Types of Life Insurance Policies

What is universal life insurance?

A policy with a flexible premium and adjustable death benefit that accumulates cash value.

Cash Value

A policy's savings element or living benefit.

Accumulate

Build up

Which policy component decreases in decreasing term insurance? A. Cash value B. Dividend C. Premium D. Face amount

D. Face amount Why: Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

What is limited pay whole life insurance?

Designed so that the premiums for coverage will be completely paid-up well before age 100.

What is single premium whole life?

Designed to provide a level death benefit to the insured's age 100 for a one-time, lump sum payment. The policy is completely paid up after one premium and generates immediate cash.

Which of the following is an example of a limited-pay life policy?

Life paid-up at age 65

Which of the following policies would be classified as a traditional level premium contract? A. Universal life B. Variable universal life C. Straight life D. Adjustable life

Straight life

What are the three basic forms of whole life insurance?

Straight whole life Limited pay whole life Single premium whole life.

**Remember this**

Term insurance has no cash value.

What is return of premium (ROP)?

This type of life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

**Remember this**

"Level" in level term insurance refers to the death benefit, which does NOT change.

Annually Renewable Term life insurance:

(ART) is the purest form of term insurance. throughout the life of the policy, the death benefit remains the same and the policy is guaranteed renewable each year without proof of insurability. But, the premium increases annually according to the attained age of the new year. In New York, the max age for which coverage will not be offered is 80.

A straight life policy has what type of premium?

A level annual premium for the life of the insured.

What is term insurance?

A temporary protection because it only provides coverage for a specific period of time. Term insurance provides what is known as pure death protection.

Decreasing term:

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

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?

Joint life Why: A joint life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a benefit only at the first death.

What are some key characteristics of whole life insurance?

Level premium - The premium for whole life policies is based on the issue age. Death benefit - The death benefit is guaranteed and also remains level for life. Cash value - The cash value, created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100. Living benefit - The policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.

What are the three types of term coverage available, based on how the face amount (death benefit) changes?

Level;Increasing;Decreasing

Level Premium Term:

Provides a level death benefit and a level premium during the policy term.

**Remember this**

Term insurance provides the greatest amount of coverage for the lowest premiums.

Increasing Term:

Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

What is straight life whole life insurance?

The basic whole life policy. The policy owner pays the premium from the time the policy is issued until the insured's death or age 100 (whichever occurs first).

Attained age

The insured's age at the time the policy is renewed or replaced.

Level Term Insurance

This is the most common type of temporary protection purchased. The word level refers to the death benefit that does not change throughout the life of the policy.

What is adjustable life?

This type of life insurance was developed in an effort to provide the policyowner with the best of both worlds. Increase or decrease the premium or the premium-paying periods. Increase or decrease the face amount Change the period of protection

Endow

To have the cash value of a whole life policy reach the contractual face amount.

What is whole life insurance?

Whole 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 age 100).

**Remember this**

Whole life insurance provides lifetime (permanent) protection and accumulates cash values.

Deferred

Withheld or postponed until a specified time or event in the future.