PHP 4
which statement regarding the cash value of a whole life insurance policy is correct
available to the policy owner when policy has been surrendered
A survivorship life insurance policy usually covers how many lives
2
Single Premium Whole Life
Paid up for life with one large premium payment. Policy that is completely paid up and will generate cash value immediately
Which statement concerning a decreasing term life policy is accurate
Face amount decreases over the policy period
Incontestable Clause
Prevents the insurance company from denying a claim because or incorrect information or a concealment of facts after the policy has been in force for 2 years
Dividend Options
are the options a policy owner has when receiving dividend payments from an insurance policy.
Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate
The premium to purchase the coverage comes from the policy's cash value
In the event of premium default, which life insurance provision will use the cash value to keep the policy in force?
Automatic premium loan
Term Life
Insurance is temporary life insurance provided for specific period of time. It is also known as pure life insurance. Also is temporary protection because it only provides coverage for a specific period of time. Greatest amount of coverage for the lowest premiums.
what type of insurance policy covers two or more persons and pays the face amount upon the death of the first insured
Joint life
3 basic types of term coverage
Level Term Insurance Increasing Term Insurance Decreasing Term Insurance
A life insurance guaranteed insurability rider gives the insured the right, without providing insurability to,
Periodically purchase additional insurance
decreasing term policy
Policies that feature a level premium and a death benefit that decreases each year. Also are primarily used when the amount of protection needs to decrease over a period of time. Most common to use this term policy to insure the payment of a mortgage. Policy amount decreases as the outstanding mortgage loan balance decreases each year. Death Benefit will be 0 dollars at the end of the policy term.
Which of the following is a true statement regarding universal life insurance
Policy states how much each premium is used toward company expenses
A policy owner is permitted to take out a policy loan on a whole life policy at what point
Policy would need to have cash value
which of the following could be a future use of the cash value builds in a recently purchased whole life insurance policy
Provide supplement income in 35 years
Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?
The person insured
Grace Period Provision
The period of time after the premium payment is due. Usually 30 days. The purpose of this is to protect the policyholder against an unintentional lapse of the policy. If the insured dies during this period the benefits is payable, however any past due premiums will be deducted from the death benefit.
Standard policy provision
While there is not a set standard of policy provisions in life insurance, the standard policy provision adopted by the (NAIC) National Association of Insurance Commissioners does create uniformity amongst life insurance policies
Living Benefits
With a whole life policy, a policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered
Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends
equal the net single premium for the same face amount at the insured's attained age
a life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death
Total premiums paid plus the policy face amount
Laura added a children's rider to her life insurance policy. What type of coverage was added
level term
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
A life insurance guaranteed insurability rider gives the insured the right, without providing insurability, to
periodically purchase additional insurance
Which benefit supplement added to a life insurance policy insures an entire family?
family term rider
which life insurance policy would be eligible to include an automatic premium loan provision
whole life
what is the name of rider that provides an additional purchase option in a life insurance policy
Guaranteed insurability rider
Straight Whole life
Also called continuous premium, is a basic whole life policy, where the policy owner pays a foxed premium for the time the policy is issued until the insured's death or age 100
Which of the following combinations best describe a universal life insurance policy
Flexible premium deposit fund a monthly renewable term insurance policy
Whole life
Also called permanent life insurance, these are policies that remain in effect to age 100 as long as the premium is paid. Provides lifetime protection and includes a savings element known as cash value. Policies are usually higher than those for term insurance
how long can an insurer legally defer paying the cash value of a surrender life insurance policy
6 months
A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policy owner on receipt of the cash value
$16,000 was received tax-free and $4,0000 as ordinary income
A "Premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
An insured has a $25,000 whole life insurance policy with $6,000 cash value available. Under the extended term nonforfeiture option, what is the amount of insurance available to the insured?
