8.1

Question 1

A Term Life insurance policy is a basic type of life insurance that is lower in cost to a policyowner, is only in force for a specified period of time and does not accumulate ______, nor does it provide the policyowner with any policy loan value.

Answer 1

cash value

Question 2

A term life policy’s death benefit is payable only if ______.

Answer 2

the insured dies during the specified period of time stated in the policy

Question 3

The ‘term’ of a policy is the ______, or amount of principal payable to the policy’s beneficiary in the event the insured dies within the policy’s term.

Answer 3

number of years that the policy’s insured is covered with a specific ‘face amount,’

Question 4

Policy terms can range from ______, or longer.

Answer 4

10 years to 30 years

Question 5

Term life coverage expires ______.

Answer 5

once the term has ended and can either be renewed for an additional term or be allowed to expire.

Question 6

Assuming death has not occurred, the policy simply ends and the insurer ______.

Answer 6

assumes no further responsibility to the policyowner or beneficiary

Question 7

It is common for a term life policy to be renewed for additional terms, or converted to a ______ or other cash value policy.

Answer 7

whole life

Question 8

Term life policy premiums are based on the ______.

Answer 8

insured’s age, tobacco use, and health at the time of application

Question 9

Once issued, a term policy’s premium rate is either ______, or ‘level’ for the entirety of the term; or the policy’s premium rate is ______, which enables the insurer to increase the premium rate during the contract period.

Answer 9

guaranteed to remain constant

non-guaranteed

Question 10

A ______ premium policy is most commonly purchased. This type of policy calculates the total premium payable for the term of the policy and divides payments evenly to keep the premium rate level over the policy’s term.

Answer 10

guaranteed level

Question 11

A ______ might provide for a lower premium initially with the possibility of a rate increase after a set period of time within the policy’s term.

Answer 11

non-guaranteed level premium policy

Question 12

A term life policy can also include an ‘adjustable premium’ schedule which is indeterminate at the time of policy issuance and can ______.

Answer 12

fluctuate over the term of the policy

Question 13

Regarding an indeterminate level premium, the policy’s premium rate is determined by the insurer’s ______, interest earned from premium investments, and company expenses.

Answer 13

current mortality rates

Question 14

Concerning indeterminate level premiums, policy premiums are guaranteed to never exceed a certain amount; however, if the insurer’s profits are greater than at the time of policy issuance, the ‘current’ premium will be ______ than at the time of issuance. If profits are lower, the premium will be ______ than at the time of issuance, but the premium will not exceed ______.

Answer 14

lower

higher

the policy’s guaranteed maximum rate

Question 15

In addition to the premiums paid for a term life policy, benefits provide from the policy can also vary. The policy’s face amount can ______over the term of the policy. In addition, term life policies can provide a policyowner with the option to renew, purchase additional coverage, or ______ in the future.

Answer 15

remain level, it can decrease, or it can increase

convert to a whole life policy

Question 16

A level term life policy’s face amount remains constant, or ‘level,’ for the term of the policy. The only aspect that changes, if renewed, is the ______.

Answer 16

increase in premium due to the increased age of the policyowner

Question 17

A decreasing term life policy’s face amount ______. For instance, a decreasing term insurance policy with a face amount of $100,000 and a 10-year term will provide the full $100,000 of coverage if the insured dies within the 1st year, $90,000 of coverage the 2nd year, and so on until the benefit amount reduces to zero at the end of the 10 years.

Answer 17

decreases over the term of the policy

Question 18

______ coverage is often purchased to protect against home mortgages, student loan debt or any situation in which the need for insurance is greater at the beginning of the policy, as opposed to the end of the policy.

Answer 18

Decreasing term

Question 19

A ______ policy’s face amount increases over the term of the policy. Although this type of policy is not often sold as a stand-alone insurance product, it is typically incorporated into a ______ as an added rider.

Answer 19

increasing term life

whole life policy

Question 20

A ______ policy does not require evidence of insurability at the time of renewal; however, premium rates increase according to the ______ at the time of each renewal. This type of premium rate increase is often called ______.

Answer 20

renewable term life

age of the insured

Step-Rate Premiums

Question 21

______ is an option that allows an individual to reapply for, or ‘reissue’ his or her term life policy every few years (usually 5 years) and receive a premium lower than their guaranteed renewal rate.

Answer 21

A Re-entry option

Question 22

Regarding a re-entry option, in order to receive this lower rate, evidence of insurability must show that the policyowner is ______. If not, the policyowner will instead have to pay the ______ if they want to continue their coverage.

Answer 22

maintaining good health

guaranteed renewal rate

Question 23

A term life policy can also be ______, meaning that a policyowner can convert his or her term policy to a whole life or other cash value policy in the future without being required to provide evidence of insurability. The ‘option to convert’ is provided to the policyowner who may or may not elect to convert to a long-term policy in the future.

Answer 23

‘convertible,’

Question 24

When converting to a long-term plan, the policyowner can use either his or her current age, referred to as his or her ______ or the whole life policy can be written using the original age of the policyowner used at the beginning of the original term policy.

Answer 24

‘attained age,’

Question 25

If a policyowner’s original age is used when converting to a whole life policy, he or she will pay ______ based on the younger age in comparison to his or her current age; however, the insurer will require interest to be paid, as well as an additional payment amount equal to the difference in age that the insurer would normally charge for a policy written using the current age of the policyowner.

Answer 25

a lower premium

Question 26

Although both methods of conversion seem to add up to the same amount for the policyowner, instead of incurring a higher premium, the policyowner is actually building up his or her cash value quicker than would occur if he or she paid a higher premium using his or her current age. Essentially, instead of paying a higher premium, the policy’s ______ increases quicker as a result of the bulk payment and increased interest.

Answer 26

cash value

Question 27

A type of convertible term policy, referred to as ______, is commonly provided by insurers to ensure immediate temporary term life protection during the underwriting of a whole life policy

Answer 27

an Interim Insuring Agreement

Question 28

Referred to as ‘interim term’ coverage, an individual who wishes to purchase a whole life policy in the near future, or who is waiting for his or her whole life policy to be underwritten by the insurer, may be temporarily covered under a term policy which is then automatically converted to a ______ within a short period of time.

Answer 28

whole life policy

Question 29

An interim term policy is commonly issued for a period of ______, at which time the policy automatically converts to a whole life policy. As a result of this short period of time before conversion, premiums for the whole life policy are based on the ______ when the interim policy converts to the whole life policy, not the age of the policyowner at the time the interim term began.

Answer 29

1 month up to 11 months

age of the policyowner

Question 30

A Return of Premium Term Life, or ROP, policy is a more expensive type of term life insurance that provides an ‘end benefit’ to the policyowner at the expiration of his or her policy’s term by ______.

Answer 30

returning 100% of the premiums paid into the policy when the insured survives the policy’s term.

Question 31

Concerning a ROP policy, if an insured survives past a 35-year return of premium term life policy and the policyowner does not surrender it beforehand; the policyowner would receive ______ upon the insured satisfying the 35-year term.

Answer 31

100% of the premiums paid into the policy

Question 32

Although a return of premium provides extra incentive to purchase, deciding to purchase an ROP term life policy should be considered carefully as the ______ might be better invested in an interest-bearing retirement account, such as an IRA.

Answer 32

extra premium costs involved