Chapter 3- Types of Policies and Riders

Which of the following is not a feature of term life insurance?

A Cash surrender value Term life insurance has no cash value and is often referred to as providing pure protection. Compared to the same face amount of whole life insurance, term will cost less.

A Last-to-Die policy would be the most appropriate recommendation for which of the following?

A Married couples worried about estate taxes would be best served in most cases by a Last-to-Die, or Survivorship, policy

A ______ policy has a death benefit that can increase or decrease over time based on stock market performance, but with a guaranteed minimum death benefit, a choice of subaccounts in which cash value may be allocated, and a fixed premium.

A Only Variable Life, also known as Variable Whole Life, has all of these characteristics. Variable Universal Life does not adjust the death benefit in relation to stock market performance. Equity Indexed Universal Life does not permit allocation of cash value in stock-based funds. There is no such thing as Investment Grade Whole Life.

What "jumps" in a jumping juvenile policy?

B A "jumping juvenile" policy will normally increase the face amount of insurance by a factor of five with no change in premium at the next anniversary after the child turns anywhere from age 21 to 25 (depends on the policy). Ownership of the policy also changes at that time to the child, who is now an adult.

What is the face amount of insurance?

B The limit of liability The face amount of insurance is the stated death benefit, and is referred to as the insurer's limit of liability--- the most the policy will pay in the event of the insured's death.

Which of these best describes a disability income rider?

C A disability income rider pays monthly income to a totally disabled insured. The income is a specified number of dollars per $1,000 of death benefit, which may be expressed as a percentage of the death benefit. Waiver of premium allows the insured to avoid paying premiums when totally disabled. Money paid as income under a disability income rider does not affect the death benefit in any way.

When a whole life policy endows, what happens to the policy cash value?

C The face amount of the policy is paid to the policyowner. At endowment, because the insured has not already died, a whole life policy's cash value will equal the face amount of insurance. The policy ends and the cash value is paid to the policyowner.

Which of the following are characteristics of universal life insurance policies?

D Death benefit options, death benefit and premiums may be changed. Death benefits options are a key characteristic of all forms of universal life insurance. All UL policies permit the policyowner to make changes in both the amount and timing of premium payments, including making no payments at all, and the death benefit may be increased or decreased in accordance with the terms and provisions of the policy.

A "level term" policy means that the _________ remains the same throughout the lifetime of the policy.

D The policy proceeds are also known as the death benefit or face amount of insurance. In term life, at each renewal the premium will increase based on the age of the insured. The pure cost of insurance is gross premium minus the insurer's expenses and profit and without adjustment for interest earnings on reserves.

A producer is explaining the concept of limited-pay life insurance to her client. Which of these statements is incorrect?

D the basic concept of insurance premiums is that by paying less often, a person will pay less in total premium. However, in cash value policies, because the payments are funding the cash value, the actual amount per payment in a limited payment policy will be higher as the number of payments is reduced. A 10-pay policy will have higher premiums than a 20-pay policy, but the total of the 10 payments will be much less than the total of the 20 payments.