25,000
Suicide Provision
A life insurance policy protects insurance companies against people using suicide for a quick payment of the death benefit. If the insured commits suicide within the first 2 years, the insurance company will not pay the death benefit
A policy owner has just borrowed from life insurance policy's cash value. Which of these statements is true
In the event of death, loan amount is deducted from the policy proceeds
which benefit is normally payable to a life insurance policy owner when the insured's life expectancy has been severely limited
Accelerated (living) benefit
Convertible
Allows the policy owner the right to convert the coverage to a permanent whole life insurance policy without evidence of insurability. The premium for the new whole life permanent policy will be based only on the insured's current attained age
Which statement regarding a single premium life insurance policy is not correct?
Additional premiums may be required under certain conditions
Cost of Living Rider
Addresses inflation by automatically increasing the amount of insurance without evidence of insurability. The face value of the policy may increase by the cost of living factor tied to an inflation index such as the consumer price index
How long does protection normally extend to under a limited pay whole life policy
Age 100
Renewable
Allows the policy owners the rights to renew the coverage at the expiration date without evidence of insurability. Premiums for the new term policy will be based only on the insured's current attained age.
Guaranteed insurability Rider
Allows the insured to purchase additional coverage at specific future dates, without the evidence of insurability, the new premiums will be calculated only on the person's attained age
An individual who purchases a modified life insurance policy expects
An improvement in future income
Which is an accurate description of the premium in a graded premium life insurance policy
Annual Increase in premium for a stated number of years then remains level
Policy Riders
Are added to a policy and ride along, on the basic life insurance policy. Riders only have value when attached to a policy. They have no independent value.
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
Who normally pays the premiums for group credit life insurance
Borrower
Non Forfeiture Options
Cash Surrender Reduce Paid up Extended Term
which statement regarding the waiver of premium rider is accurate
Cash payment is not directly provided to the policy owner
Which statement regarding universal life insurance is correct
Cash value accumulations have a guaranteed minimum interest rate
which of the following is not a condition that must be met for an accidental death benefit to be paid
Cause of death must be from a job related injury
Cash Value
Created by the accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches 30. The accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches 100. Also referred to as nonforfeiture values
Dependent Riders
Dependents may be added to as additional (other) insureds through the use of a dependent rider. Other insured riders are typically used for spouses and children.
Which of thee is not considered a type of limited payment whole life insurance
Endownment at age 70
which of these may not be deducted from premium payments or the cash value of a variable life insurance policy
Federal premium taxes
Level Death Benefit
Guaranteed and remains level for the entire lifetime of the policy
Level Premium
For whole life policies are based on the age of the individual, when originally purchased. The premium remain the same throughout the entire life of the policy.
Free Look Provision
Generally 10 days after policy delivery to cancel policy w/ full refund, except 30 days for seniors or for replacement policies. Allows the policy owner, a free look at the policy for a specific number of days
which of the following is not subject to the promise to pay in an insuring clause
How the premium is calculated
Automatic Premium Loan Provision
Is commonly added to contracts with cash value at no addiction charge. This is a special type of loan that prevents the unintentional lapse of a policy due to the nonpayment of premium
Limited pay whole life
Is designed so that premiums for the coverage will be completely paid up well before age 100. Most versions of this policy are 20 year pay. Whereby coverage is completely paid for in 20 years or life paid up at 65 where by the coverage is completely paid up by the insured at 65
Group Life Insurance
Is insurance written for members of a group, such as place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. The group is underwritten as a whole, not on each individual member. One of the benefits of group life coverage is usually there is no evidence of insurable required.
Ordinary Life Insurance
Is life Insurance of commercial companies not issued on the weekly premiums basis. It is made up of several types of individual life insurance
Industrial Life Insurance
Issues very small face amounts, such as 1,000 or 2,000 dollars. Premiums are paid weekly and collected by debt agents. They were designed for brutal coverage
what is not true about war exclusion
It applies to civil insurrection
which of these is not a common life insurance nonforfeiture option
Life income annuity
Joe is a life insurance policyowner who has failed to pay interest on his policy loan. What will result from this nonpayment?
Loan amount is increased to reflect the amount of interest due
Tim is confined to a nursing home but doesn't have a terminal illness. Which life insurance rider is designed to help pay for this type of expense?
