Exam FX Chapter 3: Types of Life Insurance Policies

20-year level term

A policy states that it will pay a specified face amount 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?

Limited-pay whole life

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of plicy?

Decreasing term

An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?

Variable

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Universal life

Between adjustable life and universal life policies which one provides more flexibility to the policy owner?

Annually renewable term

Group life insurance policies are written as what type of insurance?

Average age of the insureds

How is the premium determined in a joint life insurance policy?

Evidence of insurability

If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide

Whole life

If an insured terminates membership in group life insurance to what type of insurance can the insured convert the coverage?

Upon the first death

In a joint life policy, when is the death benefit paid?

The insured's attained age

In annually renewable term policies, what is the annual premium based upon?

The premium remains level

In term policies what happens to the premium thought the term of the of the policy

Cash value and death benefit

In variable universal life insurance to what policy component does the term variable refer?

Universal life

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Tax deferred

Regarding taxation, how does the cash value of a universal life policy accumulate?

Annually renewable term

The death protection component of a universal life policy is expressed as what type of coverage?

100

The policy owner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount

The death benefit increase each year by the amount of the cash value increases

Under Option B in a universal life policy, what happens to the death benefit?

For 20 years or until the insured's death, whichever occurs first.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?

Guaranteed and current

Universal life policies have two types of interest rates. What are they?

Group's purpose, size, financial strength and turnover

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

Option A - level death benefit, and Option B - increasing death benefit

What are the death benefit options in universal life policies?

Loan values

What are the living benefits of whole life insurance?

Face amount

What does level refer to in level term insurance?

The amount and payment period of the premium, the face amount, and the period for protection

What elements of an adjustable life policy can be changed by the policy owners

Cash value is paid to the policyowner

What happens to the cash value when a whole life insurance policy matures?

The premium increases with each renewal

What happens to the premium in an annually renewable term life policy?

Evidence of insurability is not required

What is the main advantage of converting from group life insurance to individual coverage?

Premium payment mode

What is the major difference between the most common types of whole life policies: straight life, limited payment and single premium?

To prevent the policy from lapsing

What is the purpose of establishing the target premium for a universal life policy?

Face amount

What policy component must decrease in decreasing term insurance?

Limited Pay Whole Life

What type of life insurance policy is Life Paid-up at Age 65?

Term

What type of life insurance policy offers pure death protection?

Whole life

What type of life insurance policy provides permanent protection

Group policy

What type of policy is typically issued without proof of insurability from the insured?

Group policy

What type of policy issues certificates of insurance to the insureds?

A level premium for the life of the insured

What type of premium is charged on a straight life policy?

Single premium whole life

What type of whole life insurance policies only requires a payment of premium at its inception and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100

single premium whole life

What type of whole life insurance policy generated immediate cash value

Option A

What universal life option has a gradually increasing cash value and a level death benefit

When the premiums paid are more than the cost policy

When does an adjustable life policy accumulate cash value

Evidence of insurability

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

When the insured reaches age 100

When would a 20-pay whole life policy endow?

The policyowner

Who is entitled to the cash values in a life insurance policy?

A minor

Who is the insured under a juvenile life policy?

The employer (also known as the sponsor of the group)

Who owns a group life insurance contract?

100

Whole life policies provide protection until the insured reaches what age?

There is no cash value to borrow against

Why are policy loans not available on term insurance

decreasing term

what type of life insurance is best suited to cover a mortgage?

The full death benefit

whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (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?