Chapter 3: Types of Policies and Riders

Credit Life Insurance

A special form of decreasing term. Unlike the standard decreasing term policy, credit life automatically names the creditor as the beneficiary.

Most group life insurance has a(n) ______ term death benefit.

Level

Increasing Policy

The death benefit increases over the life of the policy while the premiums remain level.

In all cases upon the insured's death, the beneficiary receives which of the following?

The face amount of the policy.

Adjustable Face Amount

The insured can increase of decrease the face amount of the policy. Any increase in the face amount will require evidence of insurability.

Endow (Mature)

The point at which the policy's cash value in a whole life policy accumulates to equal the face amount and the proceeds are paid to the policyowner

convertible

The right to convert to a permanent policy without evidence of insurability. The premium is based upon attained age or issue age.

Annually Renewable Term

The simplest form of term life insurance is for one year. The death benefit remains level and the premiums increase yearly as the policy renews up to a specified age.

Current Assumption or Interest-Sensitive Whole Life

This is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

Indexed Universal Life Insurance

This policy gives policy owners the opportunity to decide the percentage of cash value that is invested in traditional fixed income securities

Flexible premium adjustable life is another name for:

Universal Life

Flexible Premiums

Universal Life and Variable Universal Life

A payor rider is used to keep what type of policy in force?

A juvenile insurance policy

Flexible Premium

A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.

Which of the following policies requires a producer to have both a life and securities license to sell?

Both Variable Life and Variable Universal Life require a securities and life license to sell. A securities license is not required for Adjustable Life, Universal Life, or Equity-Indexed Life.

Permanent insurance differs from term insurance with regard to:

Cash value accumulation

Traditional whole life policies

Earn a guaranteed rate of return on the cash value.

In all cases upon the insured's death, the policy owner receives which of the following?

The endowment value.

Single Premium Whole Life

The entire premium is paid in a lump sum at the time of purchase and creates immediate cash value.

Life insurance endows or matures when the cash value equals..

The face amount

Rider

an added benefit attached to the policy that supplements existing coverage. A rider is usually added at the time of application and typically requires a small increase in premium.

Viatical Settlement

an agreement between a third party and a life insurance policy owner insuring the life of an individual with a life-threatening or terminal illness, normally with a life expectancy of 2 years of less.

ordinary whole life policy

can be sold as Straight Life, Limited Pay Life, and Single Pay Life

Term insurance provides a pure death benefit and is sometimes referred to as "temporary insurance because..

it is issued for a specified number of years or to a specified age.

The face amount of a Whole Life Policy is:

paid to the policy owner if the policy mates or endows

The face amount of a whole life policy is paid to the..

policy owner if the policy matures or endows.

The cash value in a whole life policy is a living benefit which the policy owner may borrow against or receive if the policy is...

surrendered before the insured dies.

The type of policy that can be changed from one that does not accumulate cash values to one that does is a:

Convertible term policy

Ed purchased policies on behalf of his grandchildren. He wanted to be certain they could purchase additional policies at specified ages. He was able to do this by adding which rider?

Guaranteed Insurability Rider

Universal Life Insurance

Insurance protection and a savings element that grows on a tax-deferred basis. "Unbundled Policy"

The Return of Premium Rider, the Return of Cash Value Rider, and the Cost of Living Rider all use which type of term insurance to accomplish their objective?

Increasing Term

Re-Entry Term

Level term policy with a provision that the renewal premium will be reduced if the insured meets certain underwriting qualifications.

Cash value

Money accumulated in a permanent whole life policy that is considered a living benefit which the policyowner may borrow against or receive if the policy is surrendered before the insured dies.

Option A Death Benefit

Pays the face amount of the policy and provides a level death benefit.

An insured owning an Adjustable Life Policy enjoys a policy that has characteristics of both ______ and _______.

Permanent and Term

Ordinary Whole Life Insurance

Provides insurance protection to age 100, cash value accumulation to age 100, and fixed level premium payments.

In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the _______

Risk Corridor

Option B Death Benefit

Says the face amount stated in the contract which is level term, plus any cash values accumulated over the Yeats. The mortality charge is greater than the other Death Benefit.

Re-Entry Term Option

Term policies with this option will allow the insured, upon the end of the original term, to renew based on attained age and may qualify at a discounted rate by proving evidence of insurability.

What rider is designed to help the insured offset the effects of future inflation on the policy's face amount?

The Cost of Living Rider allows for the policy's death benefit to keep up with inflation without having to prove insurability but with an increase in premium to reflect the added risk to the insurer.

Face Amount

The death benefit amount payable on a life insurance policy. In other words, the amount of coverage the policy provides. This is sometimes referred to as the limit of liability.

Decreasing Policy

The death benefit decreases, but premiums remain level for the policy term.

Joe has a whole life policy with a guaranteed insurability rider. He was 21 at the time the policy was issued. If he exercises all of the options at the ages specified under the typical rider, how many policies will he end up with?

Under the typical guaranteed insurability rider, Joe would have options to buy additional policies of the same type and face amount at ages 25, 28, 31, 34, 37, and 40, therefore he would buy 6 more to bring his total policies owned to 7.

Fixed Premiums

Whole Life and Variable Life

Level Policy

the death benefit remains level and the premiums remain level during the policy term

Life insurance endows or matures when the cash value equals...

the face amount