Chapter 11 Flashcards
1
Q
What are the 3 major types of life insurance?
A
- Term
- Whole Life
- Universal Life
2
Q
What are the characteristics of term life insurance?
A
- No cash value
- Provides the most death protection per premium dollar spent
- Premiums tend to increase overtime (Tend to track the mortality curve)
3
Q
What are the characteristics of whole life insurance?
A
- Cash value (merely a by-product of the premium payment)
- Permanent insurance
- Lasts a person’s whole life
4
Q
What are the characteristics of Universal Life insurance?
A
- Cash value (established deliberately)
- Term insurance and an investment
- Can very premium payments
- More expensive in the early years
- Interest earnings accumulate on a tax-deferred basis and increase cash value of policy
- Decline in rates and cash value may be misleading
5
Q
What are the types of term insurance?
A
- Straight term: Not renewable
- Renewable term: Right to buy coverage in the future regardless of health
- Conversion option: Convertible to a different form of life insurance regardless of insured’s health at time of conversion
- Level term: Face amount (stated sum of money to be paid to the person)
- Decreasing term: Purchased for a specific purpose, provide cash to pay off the mortgage 30 years mortgage = 30 years decreasing
- Increasing term: The face amount goes up periodically on a predetermined basis
