Life Insurance Policies

Pamela has a $100,000 ten year level term policy. If she dies three years into the term, how much will her beneficiary receive:

$100,000

At age 30, Clark Peterson wishes to purchase a Whole Life policy. His producer explains that he can pay for the policy in several ways. One method is called 20-Pay Life, and another, Straight Life. Clark wishes to know which plan will accumulate cash value at a faster rate in the early years of the policy. Which of the following would be the producer's most appropriate response:

"20-Pay Life will accumulate cash value faster."

If an insured makes an assignment to a third party for an amount less than the death benefit of the policy, it is known as a:

A life settlement is a contract between a policy owner and a third party, who agrees to buy the owner's policy for more than its cash value but less than its face amount. The owner then assigns the ownership of the policy to the third party (absolute assignment), who names themselves as beneficiary. A life settlement is very similar to a viatical settlement, except on a life settlement, the policy owner does not have a terminal illness.

Joint life can be written as all of the following, EXCEPT:

Accidental death and dismemberment

Which of the following policies provides only a Death benefit that declines over a definite and limited period of time:

Decreasing Term

Which policy is generally used to accumulate funds for education:

Endowment policies are usually sold either for retirement purposes at age 65 or to children to fund their college education. This type of policy reaches maturity at a predetermined time selected by the insured or policyholder. An E 65 would reach maturity at 65 and the cash value would equal the face amount. A 15-year Endowment covering a three-year-old would endow at the child's age of 18 and the funds could be used for their college education. Of course, if the insured dies during the policy period (before the policy endows) then the company would pay the face amount to the beneficiary. Endowments are always the most expensive type of life insurance. Endowment policies also contain the three non-forfeiture options, since they do have a cash value.

A single premium used to buy a Whole Life policy will pay up the policy:

For the life of the policy

What are the benefits of a a graded whole life policy?

Graded premium whole life is sold initially at a discount, but the premium gradually increases over a period of time, although the face amount or policy limit stays the same. It is designed to attract customers who cannot afford whole life right now, but expect their future income to increase. Adjustable whole life is sold to people with fluctuating incomes who want a policy whose premium and/or face amount may be adjusted to meet their changing needs.

Which of the following is an example of a Limited-Pay life policy:

Life Paid-Up at age 65. There are three basic types of life insurance: 1) Whole Life, 2) Term and 3) Endowment. Limited Pay Life policies, such as LP 65 and 20-Pay Life, are variations of Whole Life or Straight Life. The premium-paying period has been shortened, but the policy still does not mature until age 120.

What type of life insurance has limits on either the number of years premiums must be paid or the age by which all premiums must be paid:

Limited pay whole life is a type of whole life, where the premiums are due only to a certain age, such as a LP 65, or are payable only for a certain number of years, such as a 20 pay life.

Which of the following best describes the normal Conversion benefit available to terminated employees under a Group Life insurance policy?

The employee may convert to an individual Permanent Life policy within 31 days without submitting evidence of insurability. The conversion privilege on Group Life extends for 31 days after the insured terminates from the job. They can convert only to a Whole Life (Permanent insurance) policy written by the same company without submitting evidence of insurability. They cannot convert to more coverage than they had on the Group Life policy. They cannot convert to Term, only to Whole Life.

When an insured purchases a Decreasing Term policy, which of the following decreases each year:

The face amount Explanation: Although the premium remains the same each year on Decreasing Term insurance, the face amount decreases, usually straight line each year. So, if you bought a 20-year Decreasing Term policy, after 10 years your face amount would be reduced by half. However, since the premium remains the same, you could say the cost of your insurance had doubled! Decreasing Term has no cash value. It is usually convertible, but not renewable.

If a client buys a new $50,000 life insurance policy and dies 1 month later:

The insurer must pay the claim. Assuming the premium has been paid, life insurance coverage becomes effective once the underwriter approves the application and issues the policy, and coverage will apply unless the insured lied about a material fact on their application or died as a result of suicide in the first 2 years.

Which policy provides the greatest amount of protection for an insured's premium dollar as well as some cash accumulation:

Whole Life