Exam FX Chapter 3: Types of Life Insurance Policies
20-year level term
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 death occurs after the 20 year period. What type of policy is this?
Limited-pay whole life
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of plicy?
Decreasing term
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
Variable
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?
Universal life
Between adjustable life and universal life policies which one provides more flexibility to the policy owner?
Annually renewable term
Group life insurance policies are written as what type of insurance?
Average age of the insureds
How is the premium determined in a joint life insurance policy?
Evidence of insurability
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide
Whole life
If an insured terminates membership in group life insurance to what type of insurance can the insured convert the coverage?
Upon the first death
In a joint life policy, when is the death benefit paid?
The insured's attained age
In annually renewable term policies, what is the annual premium based upon?
The premium remains level
In term policies what happens to the premium thought the term of the of the policy
Cash value and death benefit
In variable universal life insurance to what policy component does the term variable refer?
Universal life
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Tax deferred
Regarding taxation, how does the cash value of a universal life policy accumulate?
Annually renewable term
The death protection component of a universal life policy is expressed as what type of coverage?
100
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 death benefit increase each year by the amount of the cash value increases
Under Option B in a universal life policy, what happens to the death benefit?
For 20 years or until the insured's death, whichever occurs first.
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 for what time period?
Guaranteed and current
Universal life policies have two types of interest rates. What are they?
Group's purpose, size, financial strength and turnover
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Option A - level death benefit, and Option B - increasing death benefit
What are the death benefit options in universal life policies?
Loan values
What are the living benefits of whole life insurance?
Face amount
What does level refer to in level term insurance?
The amount and payment period of the premium, the face amount, and the period for protection
What elements of an adjustable life policy can be changed by the policy owners
Cash value is paid to the policyowner
What happens to the cash value when a whole life insurance policy matures?
The premium increases with each renewal
What happens to the premium in an annually renewable term life policy?
Evidence of insurability is not required
What is the main advantage of converting from group life insurance to individual coverage?
Premium payment mode
What is the major difference between the most common types of whole life policies: straight life, limited payment and single premium?
To prevent the policy from lapsing
What is the purpose of establishing the target premium for a universal life policy?
Face amount
What policy component must decrease in decreasing term insurance?
Limited Pay Whole Life
What type of life insurance policy is Life Paid-up at Age 65?
Term
What type of life insurance policy offers pure death protection?
Whole life
What type of life insurance policy provides permanent protection
Group policy
What type of policy is typically issued without proof of insurability from the insured?
Group policy
What type of policy issues certificates of insurance to the insureds?
A level premium for the life of the insured
What type of premium is charged on a straight life policy?
Single premium whole life
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
single premium whole life
What type of whole life insurance policy generated immediate cash value
Option A
What universal life option has a gradually increasing cash value and a level death benefit
When the premiums paid are more than the cost policy
When does an adjustable life policy accumulate cash value
Evidence of insurability
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
When the insured reaches age 100
When would a 20-pay whole life policy endow?
The policyowner
Who is entitled to the cash values in a life insurance policy?
A minor
Who is the insured under a juvenile life policy?
The employer (also known as the sponsor of the group)
Who owns a group life insurance contract?
100
Whole life policies provide protection until the insured reaches what age?
There is no cash value to borrow against
Why are policy loans not available on term insurance
decreasing term
what type of life insurance is best suited to cover a mortgage?
The full death benefit
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 are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?
