Chapter 4 Types of life policies

Both universal life and variable universal life have a A. Level fixed premium B. decreasing premium C. increasing premium D. flexible premium

D. Flexible premium

The following are features of the indexed universal life EXCEPT. A. flexile premium B. Adjustable death benefit C. Policy's cash value is dependent on the performance of equity index S. Sale of this product requires securities license

D. Sale of this product requires security license

family maintenance policy

Life insurance based on family income policy which combines whole life with level term to provide a beneficiary with income over a specified period of time.

Single Premium Whole Life

Paid up for life with one large premium payment

straight life

A whole life policy under which premiums are paid throughout the life of the insured or age 100

Whole life insurance

provides lifetime protection, and includes a savings element (or cash value) Whole life endows at the insureds age of 100

permanent insurance

builds cash value and remains in effect for the entire life of the insured

intermediate premium

2 premium rates: guaranteed max- stated in contract; non-guaranteed lower rate which policy owner pays during initial period; after initial period, insurer establishes new rate, never higher than max

A 20-year family income policy was purchased effective April 1, 2001. The insured died four months later, on August 1, 2001. The beneficiary receives monthly income for A. 19 years 8 months B. 9 years 8 months C. 20 years D. 10 years

A. 19 years 8 months

All of the following are true about variable products except? A. Premiums are invested in the insurers general account B. Minimum death benefit is guaranteed C. cash value is not guaranteed D. policyowners bear the investment risk

A. Premiums are invested in insurers account.

An applicant wants to buy life insurance in which he can count on receiving the same benefits as stated in the contract. which type should he buy? A. fixed B. permanent C. variable D any type of annuity

A. fixed

All of the following are true about variable products EXCEPT A. cash value is not guaranteed B. policyowners bear the investment risk C. premiums are invested in the insurers general account D. Minimum death benefit is guaranteed

C. Premiums are invested in insurers general account

family policy

Combines whole life with term to cover family members in a single policy, providing coverage on every member of a family.

Increasing term

Level premiums and a death benefit that increases each year over the duration of the policy term. Usually has a rider that provides refund of premium or increase due to cost of living increases

Living benefits

Pplicyowner can borrow against the cash value while policy is in effect or receive cash value when policy is surrendered.

What is level premium

Premium and benefit stay the same through the term of policy

convertible provision

Provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability

Term Life

Temporary protection bc its coverage for a period of time.

Indexed whole life

cash value is equal to the equity index. The face value increases to keep up with inflation

3 Types of term coverage

level, increasing, decreasing

survivorship life

same as joint life but pays on the last death. Often used to offset liability of the estate tax upon death of last insured

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? A. ordinary life B. joint life C. decreasing term D. whole life

B. Joint life

which of the following determines the cash value of a variable life policy? A. Premium mode B. Performance of the policy portfolio C. Company general account d. Policys guarantees

B. Performance of portfolio

If an agent wishes to sell variable life policies, what license must the agent obtain? A Personal lines B. Securities C. Adjuster D. Surplus lines

B. Securities

Which of the following elements in an indexed universal life policy is tied to the index A. Face amount B. premiums C. Cash values D. death benefit

C. Cash values

Intermediate level premium

Contains a provision that provides a current premium scale and a maximum premium scale which premiums cannot be raised.

family term rider

incorporates the spouse term rider along with the children's term rider in a single rider

adjustable life

provides policy owner with the best of both worlds, term and permanent coverage. The insured typically determines how much coverage is needed and the affordable amount of premium. Policy owner has the following options: 1. increase / decrease premium 2. increase / decrease face amount 3. change period of protection. They also have the right of converting from term to whole or vice versa

universal life

the policy owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again, even skip a payment as long as there is sufficient cash value. Universal life offers 2 death benefits. 1. level 2. increasing

Family income policy

A combination of whole life insurance and decreasing term insurance to provide both temporary and permanent family protection. The purpose of family income coverage is to provide benefits to the surviving family if a breadwinner prematurely dies.

The type of policy that can be changed from one that does not accumulate cash value to the one that does is a A. whole life B. convertible term C. renewable term D. decreasing term

B. convertible term

one of the advantages of a family life insurance policy that provides coverage for children is that it A. allows any income the children make be included in coverage B. May be converted to permanent insurance for the children without requiring evidence of insurability C. Covers children for free D. Allows spouse extra coverage for every child covered.

B. may be converted to permanent without proof of insurability

Decreasing term

Feature a level premium and a death benefit that decreases each year over the duration of the policy term. Commonly purchased to insure payment of mortgage or other debts.