Long term care benefit rider
Level Term Insurance
Most common type of temporary protection purchased. Refers to the death benefit that does not change throughout the life of policy
which of the following is not a dividend option for a life insurance policy
Receiving the entire policy in cash value
what could be the potential result of taking out a cash value loan under a life insurance policy
Reduces the amount receivable upon surrender of the contract
A life insurance policy owner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen
Reduction of premium payment
A life insurance policy owner would like a dividend option that results in a limited current outlay of funds. Which dividends option would be chosen
Reduction of premium payment
A life insurance policy's waiver of premium rider has the ability to
Relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
Term policies are
Renewable, Convertible, Renewable and Convertible
A Material change in a modified endowment contract (Mec) results in
Seven pay test, adjusted for cash value
What are the three types of whole life insurance
Straight whole life Limited pay Whole life Single premium whole life
When receiving dividends what happens
Take dividends in cash apply dividends against premium payments allow dividends to accumulate interest Buy paid up additions (whole life policy) Purchase one year term insurance
Cash Option
The "cash" dividend option allows the policy owner to cash out the dividends they receive.
Misstatement of Age or Sex Provision
The age and sex are important facts in figuring the premiums that will be charged for a life insurance policy, this provision allows the insurance company to adjust the policy at any time due to a misstatement of age or gender. In the event of a claim the insurance company is allowed to adjust the death benefit or the premium to the correct age or gender
Rights of ownership
The assignment provision specifies the policy owner's right to transfer ownership of the policy.
Which statement concerning adjustable life insurance is accurate
The face amount and premiums can be changed simultaneously by the policy owner
Insuring Clause
The insurance company's agreement and promise to pay the death benefit
which of the following is true regarding a person receiving a waiver premium benefit
The insured must be disabled for a period of time
Taxable income may be the result from all of these modified endowment contract (MEC) transactions except for
The policy is surrendered for less than what was paid into it
An advantage of owning a flexible premium life insurance policy would be
The policy owner can make policy changes without difficulty
An advantage of owning a flexible premium life insurance policy would be xf
The policy owner can make policy changes without difficulty
Consideration Clause
The policy owners promise to make premium payments
what happens when a policy owner borrows against the cash value of his life insurance policy
The policy proceeds would be reduced by the outstanding loan balance
Which of these must be disclosed in a universal life policy
The policy's surrender charges
how does a continuous premium whole life policy differ from a limited payment whole life policy
The time period in which premiums will be paid
Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments
Variable Universal life
An Insurance policy that can also be classified as a securities product is called
Variable life
Face amount plus cash value policy
a contract that promises to pay at the insured's death the face amount of the policy plus a sum equal to the policy's cash value.
Absolute Assignment
a policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and full rights to its benefits. Generally, when a policy is assigned to secure a debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form.
Term Rider
a type of life insurance product which covers children under their parent's policy. Family plan policies usually cover the family head with permanent insurance, and the coverage on the spouse and children is term insurance in the form of a rider. A term rider is always level term. This is cheaper than every family member getting their own policy. For example, the main policy may be on Dad, then mom and the children are riding on (attached to) dad's policy as term riders. Term riders allow for additional family members to be covered under one policy by attaching everyone to a main policy. Term riders can also allow an applicant to have excess coverage by adding an additional term rider for them to the main policy.
A life insurance policy provision that has the ability to reduce death benefit is called
accelerated (living) benefits
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
Automatic Premium Loan Provision
allows the insurance company to deduct the overdue premium from an insured's cash value by the end of the grace period if a payment is missed on a life policy. The insurance company can AUTOMATICALLY take out a LOAN for you against your CASH VALUE to cover your PREMIUM if they don't receive payment when due. This automatic premium loan can continue until the policy owner resumes making payments, or the policy runs out of cash value. Your policy will lapse if you don't resume payments before you run out of cash value.
Accelerated Benefits Rider:
allows the insured to receive a portion of the death benefit before death if the insured has a terminal illness and is expected to die within 1-2 years. Whatever amount is withdrawn in an accelerated death benefit will decrease the death benefit when death occurs.
misstatement of age or sex provision
allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application. The misstatement of age provision allows the insurer to adjust the benefits payable if the age of the insured was misstated when the application for the policy was made. If the insured were older at the time of application than is shown in the policy, benefits would be reduced accordingly. The reverse would be true if the insured were younger than listed in the application.
