Chapter 3 Life Insurance Policies

The policyowner 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?

Age 100

Whole life policies provide protection until the insured reaches what age?

Age 100

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

To prevent the policy from lapsing

Under Option B in a universal life policy, what happens to the death benefit?

Under Option B, the death benefit increases each year by the amount of the cash value increases

When would a 20-pay whole life policy endow?

When the insured reaches age 100

When does an adjustable life policy accumulate cash value?

When the premiums paid are more than the cost of the policy

Who owns a group life insurance contract?

The employer (also known as the sponsor of the group)

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Universal Life

What type of life insurance is best suited to cover a mortgage?

Decreasing term

When the amount of insurance in an adjustable life policy, what will the insurer require from the insured?

Evidence of insurability

What policy component must decrease in decreasing term insurance?

Face amount

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

Group's purpose, size, financial strength and turnover

Universal life policies have two types of interest rates. What are they?

Guaranteed and current

During partial withdrawal from a universal life policy, what portion, if any, will be taxed?

Interest earned on the withdrawn cash value

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?

Limited-pay whole life

What universal life option has gradually increasing cash value and a level death benefit?

Option A

What are death benefit options in universal life policies?

Option A - level death benefit, and Option B - increasing death benefit

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

Regarding taxation, how does the cash value of a universal life policy accumulate?

Tax deffered

What elements of an adjustable life policy can be changed by the policy owners?

The amount and payment period of the premium, the face amount, and the period of protection

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?

The full death benefit

In annually renewable term polices, what is the annual premium based upon?

The insured's attained age

Why are policy loans not available on term insurance?

There is no cash value to borrow against

Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?

Universal Life

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

Whole life

Group life insurance policies are written as what type of insurance?

Annually renewable term

The death protection component of a universal life policy is expressed as what type of coverage?

Annually renewable term

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?

For 20 years or until the insured's death, whichever occurs first

What are the "living benefits" of whole life insurance?

Loan values

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?

20-year level term

What type of premium is charged on a straight life policy?

A level premium for the life of the insured

Who is insured under a juvenile life policy?

A minor

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?

Decreasing Term

What does "level" refer in level term insurance?

Face amount

What type of life insurance policy is Life Paid-up at Age 65?

Limited-pay Whole life

What type of whole life insurance policy generates immediate cash value?

Single premium whole life

What happens to the cash value when a whole life insurance policy matures?

Cash value is paid to the policyowner

What type of life insurance policy can be changed from a policy with no cash value to one that generates cash value?

Convertible term

What is the major difference between the most common types of whole life policies: Straight Life, Limited Payment and Single Premium?

Premium payment mode

Who is entitled to the cash values in a life insurance polcy?

The policyowner

What type of life insurance policy provides permanent protection?

Whole Life

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability is not required

What type of life insurance policy offers pure death protection?

Term

A policyowner borrowed a portion of cash value from his whole life policy. If the loan is no repaid, how will that affect the death benefit to the beneficiary?

The amount of the loan will be subtracted from the death benefit

How is the premium determined in a join life insurance policy?

The premium is based on the average age of the insureds

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

The premium remains level

In variable universal life insurance, to what policy component does the term 'variable' refer?

Cash value and death benefit

In a joint life policy, when is the death benefit paid?

Upon the first death

What happens to the premium in an annually renewable term life policy?

The premium increases with each renewal

If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?

Evidence of insurability