Types of Life Policies Flashcards
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Questions and Answers

Which statement is NOT true regarding a Straight-Life Policy?

  • Its premium steadily decreases over time. (correct)
  • Straight Life policies charge a level annual premium.
  • It provides a level, guaranteed death benefit.
  • None of the above.

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

  • Creditor can insure the debtor for any amount.
  • Creditor can only insure the debtor for the amount owed. (correct)
  • The insurance amount is fixed regardless of the debt.
  • None of the above.

    • What is the purpose of establishing the target premium for a universal life policy?

    To keep the policy in force

    What is the Payor Benefit Rider?

    <p>It waives the premiums if the person paying them is disabled or dies while the child is still a minor.</p> Signup and view all the answers

    What is Modified Life?

    <p>A type of life insurance with lower premiums for the first few years.</p> Signup and view all the answers

    What type of policy has the least expensive first-year premium payment?

    <p>Annually Renewable Term</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

    What must a domestic insurer issue variable contracts establish?

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

    Both Universal Life and Variable Universal Life have what feature?

    <p>Flexible premium</p> Signup and view all the answers

    In term policies, what happens to the premium throughout the term of the policy?

    <p>Premium always remains level.</p> Signup and view all the answers

    What type of policy increases in face amount when the insured reaches a specified age?

    <p>Jumping Juvenile Policy</p> Signup and view all the answers

    What is a Level Term Policy?

    <p>A 20-year term policy providing a level death benefit for 20 years.</p> Signup and view all the answers

    How does the premium in a Survivorship Life policy compare to a Joint Life policy?

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

    If a policyholder withdraws a portion of the cash value and incurs a fee, what type of policy do they likely have?

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

    What type of policy issues certificates of insurance to insureds?

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

    What is Indexed Universal Life?

    <p>Policies featuring flexible premiums, adjustable death benefits, and an investment component based on equity index performance.</p> Signup and view all the answers

    What happens to premium payments in a Limited Pay Whole Life policy?

    <p>Payments cease at age 65 but coverage continues until death or age 100.</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

    What is Credit Life Insurance?

    <p>The creditor is the beneficiary and policy owner, equal to the outstanding loan balance.</p> Signup and view all the answers

    How does the face amount change in a Decreasing Term Policy?

    <p>The premium remains unchanged while the face amount decreases.</p> Signup and view all the answers

    In an Adjustable Life policy, which of the following can be changed by the policy owner?

    <p>Premium payment</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

    What is a Family Policy?

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

    How does the death benefit under the Universal Life Option B change?

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

    What does Universal Life allow the policy owner to do?

    <p>Skip premium payments without the policy lapsing.</p> Signup and view all the answers

    What is Interest Sensitive Whole Life?

    <p>Cash values change based on the company's investments and expense factors.</p> Signup and view all the answers

    What is Graded Premium Whole Life?

    <p>Lower premiums for a designated timeframe that rise annually thereafter.</p> Signup and view all the answers

    What is Return of Premium (ROP)?

    <p>Life insurance that pays an additional death benefit equal to premiums paid.</p> Signup and view all the answers

    What is a Family Maintenance Policy?

    <p>A combination of whole life insurance and level term insurance.</p> Signup and view all the answers

    What is Single Premium Whole Life?

    <p>Requires the entire premium to be paid in one lump sum at the policy's inception.</p> Signup and view all the answers

    Which of the following features of the Indexed Whole Life policy is NOT fixed?

    <p>Cash value growth</p> Signup and view all the answers

    Study Notes

    Life Insurance Policies Overview

    • Straight-Life Policy: Charged level premiums throughout the insured's life, guaranteeing a level death benefit; premiums do not steadily decrease over time.
    • Credit Life Policy: Insures debtors only for the amount owed to creditors, ensuring the loan balance is covered in case of death.
    • Universal Life Policy: Target premium established to maintain policy status, allows flexibility in premium payments.

    Specialized Riders and Policy Features

    • Payor Benefit Rider: Waives premiums for juvenile policies if the payer (often a parent) becomes disabled or passes away, covering until the insured turns 21.
    • Modified Life: Features lower initial premiums that increase over the coverage duration.

    Term Insurance Policies

    • Annually Renewable Term: Offers the least expensive first-year premium; premiums increase yearly based on insured's age, with benefits level.
    • Decreasing Term: Commonly used in credit life insurance; face amount decreases while the premium stays constant.
    • Increasing/Level Term Policies: Maintain constant premiums, but face amounts may vary throughout the policy's term.

    Unique Policy Types

    • Jumping Juvenile Policy: Increases the face value significantly at a specified age, providing more coverage as the insured matures.
    • Survivorship Life Policy: Covers multiple lives, pays out on the last death, leading to lower premiums compared to joint life policies.

    Cash Value and Flexibility

    • Universal Life: Allows for withdrawal from cash value; limits and fees apply, enabling financial flexibility.
    • Indexed Universal Life: Combines features of universal life with cash value dependent on equity index performance, no securities license required to sell.
    • Interest Sensitive Whole Life: Cash values can fluctuate based on company investments, diverging from fixed projections.

    Additional Policy Options

    • Family Policies: Enable coverage conversion to permanent insurance without needing to prove insurability.
    • Return of Premium (ROP): Life insurance policy that refunds premiums paid if the insured survives the policy term or pays additional benefit if death occurs within the term.
    • Family Maintenance Policy: Blends whole life with level term insurance, offering one-time payment upon death plus ongoing support payments.

    Special Considerations

    • Single Premium Whole Life: Requires a single lump-sum payment at inception, providing immediate coverage.
    • Indexed Whole Life: Cash value growth is not fixed, while premiums remain constant; offers policyholders potential for higher returns based on market performance.
    • Graded Premium Whole Life: Features lower premiums early on, which gradually increase until stabilization occurs after a set period.

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    Test your knowledge on various types of life insurance policies with these flashcards. Assess your understanding of key concepts like Straight-Life Policies and Credit Life Policies. Perfect for students or professionals looking to refresh their insurance knowledge.

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