Chapter 4 (Life Policies)- Life Insurance Policies - Provisions, Options and Riders

10. A policy-owner may change two policy features on what type of life insurance?

Adjustable Life

Equity Index Whole Life Insurance

Life Insurance is permanent life insurance that allows policyholders to tie accumulation values to a stock market index.

7. Which of the following are the premium payments for a Universal life policy NOT used for?

Separate account Investments

11. The type of multiple protection coverage that pays on the death of the last person is called a(n)

Survivorship Life Policy

16. Which of the following policies does NOT build cash Value

Term

19. What types of life insurance are normally used for key employee indemnification?

Term, Whole and Universal Life insurance

17. Which of these would be the best example of a limited pay life insurance policy?

Whole Life policy with premiums paid up after 20 years

1. A renewable Term Life Insurance policy allows the policy-owner the right to renew the policy when?

Without producing proof of insurability

Decreasing Term Insurance

a form of term insurance in which the benefits that will be paid to the beneficiary are reduced over time and the premium remains constant. common for home mortgages

Adjustable Life Insurance

allows policy owner to change two policy features: premium and face amount. flexible premiums. combination of whole life and term life. premiums, death benefits and policy protection period can all be modified

Renewal

automatic continuance of insurance coverage

14. A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than the IRS will allow

13. All of these are valid options for an Adjustable Life Policy EXCEPT

A nonforfeiture option can be used to increase the death benefit

Family Term Rider

Combines the spouse and children's term rider in one rider.

12. Which of these is NOT subject to income taxation under a Modified Endowment Contract (MEC)?

Death benefit

15. Peter has a policy where 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. What kind of policy is this?

Equity Index Whole Life

3. Which of these riders will pay a death benefit if the insured's spouse dies?

Family Term Insurance Rider

Payor Benefit Rider

Found in juvenile polices which waivers the premiums if the person paying them (often the parent) is disabled or dies while the child is still a minor

Term Life Insurance

Gives you greatest amount of coverage for limited period of time. provides pure death protection since it only pays a death benefit if insured dies during policy

8. Which type of life insurance is normally associated with a Payor Benefit rider?

Juvenile insurance

5. When a decreasing term policy is purchased, it contains a decreasing death benefit and

Level Premiums

Under a Modified Endowment Contract, what are the likely tax consequences?

Pre-death distributions will become taxable

18. How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

6. What is the automatic continuance of insurance coverage referred to as?

Renwal

2. Partial Surrender is allowed in which of the following life policies

Universal Life

9. A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called

Universal Life

Survivorship Life Policy (Joint Survivor)

cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. only pays upon death of last insured

Whole Life - Limited pay

coverage remains on a limited-pay life policy until age 100 or death. though premium payments are limited to a certain period, insurance protection extends until insured death. premiums would need to be paid for 20 year straight then no more required premiums but guaranteed coverage till death or 100

4. Decreasing term life insurance is often used to?

is term life insurance that provides an annually decreasing face amount over time with level premiums. commonly used for home mortgage

Whole LifeModified Endowment Contract (MEC)

policy exceeds maximum amount of premium that can be paid into policy and still have it recognized as life insurance contract.contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured or at insured's death before end of period stated. the death benefit would not be subject to taxation

Universal Life

policy incorporates flexible premiums and adjustable death benefits. investment gains go toward cash value and owner can use cash value to manipulate the flexible aspects of it. Gives you most options and control. the premium payments are NOT used for separate account investments

Whole Life Insurance

provides death benefit for entire life of insured. also living benefits in form of cash. matures at age 100 with normally level premium; often compared to buying, like a house