Life Insurance Chapter 2
limited pay life insurance
A form of whole life insurance characterized by premium payments only being made for a specified or limited number of years.
Joint Life
A single policy that is designed to insure two or more lives.
Universal Life Option A
Level death benefit
Single Premium
Lifetime coverage purchased with a single premium
Which component increases in the increasing term insurance?
death benefit
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
limite-pay life
what does the word level refer to in level term insurance
the death benefit that does not change through out the life of the policy
what is the main use of annuities
to provide retirement income
Which statement is NOT true regarding a Straight Life policy?
A)It usually develops cash value by the end of the third policy year. B)It has the lowest annual premium of the three types of Whole Life policies. C)Its premium steadily decreases over time, in response to its growing cash value. D)The face value of the policy is paid to the insured at age 100.
Term policies are available as Level, Increasing, and Decreasing. What policy component fluctuates depending on the policy type?
Death benefit
An agent selling variable annuities must be registered with
FINRA
Universal life option B
Increasing death benefit
If an insured skips a premium payments on a universal life policy, the missing premium may be deducted from the policy's cash value. The policy will _____ lapse
NOT
Universal life is also an interest-sensative policy. The insurer guarantees a contract interest rate (usually between 3-6 percent) there is also potential for current interest rate which is _______ guaranteed in the contract
NOT
Convertible Provision
Provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability
Most term insurance policies are
Renewable, Convertible or Renewable and Convertible (R&C)
Insurability
The acceptability of an applicant who meets an insurance company's underwriting requirements for insurance.
Ordinary (Straight) Life
The type of whole life insurance where premiums are payable over the whole life of the insured to age 100 is called
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Renewable provision
allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability
what are the two components of a universal life policy
an insurance component and a cash account
Term insurance has no _____ value
cash
an individual has just borrowed $10k from his bank on a five-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation
decreasing term
For joint life the death benefit is paid upon the _______ death only
first
Term insurance provides the ________ amount of coverage for the _________ premium
greatest, lowest
Annually renewable term policies provide a level death benefit for a premium that
increases annually, with the age of the insured
decreasing term policies feature a _______ premium and a death benefit that ________ each year over the duration of the policy term (usually used to insure payments of a mortgage or other debts)
level, decreases
Increasing term features _________ premiums and a death benefit that ________ each year of the duration of the policy term. (often used by insurance companies to fund certain riders that provide a refund of premiums)
level, increase
If an agent wishes to sell variable life policies, what license must the agent obtain?
securities
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called
single premium whole life
which of the following policies would be classified as a traditional level premium contract?
straight life
Which of the following best describes annually renewable term insurance?
A)It provides an annually increasing death benefit. B)It is level term insurance. C)It requires proof of insurability at each renewal. D)Neither the premium nor the death benefit is affected by the insured's age.
Endowment policy
An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Endowment policies are often used as a way of saving over the long term.
Which of the following policies would be classified as a traditional level premium contract?
Straight Life
all other factors being equal, the least expensive first year premium payment is found in
annually renewable term
a universal life insurance policy is best described as a/an
annually renewable term policy with a cash value account
which of the following is a feature of a variable annuity
benefit payment amounts are not guaranteed
Which policy component decreases in decreasing term insurance?
face amount(death benefit)
permanent life insurance
insurance policies that build cash value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
the benefit can be increased by providing evidence of insurability
which of the following determines the cash value of a variable life policy
the performance of the policy portfolio
Universal Life Insurance
the policyowner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to cover the monthly deductions for cost of insurance. If the cash value is too small, the policy will expire.
Survivorship Life
Two or more insureds. Pays upon death of the last
how are the premium rates on a joint life policy determined
by averaging the ages of both insureds
an individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it
deferred
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 20 years or until death, which ever occurs first
annually renewable term policies provide a level death benefit for a premium that
increases annually
The type of term insurance that provides increasing death benefits as the insured ages is called
increasing term
annuity
is a contract that provides income for a specified period of years, or for life.
An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years
it will increase because the insured will be 5 years older than when the policy was originally purchased.
what is the most common type of temporary protection purchased
level term insurance
What are the three basic types of term coverage available (based on how the face amount (death benefit changes during the policy term)
level, increasing, and decreasing
Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?
longest,greatest,least or most comprehensive
the premium of a survivorship life policy compared with that of a joint life policy would be
lower
Two types of premiums for Universal Life
minimum premium, make the policy perform as an annually renewable term product.. target premium, cover the cost of insurance protection and to keep the policy in force through out its lifetime
In term policies, what happens to the premium throughout the term of the policy?
premium always remains level
whole life insurance
provides lifetime (permanent) protection and accumulates cash value
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
required a premium increase each renewal
which type of life insurance policy generates immediate cash value
single premium
What are the three basic forms of whole life insurance
straight whole life, limited-pay whole life, and single premium whole life