Modified and Graded Premium Whole Life

Two similar forms of whole life insurance in which premiums start at a lower level than standard but rise in time to a higher level. Modified premium whole life has a single increase (typically five years after policy issue), with premiums remaining level thereafter. Graded premium whole life starts with an even lower premium, but premiums increase in a series of steps until they, too, become level for the remainder of the premium period.

variable universal life

combines many features of whole life with flexible premium of universal life and investment component of variable life. The characteristics: flexible premium that can be increased, decreased or skipped, increasing and decreasing amount of insurance and cash withdrawals or policy loans

mortgage redemption

insures borrowers for an amount equal to their mortgage. Upon insureds death insurer pays off mortgage / debt

Agents selling variable life insurance products must:

be registered with FINRA / licensed by state to sell life insurance / received a securities license

Policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements regarding this change. A. death benefit can be increased only when the policy has developed a cash value B. death benefit can be increased only by exchanging the existing policy for a new one C. death benefit can be increased by providing evidence of insurability D. death benefit cannot be increased

C. death benefit can be increased by providing evidence of insurability

Jumping Juvenile Policy

Life insurance written on the life of a minor child. Face amount increases at a predetermined age. usually 21. premium remains the same

What is level term

The most common type of temporary protection. benefit doesn't change throughout the policy life

Renewable provision

renew on expiration date without evidence of insurability

Graded Premium Whole Life

Coverage has several premium increases that occur annually during each year of the step-rate premium period, which is usually the first five or ten years of the policy. After this period, premiums level off at the higher rate for the remainder of the policy.

joint life

A single policy that is designed to insure two or more lives. with 2 exceptions; based on joint age between insureds and death benefit is paid upon first death only. It is also used to insure business partners in the funding of a buy sell agreement and the other business life needs

Term insurance provides what is known as pure death protection

If insured dies during term, beneficiary is paid death benefit If policy is cancelled or expires prior to insureds death, nothing is payable at the end of the term and there is no cash value.

The following are features of the indexed universal life except A. Sale of this product requires a securities license B. Flexible premium C. adjustable death benefit D. Policy's cash value is dependent on the performance of the equity index

A. sale of this product requires a security license

Which of the following best describes annually renewable term policy? A. level term insurance B requires proof of insurability at each renewal C. neither premium nor death benefit is affected by insureds age D. provides annually increasing death benefit.

A. level term insurance

Modified Life Insurance

whole life policy where premiums are lower for first three-five years but then higher thereafter. For those who can't yet afford high premiums but will be able to.

An insured purchased a life insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is an A. adjustable life B. interest - sensitive whole life C. Credit life D. Annual renewable term

B. Interest - sensitive whole life

Return of premium

Increasing term is added to a whole life policy that provides that if death occurs prior to a given age, not only is the death benefit payable to the beneficiary, but all premiums paid as well. or if they outlive the policy

Types of life policies

Term, whole life, universal life, indexed universal life, variable life and variable universal life

Death benefit

The amount payable upon the death of the person whose life is insured.

Which of the following is incorrect regarding a $100,000 20 year level term policy? A. the policy will expire in the end of the 20 year period B. At the end of 20 years the policy's cash value will equal 100,000 C. the policy premium will remain level for 20 years D. if the insured dies before the policy expired, beneficiary will receive 100,000

B. at the end of 20 years, the policys cash value will equal 100,000

Which of the following types of insurance policy is most commonly used in credit life insurance A. whole B. Equity indexed life C. decreasing term d. increasing term

C. decreasing term

Interest Sensitive Whole Life

Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors.

return of premium rider

Term insurance that when added to whole life provides that at death prior to any given age, not only is the original face value payable but the premiums also

payor rider

When an adult insures a child, premiums will be waived until the child reaches 21, if the adult dies or is disabled

variable life insurance

cash value accumulate based upon a specific portfolio of stocks without guarantees of performance

fixed life insurance

contracts that offer guaranteed minimum or fixed benefits

Variable Life insurance is based on what kind of premium? A. level fixed B. Increasing C. Decreasing D. Graded

A. Level fixed

Level premium

Premium for whole life policy is based on age. and remains the same throughout the policy

Annual renewable Term

Purest term of insurance. benefit remains the same but premium can increase with age but no medical required

Limited pay whole life

premiums for coverage will be completely paid up well before age 100

cash value

Created by the accumulation of premium, is scheduled to equal the face amount of the policy when insured reaches 100

When the breadwinner that is insured by family policy dies, what rights are provided to the other family members that are covered under the policy A. they can convert their coverage to permanent with evidence of insurability B. Family have no rights C. can surrender coverage for cash value D. Can convert coverage to permanent life without evidence of insurability

D. They can convert to permanent without evidence of insurability