Life Insurance Policies (Chapter 3)
What is the main advantage of converting from group life insurance to individual coverage?
Evidence of insurability is not required
What does "level" refer to in level term insurance?
Face amount
What policy component must decrease in decreasing term insurance?
Face amount
What type of life insurance is best suited to cover a mortgage?
Decreasing term
What is the major difference between the most common types of the whole life policies: Straight life, limited Payment, and single premium?
Premium payment mode
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 generates immediate cash value?
Single premium whole life
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?
20-year level term
The policyowner 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?
Age 100
Whole life policies provide protection until the insured reaches what age?
Age 100
Universal life policies have 2 types of interest rates. What are they?
Guaranteed and current
What universal life option has a gradually increasing cash value and a level death benefit?
Option A
What are the death benefit options in universal life policies?
Option A - level death benefit, and option B- increasing death benefit.
What elements of an adjustable life policy can be changed by the policyowners?
The amount and payment period of the premium, the face amount, and the period for protection.
In term policies, what happens to the premium throughout the term of the policy?
The premium remains level
In a joint life policy, when is the death benefit paid?
Upon the first death
When would a 20-pay whole life policy endow?
When the insured reaches age 100
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy.
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
Whole life
What type of life insurance policy provides permanent protection?
Whole life
All the following entities regulate variable life policies EXCEPT:
The guaranty association
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?
Evidence of insurability
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of insurability
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?
For 20 years or until the insured's death, whichever occurs first.
Which of the following would help prevent a universal life policy from lapsing?
Target Premium
Regarding taxation, how does the cash value of a universal life policy accumulate?
Tax deferred
What type of life insurance policy offers pure death protection?
Term
Who is entitled to the cash values in a life insurance policy?
The policyowner
What happens to the premium in an annually renewable term life policy?
The premium increases with each renewal
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
Who is insured under a juvenile life policy?
A minor
Group life insurance policies are written as what type of insurance?
Annually renewable term
The death protection component of a universal life policy is expressed as what type of coverage?
Annually renewable term
In variable universal life insurance, to what policy component does the term "variable" refer?
Cash value and death benefit
What happens to the cash value when a whole life insurance policy matures?
Cash value is paid to the policyowner.
An individual has 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?
Decreasing term
What type of policy is typically issued without proof of insurability from the insured?
Group policy
What type of policy issues certificates of insurance of the insureds?
Group policy
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group's purpose, size, financial strength, and turnover.
What type of life insurance policy is life paid-up at age 65?
Limited-pay whole life
What are the living benefits of whole life insurance?
Loan values
The premium of a survivorship life policy compared with that of a joint life policy would be...
Lower
Under Option B in a universal life policy, what happens to the death benefit?
The death benefit increases each year by the amount of the cash value increases.
Who owns a group life insurance contract?
The employer (also known as the sponsor of the group)
Whole life insurance policies mature when the insured reaches the age 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?
The full death benefit
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
Which of the following are generally not considered when underwriting group insurance?
The insured's medical history
All of the following are characteristics of group life insurance plan EXCEPT:
There is a requirement to prove insurability on the part of the participants.
Why are policy loans not available on term insurance?
There is no cash value to borrow against.
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
Universal life
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Universal life
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?
Variable
How is the premium determined in a joint life insurance policy?
The premium is based on the average age of the insureds.
An insured buys a 5-year level premium term policy with a face amount of $10,000. the policy also contains renewability and convertibility options. when the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally purchased.
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?
Limited-pay whole life