One-Year Term Option
allows the policy owner to exchange the dividend for additional coverage in the form of a one-year term policy.
Paid up Additions option
allows the policy owner to exchange the dividend for an additional single payment whole life policy.
Reduce Pain Up Option
allows the policy owner to reduce the policy's benefit amount and, in turn, cease making premium payments.
Reduced Premium option
allows the policy owner to return the dividend payment to the insurer in exchange for a reduction in the following year's premium payments.
Waiver of Premium Rider
allows the policy owner to waive premium payments during a disability and keeps the policy in force. The waiver of premium rider is not a loan and does not provide cash payments to the policy owner. The insurance company is "waiving" the premiums." It's just as if the insured made the premiums every month.
Assignment Clause
allows the right to transfer policy rights to another person or entity.
Collateral Assignment
an assignment of a policy to a creditor as security for a debt. The creditor is entitled to be reimbursed out of policy proceeds for the amount owed. Any proceeds above the amount due at the insured's time of death will be paid to a beneficiary designated by the policy owner. Involves a transfer of partial rights to another person; this is usually done in order to secure a loan. Also this is a temporary assignment. Once the debt or loan is repaid the rights are returned to the policy owner.
Policy Loan (cash withdrawal) provisions
apply to policies that have cash value also have policy loan and withdrawal provisions. These policies must begin to build cash value after a certain number of years. In most states, this is three years. These loans, with interest, cannot exceed the guaranteed cash value, or the policy is no longer in force. The policy owner has the right to the policy's cash value. Policy loans are not taxable. Any loans with interest due at the time of death will be deducted from the insured's policy proceeds.
Nonforfeiture Options
are the options you have for your cash value if you terminate a policy that has a cash value. You are closing your account (surrendering your policy); what do you want us to do with your cash (so you don't forfeit it)? When a policy owner decides he does not want his insurance policy anymore, he has the option to surrender his policy.
Credit policies
are typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the declining loan balance. Since Credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid, credit policies can only be purchased for up to the amount of the debt or loan outstanding. For example, if you wanted an insurance policy to protect a $20,000, 5-year auto loan, you would use a 5-year decreasing term life insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the 5-year term of the policy. The face value will start out at $20,000 and change according to a schedule (the decreasing balance of the auto loan). After 5 years, the car will be paid for and the insurance policy will no longer be needed.
A source of supplemental income for a life insurance policyowner can be derived from the
cash value
what is payable to the policy owner if a whole life policy is surrendered prior to its maturity date
cash value
Equity Index Universal Life Insurance
combines most of the features, benefits and security of traditional life insurance with the potential of earned interest based on the upward movement of an equity index. Unlike, a traditional whole life plan, this plan allows policyholders to link accumulation values to an outside equity index like S&P 500. 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index.
Joint Survivor/ Last Survivor Life Policies
cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. Joint Life Survivor or Last Survivor policies only pay the death benefit upon the death of the last insured person. For example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no benefits would be paid out from the policy until M died. A Joint Life and Survivor policy covers two lives but only pays benefits after the death of the last insured.
Joint Life Policy
covers the lives of 2 individuals and save on premium cost by averaging the ages of the two insureds. Joint Life policies pay the face amount after the first person covered on the policy dies. This is similar to a Joint Checking account. The policy is shared between two people, and when one person dies, the other receives the entire account. If B and M were insured under a joint life policy and B were to die, M would receive the entire benefit and would also no longer be insured. A policy that promises to pay the fac
In what was is a life insurance policy affected by an accelerated benefit payment
decreases the death benefit
In what way is a life insurance policy affected by an accelerated benefit payment?
decreases the death benefit
What kind of life policy typically offers mortgage protection
decreasing term
Dividens
earnings distributed to stockholders, are paid only on participating policies. When the policy owner purchases the policy from a participating insurance company, they are eligible to receive dividends
which life insurance policy option allows the policy owner to have coverage equal to the net death benefit of the lapsed policy
extended term nonforfeiture option
Exclusions
features of an insurance policy stating that the policy will not cover certain risks.
