Life Overview-Type of Policies
Which of the following terms refers to the period of time during which the annuitant makes premium payments to an annuity?
accumulation period
Which of the following options may allow a vanishing premium in life insurance policies?
dividends
Which of the following is an advantage of buying an annually renewable term policy?
evidence fo insruability is not required at renewal
All of the following are possible features of variable life insurance policies except
level term
Annuities are purchased to
liquidate an estate
Liability is usually determined by proving
negligence
Level/Term Policies
premium remain the same throughout the life of the policy
3 Parties to an Annuity Contract
the owner, annuitant and the beneficiary
Low Interest Rate
traditionally charges for policy loans is one of the features that has made loans attractive with a 4% to 6% fixed rate being common in the past most insurers now charge a fixed rate of 8%
All of the following statements are true regarding a noncontributory group life insurance plan except
up to 25% of employees may contribure to the premium
Limited-Pay Policies
usually have higher premiums than straight life policies because the premium payment period is considered
Variable Rate
when they apply the policy specifies when the insurer will adjust the rate, such as on the first day of each calendar quarter
Universal Life
a combination of flexible premium and adjustable life insurance policy
Policy Loan
a nonforfeiture value in which an insurer loans a part of all of the cash value of the policy assigned as security for the loan to the policyowner
in which of the following situations insurance interest does not exist?
a person is insuring the life of his best friend
Joint Life
a single policy that is designed to insure two or more lives
Exposure
a unit of measure used to determine rates charged for insurance coverage
Survivorship Life Insurance
also called second-to-die or last survivor, similar to joint life but the policy will pay the benefit upon the last death
Adjustable Life Policy
can be either term or whole life, the insured chooses the amount of coverage that is needed and the premium that he or she can afford the policy is adjusted as the insureds needs change
Cash Value Feature
cash value build-up in a life insurance policy supports various other features
Front-End Charge
cash value policy may very well involve a substantial front-end charge or load which will appear as a reduction or in som instances as an elimination of cash value in the first years of the policy
A term life insurance policy may be changed into a whole life insurance policy is
convertible
Which of the following is an advantage of buying an annually renewable term policy?
evidence of insurability is not required at renewal
Decreasing Term Policies
feature a level premium and a death benefit that decreases each year of the policy
Increasing Term Policies
have a level premium, as do all term policies, but the face amount increases every year of the policy term
A term policy would be preferable to a whole life policy when the individual wants the policy to
have the largest death benefit for the smallest premium
Units with the same or similar exposure to loss are referred to as
homogeneous
Surrender Charge
if the policy is surrendered within a certain time period
Dangers that are carried onto the worksite by employees are known as
imported
In variable life policies, where is the cash value invested?
in seperate accounts
Spendthrift Clause
is designed to protect the beneficiary from losing the life insurance proceeds to creditors, assigning the proceeds to others or spending large sum recklessly
Three Primary components to an Insurance Projection That Affect the Insurance Premium
-expense rate for cost of administering the policy -mortality risk rate based on death assumptions -the rate of dividends to be created as earnings
Four Factors in Determining Cash Value
-premium paid -the expenses charged -the cost of term insurance -the investment earnings
Factors in Determining rates
-the age of the insured -medical history -occupation -sex
Liability Losses arise from 3 sources
1. a court if it awards legal damages to a person from an organization responsible for negligently injuring that person 2. the cost of a legal defense 3. loss prevention arising from potential legal liability
Indemnity
a collateral contract of assurance by which one person secures another against an anticipated loss that signifies compensation has been given to an insured in order to relieve him or her from a loss
Straight Life
also known as continuous premium whole life, charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit
The multiple income calculation method takes which of the following into account?
annual earnings
Dividends
are different from cash value, are paid on participating whole life policies are a refund of the premium
Annuities
are not technically insurance policies, annuity is a contract that provides income for a specific period of time or for life
Which of the following is NOT a group typically recognized as eligible for group insurance?
association-patron groups
Term Life Insurance
is temporary protection that lasts only for a specified period of time
Main Purpose of Life Insurance
is to provide the insureds peace of mind, and the knowledge that their family and loved ones will be financially protected after the insured's death
Reduction
lessening the possibility or severity of a loss. actions such as installing smoke detectors or having annual physical to detect health problmes early are examples of reduction
Accumulation Period
or pay-in period, that are invested and earn interest, after money has been paid in at a specified time regular payments are made to the person designated in teh contract
Payment Feature
premium modes are methods of paying policy premiums -annually or once every 12 months -semi-annually or twice every 12 months -Quarterly or once every three months out of 12 -monthl or once every month
Bodily injury liability includes payments for all of the following except
property damage
Whole Life Insurance
provides permanent protection
Which of the following features is available in term life insurance?
renewability
Which of the following types of policies does not have a savings component?
term life
Single-Premium Whole Life
these policies use a one-time, lump-sum premium payment to provide a level death benefit to the maturity of the policy
Limited-Pay Whole Life
a variation on straight life, the only difference is that limited-pay policy specifies a set number of years during which the policyowner must pay premiums