PFIN 340 Ch 12

Chartered Life Underwriter (CLU)

A life insurance agent who has passed a series of college-level examinations on insurance and related subjects.

Life insurance

A person purchases a policy by paying a premium and the insurance company promises to pay a sum of money at the time of the policyholder's death to the designated beneficiary. If an endowment, then the amount is paid to policyholder while living Purpose is to protect someone who depends on you from financial loss related to your death

d

A plan that insures a large number of persons under the terms of a single policy without requiring medical examinations is called a _______ life insurance policy. a) individual b) whole c) permanent d) group e) large number

Suicide Clause

A provision stating that if the insured dies by suicide during the first TWO years the policy is in force, the death benefit will equal the amount of the premium paid.

d

A special form of the liited payment plan is the _____ premium policy a) compound b) equitable c) double d) single e) simple

a

After determining you need life insurance, you should then: a) determining your life insurance objectives b) evaluate the ratings of the insurance company c) buy as much life insurance as you can afford d) estimate your life insurance requirements e) consult a local insurance company agent

whole life policy

An insurance plan in which the policyholder pays a specified premium each year for as long as he or she lives; also called a straight life policy, cash-value life policy, or ordinary life policy.

Group life insurance

Another type of life insurance policies that: - Insures large number of persons under a single policy without medical examinations - Term insurance - Often provided by an employer

e

Cash-value policies may make sense for people who: a) intended to keep the policies for only a couple of years b) are able to save easily c) need to accumulate reserves in the early years d) need benefits in the early years e) must be forced to save

b

If your insurance agent does not give you an interest-adjusted index upon request, then your best bet is to: a) tell the agent you will buy it later b) look for another agent c) tell the agent that you are still thinking d) buy the policy anyway e) complain to the better Business Bureau

a

Lori Simpson is thinking about purchasing some life insurance. She goes to a company where the policyholders are essentially the owners of th company. What type of insurance company has she visited? a) mutual b) stock c) exclusionary d) cooperative e) debt

Industrial Life Insurance

Other type of life insurance policies: - Known as home service or debit insurance - Premiums collected at insured's home - Least popular

Credit Life insurance

Other type of life insurance policy that: - Used to repay personal debt such as car loan if borrower dies - Expensive protection; considered a "ripoff"

Endowment Life insurance

Other type of life insurance policy: - Provides coverage from the beginning of the contract to maturity and guarantees payment of a specified sum to the insured, even if still living at the end of the endowment period

b

Richard Beck has a life insurance policy which he has altered to include an accidental death benefit payable to his son and daughter. This alteration has most likely been done by attaching a ____ to the policy. a) guaranteed insurability clause b) double indemnity provision c) policy dividend d) second-to-die rider e) accelerated benefits clause

e

Term insurance is protection for a specified period of time, usually: a) 1 year b) 5 years c) 10 years d) 20 years e) any of these intervals are offered

B

The life expectancy of a female at the age of 30 is 52.0 years. It means that: a) very few 30-year-old females will live past the age of 82 b) females alive at 30 years of age are expected to live an additional 52 years on average c) a 30-year-old female has the highest probability of dying d) 52.0 is the average age at which all females, age 30, will die e) a 30-year-old female has the highest probability of living

d

Which type of life insurance is the leats popular and its appeal continues to drop? a) universal life insurance b) endowment life insurance c) credit life insurance d) industrial life insurance e) group life insurance

Limited Payment Policy

Whole life insurance policy that - Pay premiums for a stipulated period, usually 20 or 30 years, or until you reach a specified age (such as 60 or 65) - Your policy then becomes "paid up" and you remain insured for life; face amount paid at death

Variable Life Policy

Whole life insurance policy that: - Minimum death benefit guaranteed but cash value is not guaranteed - The death benefit can be greater than the minimum depending on earnings of the dollars invested in a separate stock, money market, or bond fund

Adjustable Life Insurance Policy

Whole life insurance policy, but you can change your coverage by changing the premium payments or the period of coverage

Double Indemnity

a benefit under which the company pays twice the face value of the policy if the insured's death results from an accident - accidental death benefit

annuity

a contract that provides the a regular income, typically for as long as the person lives

rider

a document attached to a policy that modifies its coverage

interest-adjusted index

a method of evaluating the cost of life insurance by taking into account the time value of money

Family need Method

a method to estimate ones life insurance requirements: More thorough because it also considers employer provided insurance, Social Security benefits, and liquid assets

Nonworking spouse method

a method to estimate ones life insurance requirements: Multiply the number of years until the youngest child reaches 18 by $10,000

Incontestable Clause

a provision stating that the insurer cannot dispute the validity of a policy after a specified period After the policy has been in force for awhile (2 years), the company cannot dispute its validity for any reason, including fraud

nonforfeiture clause

a provision that allows the insured not to forfeit all accrued benefits Keep accrued benefits if you drop the policy

universal life

a whole life policy that combines term insurance and investment elements - Gives you more direct control - Can pay premiums at any time in almost any amount. Amount of insurance can be changed more easily than a traditional policy - The increase in the cash value of the policy reflects the interest earned on short-term investments - Combines term insurance and investment elements

term insurance

life insurance protection for a specified period of time; sometimes called temporary life insurance

nonparticipating policy

life insurance that does not provide policy dividends; also called a nonpar policy

participating policy

life insurance that provides policy dividends; also called a par policy

cash value

the amount received after giving up a life insurance policy

beneficiary

the person designated to receive something, such as lif einsurance proceeds, from the insured

Underwriting

the process that insurance companies use to determine the premiums that will be charged and whom they will insure