Life Insurance - Chapter 4: Types of Life Policies

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds

$50,000

What is allowed in credit life insurance?

1. Creditor requiring that a debtor has a life insurance 2. Creditor becoming a policy beneficiary 3. Creditor having a collateral assignment on the policy

These are all about decreasing term policy

1. Face amount steadily declines throughout the duration of the contract 2. The death benefit is $0 at the end of the policy term 3. The contract pays only in the event of death during the term and there is no cash value 4. Premiums remains level

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

Adjusted to the insured's age at the time of renewal

What component increases in the increasing term insurance?

Death benefit

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?

Jumping juvenile policy

What policy would be classified as a traditional level premium contract?

Straight life

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?

The cost of coverage is a deductible expense by the employer

This is true regarding the insurance amount in a credit life policy

The creditor can only issue the debtor for the amount owed

Which type of policy allows for a flexible premium and a variable investment component?

Variable universal life insurance

What type of premium do both Universal Life and Variable Universal Life policies have?

Flexible

What kind of policy does NOT typically require proof of insurability

Group insurance

These are correct regarding credit life insurance

1. The amount of insurance permissible is limited per borrower 2. Premiums are usually paid by the borrower 3. Benefits are paid to the credit 4. It insured the life of the debtor 5. The creditor can only insure the debtor for the amount owed

Annually Renewable Term Insurance

It is a level term insurance. Offers the most insurance at the lowest cost.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability

What determines the cash value of a variable life policy?

The performance of the policy portfolio

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit. Parent/Guardian becomes disabled for at least 6 months or dies. Will waive until minor becomes 21 yrs old.

An individual has just borrowed $10,000 from his bank on a 5 year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term. The policy's face amount decrease as the amount of debt is reduced.

What type of insurance covers the whole family in a single contract?

Family policy

Annually renewable term policies provide a level death benefit for a premium that?

Increases annually. Increases each year with the age of the insured.

The type of term insurance that provides increasing death benefits as the insured ages is called?

Increasing term

What component decreases in decreasing term insurance?

Face amount

The initial amount of credit life insurance may NOT exceed

The amount to be repaid under the contract