Policy Loan Provision
found only in policies that contain cash value, policy owner is allowed to borrow an amount equal to the available cash value
Which life insurance policy provision allows a policy owner to cancel the policy and receive a full refund within a limited time period after policy delivery
free-look period
how long does one premium payment cover in a single premium whole life policy
full life of the policy
which life insurance clause prohibits an insurance company from questioning the validity of the contract after a stated period of time has been passed
incontestable clause
Universal life insurance policy
incorporates flexible premiums and an adjustable death benefit. The investment gains from a Universal Life Policy usually go toward the cash value. The policyowner can use the cash value to manipulate the flexible aspects of a universal life insurance policy. A customer who wants a policy that gives them the most options and the most control would be looking for a Universal Life Policy. Universal policies use gains to fund the cash value and give the policyowner options for flexible premiums and adjustable death benefits.
Which statement regarding whole life insurance is accurate
insurance coverage can continue for life
ordinary life
insurance is individual life insurance that includes many types of temporary and permanent insurance protection plans written on individuals. Policies are individually underwritten, meaning each insured must qualify for the insurance, and premiums are most often paid in monthly, quarterly, or annually installments. Ordinary life insurance is the principal type of life insurance purchased in the United States and includes both temporary (term) life life insurance, permanent (whole, universal, and variable) life insurance coverage, as well as endowment policies.
A life insurance policy that contains an accelerated (living) benefit rider will provide funds if the
insured is expected to be confined to a nursing home for life
Absolute Assignment
involves transferring all rights of ownership to another person or entity. It is a permanent and total transfer of all the policy rights. The new policy owner does not need to have an insurable interest in the insured
Endowment Policy
is a contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the insured's death before the end of the stated period.
Grace Period
is a period after the due date of a premium during which the policy remains in force without penalty. If an insured dies during the Grace Period of a life insurance policy before paying the required annual premium, the beneficiary will receive the face amount of the policy minus any required premiums. For life insurance, the grace period is typically one month.
Convertible Term
is a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability. Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and the policy's lower premium, but want the option convert the policy to a permanent one for final expense benefits once your finances improve, you would want a convertible term life policy. The conversion privilege of a group term life policy allows an individual to leave the group term (temporary) plan and convert his or her insurance to an individual (permanent) policy without providing evidence of insurability. The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is the premium cost. The number one factor which impacts life insurance premium cost is the insureds current or attained age. For example, a $25,000 policy on a healthy 7-year-old boy will cost substantially less than a $25,000 policy on a 57-year-old man. Whether converting an individual or group term insurance policy, although your insurability is guaranteed, your age is typically reevaluated to your current (attained) age, not left at the age you were when you applied for the original term policy.
Target Premium
is a suggested premium used in Universal Life policies. It does not guarantee there will be adequate funds to maintain the policy to any time, especially to life. It may give an indication of what will be needed (under conservative estimates), to maintain the policy.
Level Term insurance
is also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal. Life insurance written to cover a need for a specified period of time at the lowest premium is called Level Term Insurance. Term insurance always expires at the end of the policy period. For example, if D needs life insurance that provides coverage for the remainder of her working years and wants to pay as little as possible, D would need Level term. Level term provides a fixed, low premium in exchange for coverage which lasts a specified time period.
Reinstatement Provision
is putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required. It Permits the policy owner to reinstate a policy that has lapsed as long as the policy owner can provide proof of insurability and pays all back premiums, outstanding loans, and interest.
Renewable Term
is term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability. For example, if you have a 10-year renewable and convertible term; After the 10 years are up, the policy terminates or you can renew it. If you renew it the premium price will go up, and you will have the policy for another 10 years. This cycle continues until you are too old to renew or it's too expensive. All TERM insurance has a final TERMINATION date where you can no longer renew it.
Decreasing term
is term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection. A decreasing term policy is a type of life policy which has a death benefit that adjusts periodically (according to a schedule) and is written for a specific period of time. Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off. For example, a 15 year decreasing term policy could protect a 15-year mortgage. As the mortgage balance reduces each year, the face value of the insurance policy will adjust accordingly to match. After the mortgage is paid off, the insurance policy will expire.
