Chapter terms
What type of policy would offer a 40 year old the quickest accumulation of cash value
20 pay life
Lump sum option
A death settlement option where death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums. The lump sum option is considered the automatic ("or default") option for most life insurance contracts
Which of these is an element of a variable life policy
A fixed level premium
K is looking to purchase renewable term insurance. Which of these types of term insurance may be renewable
Level
Net payment cost index
A formula used to determine the true cost of a policy for a policyowner. It uses the same formula as the surrender cost index with the exception that it doesn't assume that the policy will be surrendered at the end of the period. The net payment cost index is useful if ones primary concern is the amount of death benefits provided in the policy.
Morality rate
A measure of the number of deaths (in general, or due to a specific cause) in some population, scaled to the size of that population, per unit time.
Net single premium
A premium calculation used to calculate an insurer's policy reserves factoring in interest and morality
Modified premium
A premium funding option characterized by an initial premium that is lower than it should be during than it should be during an introductory period of time (normally the first three to five years). After this time, the premium will increase to an amount greater than what the initial level premium would have been, and then remains level or constant for the life of the policy
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child
Which of these types of policies may NOT have the automatic premium loan provision attached to it
Decreasing term
How are surrender charges deducted in a life policy with a rear end loaded provision
Deducted when the policy is discounted
Morbidity rate
Demonstrates the incidence and extent of disability that may be expected from a given group of persons
P owes a 25,000 life policy that pays the face amount to him if he lives to age 70 or to his beneficiary if he dies before age 70. What kind of policy does p own?
Endowment at age 70
Per capita (by the head)
Evenly distributes benefits among all named living beneficiaries
Per stripes (by the bloodline)
Evenly distributes benefits amongst a beneficiary's heirs in the event that a beneficiary dies before the insured
How are policyowner dividends treated in regards to income tax
Interest on accumulations is taxed
All of these settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death except
Interest only
A father who dies within 3 years purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision
Payor provision
The Life income
The settlement option that pays a specified amount to an annuitant, but pays no residual value to a beneficiary.
What type of life insurance incorporates flexible premiums and an adjustable death benefit
Universal Life