashcard quiz. Discover the key features, benefits, and investment components of variable life products and more. Perfect for students and professionals preparing for exams in insurance and financial planning.

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