4 - What Type of Insurance Should I Have? Flashcards
What is the face page?
It is the schedule of the insurance policy and contains many details (effective date, face amount, expiry date, etc.)
What is the “effective date?”
The date the insurance policy takes effect.
What is the face amount?
It is the amount payable to the beneficiary should the life insured die while the insurance policy is in effect.
Define “Settlement Option.”
The way that the beneficiary receives the death benefit. A lump-sum cash payment is most typical
How does Level Term insurance work?
Premiums and Face Amount remain “level” over the term.
How does Increasing Term insurance work?
Premiums and Face Amount “increase” over the term. The death benefit is the face amount in force at the time of death.
How does Decreasing Term insurance work?
Premiums remain level. Face Amount decreases. The death benefit is the face amount in force at the time of death.
What is Renewable Term Insurance?
It guarantees renewability of the term insurance regardless of health. Premiums increase, but the Face Amount remains the same.
Define “Mortality Risk.”
The risk of death used in underwriting to determine premiums. A high mortality risk = high premiums.
What is Attained Age?
The age of the life insured at the time of renewal.
What is the Renewable and Convertible option (R&C)?
It allows the policy owner to either renew term insurance, or convert to permanent insurance. It is considered an extension of the original contract (incontestability, and suicide clause do not apply).
How does Incontestability apply to insurance policies?
A life insurance policy cannot be contested after it has been in force for two years
What is the “suicide clause?”
A death benefit will not be paid to the beneficiary of a policy if the life insured dies as a result of suicide within two years of the effective date of the policy.
What is the difference between whole life and limited payment life?
Whole life premiums are paid for life.
Limited payment life premiums are paid up to a certain age, or to a specified date.
What is the difference between participating and non-participating policies?
A participating policy receives dividends when available. A non-participating policy does not.
Define “policy reserve.”
It is created by the policy owner paying more in premiums than the coverage requires in the early years of the contract.
What are the 3 non-forfeiture options?
- Automatic premium loan (APL)
- Extended term insurance (ETI)
- Reduced paid-up insurance (RPU)
How long is the grace period?
Is 30 or 31 days after the premium due date. If the premium still has not been received, the policy lapses.
What are the 3 ways in which dividends are used to purchase more life insurance?
- Paid-Up Additions (PUAs)
- Special term additions
- Term Additions
How are dividends used to reduce premiums?
They can be used to directly, or the cash-value of a PUA purchased with dividends can be used to reduce the amount of premiums.
What are 4 needs answered by whole life insurance?
- Estate Planning
- Creditor Protection
- Tax-deferred Savings
- The Need to Build Collateral
What is the major advantage of term-to-100 insurance?
It offers insurance-for-life at a lower cost than whole-life (because there are no frills… CSV, dividends, policy loans, etc.)
Best used for estate planning.
What is unique about Universal Life Insurance?
It is a combination of insurance and investment that is highly flexible.
How is unbundling a benefit to a policy owner?
It makes all of the costs of the policy transparent.
