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Questions and Answers
What type of whole life insurance policy generates immediate cash value?
What type of whole life insurance policy generates immediate cash value?
single premium whole life
Regarding taxation, how does the cash value of a universal life policy accumulate?
Regarding taxation, how does the cash value of a universal life policy accumulate?
tax deferred
What is the major difference between the most common types of whole life policies: straight life, limited payment, and single premium?
What is the major difference between the most common types of whole life policies: straight life, limited payment, and single premium?
premium payment mode
In term policies, what happens to the premium throughout the term of the policy?
In term policies, what happens to the premium throughout the term of the policy?
What does 'level' refer to in level term insurance?
What does 'level' refer to in level term insurance?
What policy component must decrease in decreasing term insurance?
What policy component must decrease in decreasing term insurance?
Under Option B in a universal life policy, what happens to the death benefit?
Under Option B in a universal life policy, what happens to the death benefit?
In annually renewable term policies, what is the annual premium based upon?
In annually renewable term policies, what is the annual premium based upon?
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
How is the premium determined in a joint life insurance policy?
How is the premium determined in a joint life insurance policy?
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?
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?
What is the main advantage of converting from group life insurance to individual coverage?
What is the main advantage of converting from group life insurance to individual coverage?
When does an adjustable life policy accumulate cash value?
When does an adjustable life policy accumulate cash value?
The policy owner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount?
The policy owner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount?
A policy states that it will pay a specified face amount if the insured dies during the 20-year premium-paying period and nothing if the death occurs after the 20-year period. What type of policy is this?
A policy states that it will pay a specified face amount if the insured dies during the 20-year premium-paying period and nothing if the death occurs after the 20-year period. What type of policy is this?
What type of life insurance policy offers pure death protection?
What type of life insurance policy offers pure death protection?
What happens to the premium in an annually renewable term life policy?
What happens to the premium in an annually renewable term life policy?
When would a 20-pay whole life policy endow?
When would a 20-pay whole life policy endow?
What type of life insurance is best suited to cover a mortgage?
What type of life insurance is best suited to cover a mortgage?
Who is entitled to the cash values in a life insurance policy?
Who is entitled to the cash values in a life insurance policy?
In a joint life policy, when is the death benefit paid?
In a joint life policy, when is the death benefit paid?
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of insurance policy would be best suited to this situation?
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of insurance policy would be best suited to this situation?
What type of life insurance policy provides permanent protection?
What type of life insurance policy provides permanent protection?
Whole life policies provide protection until the insured reaches what age?
Whole life policies provide protection until the insured reaches what age?
What are the living benefits of whole life insurance?
What are the living benefits of whole life insurance?
The death protection component of a universal life policy is expressed as what type of coverage?
The death protection component of a universal life policy is expressed as what type of coverage?
What type of premium is charged on a straight life policy?
What type of premium is charged on a straight life policy?
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?
What elements of an adjustable life policy can be changed by the policyowners?
What elements of an adjustable life policy can be changed by the policyowners?
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
A whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?
A whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?
Universal life policies have two types of interest rates. What are they?
Universal life policies have two types of interest rates. What are they?
What universal life option has a gradually increasing cash value and a level death benefit?
What universal life option has a gradually increasing cash value and a level death benefit?
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
What are the death benefit options in universal life policies?
What are the death benefit options in universal life policies?
Who owns a group life insurance contract?
Who owns a group life insurance contract?
Group life insurance policies are written as what type of insurance?
Group life insurance policies are written as what type of insurance?
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
In variable universal life insurance, to what policy component does the term variable refer?
In variable universal life insurance, to what policy component does the term variable refer?
What type of life insurance policy is life paid-up at age 65?
What type of life insurance policy is life paid-up at age 65?
What is the purpose of establishing the target premium for a universal life policy?
What is the purpose of establishing the target premium for a universal life policy?
Why are policy loans not available on term insurance?
Why are policy loans not available on term insurance?
Who is insured under a juvenile life policy?
Who is insured under a juvenile life policy?
What happens to the cash value when a whole life insurance policy matures?
What happens to the cash value when a whole life insurance policy matures?
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
What type of policy issues certificates of insurance to the insureds?
What type of policy issues certificates of insurance to the insureds?
What type of policy is typically issued without proof of insurability from the insured?
What type of policy is typically issued without proof of insurability from the insured?
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80, and there is no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80, and there is no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
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Study Notes
Types of Life Policies Overview
- Whole life insurance can be categorized into different types based on premium payment modes: straight life, limited payment, and single premium.
- Single premium whole life generates immediate cash value upon purchase.
- Whole life insurance provides permanent protection until the insured reaches age 100.
Cash Value and Premiums
- The cash value of a universal life policy accumulates on a tax-deferred basis.
- In term policies, premiums remain level throughout the term.
- In decreasing term insurance, the face amount decreases over time.
- Premiums in annually renewable term policies are based on the insured's initial age and will increase upon renewal.
Death Benefits and Policy Options
- Universal life policies offer two death benefit options: Option A (level death benefit) and Option B (increasing death benefit).
- Option B increases the death benefit each year by the amount the cash value increases.
- In a joint life policy, the death benefit is paid upon the first death.
Special Policy Features
- Individuals holding variable life policies may see fluctuations in cash value and death benefit.
- Whole life policies provide living benefits such as loan values which policyholders can utilize.
- Group life insurance policies are typically written as annually renewable term and do not require proof of insurability.
Policy Ownership and Conversions
- The policyowner is entitled to the cash values in a life insurance policy and is usually different from the insured.
- Converting from group life insurance to individual coverage does not require evidence of insurability.
- In the event of termination from group life, individuals can convert to whole life insurance without needing proof of insurability.
Payment Structures and Flexibility
- Limited-pay whole life policies require premiums for a specified number of years.
- Adjustable life policies allow the policyowner to change premium amounts, face amounts, and protection periods.
- Universal life policies offer greater flexibility compared to adjustable life policies.
Specific Situations and Policy Types
- Decreasing term insurance is best suited for covering mortgages or similar debts that decrease over time.
- If the insured under a whole life policy dies before reaching age 100, the full death benefit is paid to beneficiaries, provided there are no outstanding loans.
- The premium for a joint life insurance policy is determined based on the average age of both insured individuals.
Special Considerations
- Evidence of insurability is required for group life enrollment outside of open enrollment.
- Policy loans are not available on term insurance, as there is no cash value to borrow against.
- Policies designed for minors are classified as juvenile life insurance.
This overview provides an essential understanding of various life insurance policy types, their structures, benefits, and specific characteristics advantageous for both individuals and groups.
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