Chapter 4

Question 1

Level term life insurance

Answer 1

provides a level amount of protection for a specified period, after which the policy expires.

Question 2

Increasing term life insurance

Answer 2

provides a death benefit that increases at periodic intervals over the policy’s term.

Question 3

Decreasing term life insurance

Answer 3

provides a death benefit amount that decreases gradually over the term of protection.

Question 4

Mortgage redemption insurance

Answer 4

is a type of decreasing term life insurance policy.

Question 5

Credit life insurance

Answer 5

is a limited benefit (term) policy that’s designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. The maximum benefit for a credit life insurance policy, regardless of individual or group, is the value of the loan.

Question 6

Interim term life insurance

Answer 6

is a type of convertible term insurance that’s written on a person who wants protection immediately, but who’s not able to afford permanent protection immediately. The premium for the temporary protection is based on the original application age. The premium for permanent protection is based on the age when permanent protection begins (the attained age).

Question 7

Advantages of term life insurance policies include:

Answer 7

Term life insurance is less expensive than permanent insurance.

Term life insurance may protect the insured’s insurability if the policy is renewable and or convertible.

Term life insurance may be used in conjunction with debts, mortgages, or as a supplement to whole life insurance.

Term life insurance provides the most substantial amount of protection for the lowest cost.

Question 8

Disadvantages of term life insurance include:

Answer 8

The protection provided by term life insurance policies terminates when the policy terminates. No protection is in effect once the term protection ends.

If the term life insurance policy is renewable or convertible, premium rates rise as the insured ages, which often leads to policy cancellation prior to the policy terminating.

Due to the temporary nature of term insurance, few death claims are actually paid under term life insurance policies.

Term life insurance policies don’t contain any cash savings or equity elements (i.e., cash value). Since it has no cash value, it doesn’t mature as does a whole life policy.

Question 9

Whole life insurance

Answer 9

provides for the payment of a death benefit or face amount of coverage upon the death of the insured, regardless of when the death occurs.

It’s a form of permanent insurance.

Level, fixed, or predetermined death benefit and premium

The shorter the payment period, the higher the premium.

Mature or endow means that the cash value accumulations are equal to the face amount.

Whole life insurance is designed to mature at the age of 100.

Question 10

Limited Payment Whole Life

Answer 10

Payments are made for a period such as 5,10,20 years. Benefits are recieved at death or 100 years.

Question 11

Modified / Graded Premium Whole Life

Answer 11

Lower premium than whole life in the first five years

Higher premium than whole life in year six and fixed thereafter

Question 12

Adjustable Whole Life

Answer 12

Permanent insurance in which the face amount and premium may change

Flexible / adjustable death benefit based on changing needs

Question 13

Universal Life (UL)

Answer 13

Universal life insurance is essentially a term policy with cash value, flexible premiums, and an adjustable death benefit.

Question 14

Equity Indexed Life

Answer 14

combines most of the features, benefits, and security of traditional life insurance with the potential of earned interest based on the upward movement of an equity index.

Question 15

Variable Life (VL)

Answer 15

Tax-deferred cash value is deposited in a separate account and then invested in securities

Permanent insurance in which the owner has control over the investment portion

Fixed premium

The death benefit and cash value will vary based on investment performance
Guaranteed minimum death benefit

Question 16

Endowment

Answer 16

An endowment policy is characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date

Question 17

joint life policy

Answer 17

covers two or more people and pays a benefit upon the first death of a covered person.

Question 18

last to die (survivor) policy

Answer 18

covers two or more people and pays a benefit upon the death of the last covered person.

Question 19

Non-medical life insurance

Answer 19

typically doesn’t require a medical exam and tends to be more expensive than medically underwritten policies.

Question 20

participating life insurance policy

Answer 20

is a policy that has dividend payments from the life insurance company.

Question 21

non-participating policy

Answer 21

does not have the right to share in excess earnings and consequently doesn’t receive dividend payments.

Question 22

Tax Deferred

Answer 22

your money (Cash Value) grows faster because it’s not being reduced by taxes each year.