Types of Life Policies
Interest-sensitive whole life provides the same benefits as other traditional whole life policies with the added benefit of:
current interest rates, which may allow for either greater cash value accumulation or a shorter premium-paying period.
Since the premium of universal life can be adjusted, the insurance companies may give the policyowner a choice to pay either of the two types of premiums:
1. The minimum premium 2. The target premium
When it comes to making adjustments, the policyowner has the following options:
1. increase or decrease the premium or the premium-paying period. 2. Increase or decrease the face amount 3. Change the period of protection
There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term:
1.Level 2. Increasing 3. Decreasing
Whole life policies endow at the insured's age:
100, which means the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100.
The convertible provision provides the policyowner with the right to:
convert the policy to a permanent insurance policy WITHOUT evidence of insurability.
A decreasing term policy is usually _________; however, it is usually not ____________ since the death benefit is $0 at the end of the policy term.
covertible; renewable
The word level refers to the:
death benefit that does not change throughout the life of the policy
If an insured skips a premium payment on a universal life policy, the missing premium may be:
deducted from the policy's cash value. The policy will NOT lapse.
In joint life, the death benefit is paid upon the:
first death only
Regardless of the type of term insurance purchased, the premium is:
level throughout the term of the policy, only the amount of the death benefit may fluctuate
Variable Life insurance (sometimes referred to as variable whole life insurance) is a:
level, fixed premium, investment-based product.
Whole life insurance provides:
lifetime protection, and includes a savings element (or cash value)
In adjustable life, as the insured's need change, the policyowner can:
make adjustments in his or her policy.
Universal life offers one of two death benefit option to the policyowner:
1. Option A: level death benefit 2. Option B: increasing death benefit
Term insurance provides what is known as pure death protection:
1. If the insured dies during this term, the policy pays the death benefit to the beneficiary 2. If the policy is cancelled or expires prior to the insured's death, NOTHING is payable at the end of the term 3. There is NO cash value or other living benefits
The purest form of term insurance is:
Annually Renewable Term (ART)
The minimum premium is the:
amount needed to keep the policy in force for the current year.
A universal life policy has two components:
an insurance component and a cash value account.
Under Option B (increasing death benefit), the death benefit includes the ___________________ in cash value so that the death benefit ______________ each year by the amount that the cash value ___________.
annual increase; gradually increases; increases.
The insurance component of a universal life policy is always:
annually renewable term insurance.
Paying the minimum premium will make the policy perform as an:
annually renewable term product.
Upon selling, renewing, or converting the term policy, the premium is figured at:
attained age
Straight life (also referred to as ordinary life or continuous premium whole life) is the:
basic whole life policy.
Adjustable life was developed in an effort to provide the policyowner with the:
best of both worlds (term and permanent coverage.
The living benefits of a whole life policy are that the policyowner can:
borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.
Term insurance has no:
cash value
The main feature of indexed whole life insurance is that the:
cash value is dependent upon the performance of the equity index, such as S&P 500 although there is a guaranteed minimum interest rate.
Variable Universal life is a:
combination of universal life and variable life.
Limited-pay whole life is designed so that the premiums for coverage will be:
completely paid-up well before age 100. Often times by age 65.
Life traditional forms of life insurance, variable life insurance policies have:
fixed premiums and a guaranteed minimum death benefit. The cash value of the policy, however, is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.
Universal life insurance is also known by the general name of:
flexible premium adjustable life.
Like universal life, variable universal life provides the policyowner with the:
flexible premiums and an adjustable death benefit.
With limited-pay whole life, the cash value ________ while the premium ______________.
goes up; ends early
With single premium whole life, the cash value _________, while the premium ____________.
goes up; is a one time payment.
With straight life, the cash value goes ________ while the premium __________.
goes up; remains the same.
Term policies provide for the _________ amount of coverage for the __________ premium as compared to any other form.
greatest; lowest
With whole life policies, the death benefit is:
guaranteed and also remains level for life.
Premiums for whole life policies usually are _________ than for term isnurance.
higher
In Universal life insurance, the policyowner has the flexibility to:
increase the amount of premium paid into the policy and to later decrease it again.
Indexed whole life policies are classified depending on whether the policyowner of the insurer assumes the inflation risk. If the policyowner assumes the risk, the policy premiums __________ with the _______________ in the face amount. If the insurer assumes the risk, the premiums ___________.
increase; increases; remains level.
Return of Premium (ROP) life insurance is an:
increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
In joint life, the premium is based on a:
joint average age that is between the ages of the insured's
Survivorship life is much like joint life and the premium is based on a joint age. The major difference is that survivorship life pays on the:
last death rather than upon the first death.
Whole life policies have a _________ premium.
level
With Annually renewable term, the death benefit is:
level
Level premium term provides a:
level death benefit AND a level premium during the policy term.
Single premium whole life (SPWL) is designed to provide a:
level death benefit to the insured's age 100 for a one-time, lump-sum payment.
Decreasing term policies feature a:
level premium and a death benefit that decreases each year over the duration of the policy term.
The most common type of temporary protection purchased is:
level term insurance
Although adjustable life policies contain most of the common features of other whole life policies, the cash value of an adjustable life policy only develops when the premiums paid are:
more than the cost of the policy
Decreasing term coverage is commonly purchased to insure the payment of a:
mortgage or other debts if the insured dies prematurely
Like variable life, the policyowner rather than the insurer, decides where the:
net premiums (cash value) will be invested.
Also, like variable life, the cash values are ___________, and the death benefit is __________.
not guaranteed; not fixed
Universal life policies allow the _______________ of the policy cash value.
partial withdrawal (partial surrender)
With annually renewable term, the policy may be guaranteed to be renewable each year without:
proof of insurability
However, increases in the death benefit or changing to a lower premium type of policy will usually require:
proof of insurability.
The target premium is a:
recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Under Option A (Level death Benefit), the death benefit _____________ while the cash value _____________, thereby _________ the pure insurance with the insurer in the later years.
remains level; gradually increases; lowering
The renewable provision allows the policyowner the right to:
renew the coverage at the expiration date WITHOUT evidence of insurability.
Most term insurance policies are:
renewable, convertible, or renewable and convertible (R&C)
The insurer sets the initial premium based on current assumptions about:
risk, interest and expense.
A producer must also be licensed for both _____________________ in order to sell variable universal life.
securities and life insurance.
Joint life is a:
single policy that is designed to insure two or more lives.
Because insurance companies are not sustaining the investment risk of the contract, the underlying assets of the contract must be held in a separate account, which invests in:
stocks, bonds, and other securities investment options.
The three basic forms of whole life insurance are:
straight whole life limited-pay whole life and single premium whole life
Term Insurance:
temporary protection because it only provides coverage for a specific period of time.
An adjustable life policy can assume the form of either:
term insurance or permanent insurance.
Joint life policies can be in the form of:
term insurance or permanent insurance.
The policyowner also has the option of converting from:
term to whole life of vice versa.
Permanent life insurance is a general term used to refer to:
various forms of life insurance policies that build cash value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid.
The most common type of permanent insurance is:
whole life
Interest-sensitive whole life, also referred to as current assumption, is a:
whole life policy that provides a guaranteed death benefit to age 100.
The return of premium is paid if the death occurs:
within a specified period of time or if the insured outlives the policy term.