Increasing Term
is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Juvenile Insurance
is written on the lives of children who are within specified age limits and generally under parental control.
which of these would not be a valid reason to add the waiver of premium rider to a life insurance policy
it allows a policy loan to cover premium payments if the policy owner becomes totally disabled
The insurance coverage in a variable life insurance policy may vary based on the value of
its underlying investments
Accumulate Interest Option
ividend option allows the policy owner to leave dividends with the insurer to accumulate interest. In turn, the policy owner will be required to pay taxes on any interest (profit) generated by the dividend.
The death proceeds of a credit life insurance policy are typically paid to the
lender
A life policy that has premiums that are lower than normal during the early years is called
modified life
Cash Surrender Option
nonforfeiture option allows the policy owner to receive the policy's cash value. The policy owner no longer has coverage at this point. Usually, the maximum length of time a life insurance company may legally defer paying the cash value of a surrendered policy is six months (Delayed Payment provision).
Extended Term Option
nonforfeiture option permits the policy owner to use the policy's cash value to buy level, extended term insurance for a specified period. No further premium payments are made. The coverage provided with the extended-term nonforfeiture option is equal to the net death benefit of the lapsed policy.
Family Income Policies
pay an income beginning at the insured's death and continues for a period specified from the date of policy issue. For example, G purchased a Family Income policy at age 40, with a 20-year rider period. If G were to die at age 50, G's family would receive an income for 10 years.
Family Maintenance Policy
pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period. If P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20- year period, he should purchase a Family Maintenance policy. Family maintenance policies provide an income for a specific period starting at the death of the insured.
Accidental Death Benefit Rider (Multiple Indemnity)
pays an additional sum to the beneficiary if the insured dies due to a covered accident. The amount paid is a multiple of the policy face amount, such as double or triple the original benefit. Accident death life insurance provides the cheapest way to add a lot of coverage for a limited period.
Return of Premium Rider
pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a specific period specified in the policy. It may also return premiums to the insured at the end of a specified period.
Guaranteed Insurability Rider (Future Increase Option)
permits the policy owner to buy additional permanent life insurance coverage at predetermined intervals without submitting proof of insurability. It also includes specific events like marriage and births, without requiring proof of insurability. Usually, the benefit is allowed every three years, up to the original face amount of the policy.
If the insured dies during the grace period without having paid the premium, how much will the insurer pay
policy face amount minus any premiums due
These are all accurate statements regarding universal life insurance except
policy loans are not permitted
Adjustable Life
policy owner is usually looking for a policy offering flexible premiums. As financial needs and objectives change, the policyowner can make adjustments to the premium and/or face amount of an Adjustable Life insurance policy. Adjustable life policies are able to provide these features by combining whole life and term life into a single plan. If a policyowner was looking for a policy in which they could control the amount and frequency of payments with a death benefit that can be adjusted as their life needs change, they would want an adjustable life policy. There typically are no dividends involved with adjustable life policies. Increasing the face amount may require a policyowner to provide proof of insurability. Usually, a customer with an Adjustable life policy has a special need for flexible premiums.
How is the insured protected if a payor benefit rider is attached to the life insurance policy?
premium payments are waived in the event premium payor dies or becomes disabled
Whole life insurance
provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium. All whole life has the same type of benefits. The only difference in "types" of whole life is how the policy is paid. Some will be paid straight until death or age 100, some will be paid for after a few years or by a specific age, some may give you a little discount in the early years to help you get started, etc. All whole life lasts until death or age 100, has a fixed premium, and level benefit with cash value accumulation, regardless of how it is paid. Whole life is often compared to BUYING; like BUYING a house.
