Chapter 3 (Flexible Premium Policies)

Question 1

___________ was developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage)

Answer 1

Adjustable life

Question 2

________ insurance is also known by the generic name of flexible premium adjustable life

Answer 2

Universal life

Question 3

The _________ premium is the amount needed to keep the policy in force for the current year.

Answer 3

minimum

Question 4

The ________ 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.

Answer 4

target

Question 5

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 ________ lapse.

Answer 5

NOT

Question 6

As well as being a flexible premium policy, universal life is also an interest-sensitive policy. Although the insurer guarantees a ___________ (usually 3 to 6%), there is also potential for the policyowner to get a current interest rate, which is not guaranteed in the contract but may be higher because of current market conditions.

Answer 6

contract interest rate

Question 7

A universal life policy has two components: an ______________ and a cash account. The insurance component of a universal life policy is always annually renewable term insurance.

Answer 7

insurance component

Question 8

Under _______________, the death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years.

Answer 8

Option A (Level Death Benefit option)

Question 9

Under __________ (Increasing Death Benefit option), the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases

Answer 9

Option B

Question 10

The main feature of ___________ (or equity index 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.

Answer 10

indexed whole life