Chapter 2: types of life insurance policies

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

A full death benefit Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.

Which of the following is true regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level term A 20-year term policy is written to provide a level death benefit for 20 years.

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life (Premium payments will cease at her age 65, but coverage will continue to her death or age 100.)

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life (Premium payments will cease at her age 65, but coverage will continue to her death or age 100.)

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-pay Life In limited-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years.

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower (Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.)

Under a pure life annuity, an income is payable by the company

Only for the life of the annuitant. - With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life.

Which two terms associated directly with the way an annuity is funded?

Single payment or periodic payments

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend

Straight Life With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant.

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

The insured may renew the policy for another 10 years, but at a higher premium rate.

Which of the following is true regarding the premium in term policies?

The premium is level for the term of the policy

Which type of life insurance policy generates immediate cash value?

a) Single Premium Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

Which of the following best describes a pure life annuity settlement option?

pure life provides payment for as long as the annuitant is alive