The automatic premium loan provision can be accurately described as a
provision that provides a policy loan to pay any premiums by the end of the grace period
What happens to the death benefit of a life insurance policy if the insured elects a partial payment from the accelerated (living) benefit provision
reduced
what effect can a long term care benefit rider have on a life insurance policy
reduced death benefit
When a lapsed policy's premium has been paid current, it has the potential of being
reinstated
Variable life insurance policies
require a producer to have proper FINRA and National Association of Securities Dealers (NASD) securities registration prior to selling any variable policy contract, whether it be life insurance or an annuity, as they include regulated securities. These policies are also known as interest sensitive policies. The policies usually have a fixed level premium, but the cash value and death benefits of a Variable Life policy can fluctuate according to the performance of its underlying investment portfolio. A typical Variable Life Policy investment account grows through mutual funds, stocks, and bonds. This includes Variable Life, Universal Variable life, Variable Whole Life, and Variable Annuity. If a policyowner or applicant was looking for a policy to offset inflation, they would want to look into a variable policy. Since the policyowner is assuming all of the investment risk and the rate of return is not guaranteed, a person must have proper FINRA securities registration in addition to an insurance license to sell any variable contracts.
Annual Renewable Term
s term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
assets that back the non-guaranteed values of variable life insurance products are held in which account
separate account set up by the insurer
Consideration Clause
states a policy owner must pay a premium in exchange for the insurer's promise to pay benefits. A policy owner's consideration consists of completing the application and paying the initial premium. The amount and frequency of premium payments are contained in the consideration clause. "Please CONSIDER me for insurance. Here is my COMPLETED APPLICATION, INITIAL PREMIUM, and how much, how often I agree to pay. Please consider me."
Incontestable Provision period
states that the insurance company may not challenge the validity of the policy once the policy has been in force for a period of time, typically two years. Over the years, case law has established precedence that the Incontestable Clause applies to cases of fraud.
Suicide Clause
states that the policy will be voided, and no benefit will be paid if the insured commits suicide within two years from policy issuance. The primary purpose of a suicide provision is to protect the insurer from applicants contemplating suicide.
Entire Contract Provisions
states the insurance policy itself, any riders and endorsements/amendments, and the application comprises the entire contract between all parties.
Free Look Period
states the policy owner is permitted a certain number of days once the policy is delivered to look over the policy and return it for a refund of all premiums paid.
How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?
survivorship life policy is lower
Increasing Term Policy
term policies feature level premiums and a death benefit that increases each year.
what would be considered an advantage of purchasing term life insurance
the initial premium is lower compared to an equivalent amount of whole life coverage
Insuring Clause (Insuring Agreement)
the insurer's basic promise to pay specified benefits to a designated person in the event of a covered loss. States the scope and limits of coverage
Entire Contract Provision
the policy owner is entitled to the entire contract so that he knows any riders or waivers
what is considered the collateral on a life insurance policy loan
the policy's cash value
Which of these is not a reason to buy a term life policy
to accumulate savings
how is a collateral assignment used in a life insurance contract
transfers specific ownership rights to a creditor
Non-Medical Life Insurance
typically does not require a medical exam and tends to be more expensive than medically underwritten policies. The insurer will average out everyone's risk and charge accordingly. Although insurers typically will not require a medical exam, they will still inquire about the applicant's medical history and lifestyle.
what is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued
under $50,000 initially, but increases over time
which of the following statements about universal life insurance is not true
universal life insurance normally has a minimum guaranteed cash value for duration of the policy
Payor Provision (rider or clause)
waives future premiums for a juvenile life insurance policy if the person responsible for paying the premiums dies or becomes disabled.
An investor (or stranger) originated life insurance policy
when the insured dies, the policyowner (investor) benefits. In normal circumstances, it is a beneficiary with insurable interest who benefits from the death of an insured. An investor originated life insurance policy is when an investor purchases a policy on the life of someone else to profit upon that person's death. The investor is typically the policyowner, payor, and names themselves beneficiary. Usually, this is in exchange for a monetary living benefit for the insured. For example, L, the Investor, has taken out a $100,000 life insurance policy on E, the insured. L is the policyowner who will receive the $100,000 upon E's death. E is the insured, and in exchange for allowing the policy on his life, receives $500 a month to help with bills. Investor or Stranger Originated Life Insurance Policies are illegal, as they are designed to circumvent the insurable interest requirements of an in
