Chapter 3 -Types Of Policies

Question 1

Face amount

Answer 1

Limit of liability

Is the death benefit payable on the policy if the insured dies before the policy ends

Question 2

Term insurance

Answer 2

Is pure insurance and provides death benefit. Does not offer any cash or living benefits.

Question 3

Level

Answer 3

Death benefit remain level and the premiums remain level during the policy term

Question 4

Decreasing

Answer 4

The death benefit decreases but the premiums remain level for the policy terms

Question 5

Increasing

Answer 5

Death benefit increases over the life of the policy while the premiums remain level

Normally written as a rider to provide cost of living or return of premiums benefits

Question 6

Annually Renewable Term

Answer 6

Simplest form of term life insurance is for 1 year. Death benefit remains level and premiums increase yearly as the policy renews up to a specific age

Question 7

Return of Premiums

Answer 7

Written as increasing term insurance and provided for an additional death benefit that equals a full refund of premiums if the insured is still living at the end of the term

Question 8

Renewable

Answer 8

Benefit that will renew the contract on the renewal date without evidence of insurability.

Question 9

Straight life/Continuous Premium

Answer 9

Premium is level and payable to age 100 or death if the insured. Face amount remains level throughout the life of the policy

Highest total premium outlay

Question 10

Limited Payment

Answer 10

Premium payments are for a specified time or specific age. Face amount remains level and cash value continues to earn interest and mature at age 100

Question 11

Single Premium

Answer 11

Entire premium is paid in a lump sum at the time of purchase and creates immediate cash value

Lowest total premium

Question 12

Adjustable Fave Amount

Answer 12

Insured can increase or decrease the face amount of the policy. Any increase in the face amount will require evidence of insurability

Question 13

Mortality Charges

Answer 13

Is the cost of pure insurance and although it is deducted monthly, it is determined annually based on the insured age

Deducted monthly from the policy cash value.

Question 14

Convertible

Answer 14

Right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period

Premium will be higher since permanent policy will provide a cash value and coverage last to age 100

If based on original age- back premiums plus interest will be required at time of conversion