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