Chapter 2 Life Insurance

straight whole life, limited- pay whole life and single premium

3 types of whole life insurance

1. Level premium 2. Death Benefit 3. Cash Value 4. Living Benefits

4 key characteristics of whole life insurance are: 1. _______ 2._______ 3._______ 4._______

Convertible

A decreasing term policy is usually _________; however, it is usually not renewable since the death benefit is $0 at the end of the term policy.

Nonforteiture

Aka for Cash Value

Term Insurance Policies

Most ________ are Renewable, convertible, or Renewable & Convertible (R&C)

Pure Death Protection

Term insurance provides what is known as _______: which is if the insured dies during this term, the policy pays the death benefit to the beneficiary. If the policy is canceled or expires prior to the insured's death, nothing is payable at the end of the term; and if there is no cash value or other living benefits.

Whole Life Insurance

______ provides lifetime protection, and includes savings element (or cash value). _____ policies endow at the insured's age 100, which means the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100. The policy premium is calculated assuming that the policyowner will be paying the premium until that age.

Permanent Life Insurance

______- is a general term used to refer to various forms of life insurance policies that build cash value and remain in effect for the entire life of the insured (or until the age of 100) as long as the premium is paid.

Level Premium Term

_______, provides a level death benefit and a level premium during the policy term. `

straight life

ordinary life or continuous premium whole life also known as ________ .

Level premium

the premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy is ___________ type of premium.

False- the death benefit is guaranteed and also remains level for life

true or false: the death benefit is guaranteed but does not remain level for life.

100 years old

what is the policy maturity date?

Straight life

which whole life insurance type has the lowest annual premium?

Term Policies

_____ policies provide the greatest amount of coverage for the lowest premium as compared to any other form of protection. There is usually a maximum age above which coverage will not be offered or at which coverage can not be renewed.

Level Term Insurance

______ is the most common type of temporary protection purchased.

Level

The word ____ refers to the death benefit that does not change throughout the life of the policy.

Mortgage or other debt

The Decreasing term coverage us commonly purchased to insure payment of a _____ or _____ if the insured dies prematurely. The amount of coverage thereby decreases as the outstanding loan balance decreases each year.

Convertible

The ___ provision provides the policy owner with the right to convert the policy to a permanent insurance policy WITHOUT evidence of insurability. The premium will be based on the insured's attained age at the time of conversion.

Renewable

The _____ provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability. The premium for the new term policy will be based on the insured's current age.

Living benefits

The policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. The cash value, also called the nonforfeiture value, does not usually accumulate until the policy year and it grows tax deferred.

How the face amount (death benefit) changes

There are 3 basic types of term coverage available, based on _____________ during the policy term: 1. Level 2. Increasing 3. Decreasing

True

True or False: Premiums for whole life policies usually are higher than for term insurance..

Whole Life Insurance

What is the most common type of permanent insurance?

Increasing Term Policy

What type of policy would be ideal to handle inflation and the increasing cost of living? _____ This type of policy is often added to another policy rider, such as with return of premium policies.

Annually renewable term (ART)

___ is the purest form of term insurance. The death benefit remains level (in a sense its a level term policy), and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.

Pure Life Insurance

____ is the aka for Term Insurance

Cash Value

_____ , is created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches the age of 100 (the policy maturity date), and is paid out to the policy owner. (remember the insured and the policy owner do not have to be the same person). _____ are credited to the policy on a regular basis and have a guaranteed interest rate.

Increasing term

_____ features level premiums and a death benefit that increases each year over the duration of the policy term. The amount of the increase in the death benefit usually expressed as a specific amount or a percentage of the original amount. _____ policy is often used by insurance companies to fund certain riders that provide a refund of premiums or a gradual increase in total coverage, such as the cost of living or return of premium riders.

Decreasing Term Policy

______ policy features a level premium and a death benefit that decreases each year over the duration of the policy term. ____ is primarily used when the amount of needed protection is Time Sensitive, or decreases over time.

Level premium term example

a 100,000 10- year level term policy will provides 100,000 death benefit if the insured dies at any time during the 10 year period. The premium will remain level during the entire 10 year period. If the policy renews at the end of 10 year period, the premium will be based on the insured's attained age at the time of renewal. This is an example of _____?

Term Insurance

_____ is Temporary protection because it only provides coverage for a specific period of time.

Straight Life

______ is the basic whole life policy