3 - Life Insurance Policies - Provisions, Options and Riders: Exam 1 Life Provisions

Which of these is an element of a Variable Life policy? A fixed, level premium insurer assumes the investment risk no investment risk to the policy owner rate of returns are guaranteed

A fixed, level premium. Variable life policies have a fixed, level premium.

Credit life insurance is typically issued with which of the following types of coverage?

Decreasing term. the type of insurance used for Credit life is typically decreasing term, with the term matched to the length of the loan period.

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?

Equity index insurance yields greater gains than bonds but will still protect the principal with a minimum of risk.

What is Credit Life insurance?

Insurance that covers a debtor's life and will help provide funds to pay off a loan if the debtor dies before the loan is repaid

A company that owns a life insurance policy on one of its key employees may do all of the followin EXCEPT" -borrow against cash value -change beneficiary -cancel policy -change the policy's interest rate

The company may do all of these things with a Key Person Insurance policy EXCEPT "change the policy's interest rate."

What is a face amount?

The face amount in life insurance is how much coverage your life policy has or in other words, how much life insurance money is given to the beneficiary following the premature demise of the policyholder. In the world of life insurance, the face amount (or face value) is also known as the death benefit. The amount of coverage you purchased for your life insurance policy equals the face amount of your life insurance policy.

Which is true concerning a Variable Universal Life policy?

The policyowner controls where the investment will go and selects the amount of the premium payment. With Variable Universal Life, the policyowner controls the investment of cash values and chooses the timing and amount of premium payments.

What is an endowment policy?

An endowment policy is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit.

What Is the Cash Value of a Life Insurance Policy?

Cash value is the amount of money inside a permanent life insurance policy. It is the accumulation of funds that remains after your premiums pay for policy fees and expenses, including the cost of insurance.

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Family maintenance policy. A family maintenance policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of the preselected period.

What is interest sensitive life insurance?

It is a fixed premium type of whole life policy that offers guaranteed death benefits to policy holders even until they reach the age of 100. The cash value is comparable to the current money market rates. Advantage = advantage of an interest-sensitive life insurance policy is its ability to include excess or current interests into the policy which results to an accumulation in your cash values. Examples:

Which Life insurance policy combines term insurance with an investment element? -increasing term life -graded life -decreasing term life -universal life

Universal life

K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.

Universal. Universal life insurance, popular in the 1980s, worked as advertised for years, when interest rates were in the high single digits and above. Interest rates have since taken a dramatic fall, which negatively affected the performance of Univseral Life policies issues in the 1980's. This ultimatly resulted in the policyowner paying a much higher premium due to the increased cost of the underlying Term life policy and having no cash value to offset the premiums.

A(n) __________ __________ Life policy combines investment choices with a form of Term coverage

VARIABLE UNIVERSAL LIFE combines investment choices with a form of Term coverage.

A Variable life policy: -guarantees a minimum rate of return -does not allow the policyowner to assume to investment risk -does not guarantee a return on its investment accounts -does not guarantee an assignment provision

Variable insurance products do not guarantee contract cash values, and its the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.

Under a Graded Premium policy, the premiums

are lower during the policy's early years. A Graded Premium life policy provides for annual increases in premiums for a contact face amount of insurance during a defined preliminary period, with the purpose of making intial payments more affordable. The premium increases each year during the early years of the contract (usually five years) and remains the same after that time.