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Life Insurance (10 Chapters) > Chapter 4: Types Of Insurance > Flashcards

Chapter 4: Types Of Insurance Flashcards

1
Q

Ordinary life insurance

A
  • Many types if temporary or permanent insurance

- Premiums paid monthly, quarterly, semiannually or annually

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2
Q

Industrial insurance

A
  • Small amounts
  • Premiums paid weekly
  • “burial insurance”
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3
Q

Group insurance

A
  • Provides coverage for many people under one contract (unions, employee groups, creditors…)
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4
Q

What is term-life insurance?

A
  • Coverage for a specific period of time
  • Greatest coverage for lowest premiums
  • Benefits paid only if person dies within period of time
  • no cash value or living benefits
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5
Q

Re-entry Term Insurance

A

Renewable term insurance if the insured passes a medical examination

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6
Q

Whole Life Insurance

A
  • Permanent protection for entire life
  • Premiums do not change
  • Cash values: Savings element of policy if surrendered
  • Maturity at age 100
  • Living benefits
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7
Q

Name the three whole life insurance plans

A

Straight: Permanent level protection with level premiums

Limited Pay: Premiums due only for a period of time

Single-Premium: Large one time only premium

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8
Q

Premium Periods

A

The shorter the premium pay period the quicker the cash values will grow

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9
Q

Modified Whole Life

A

Has premiums that are lower than typical whole life premiums for the first few years then higher premiums after

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10
Q

Equity Index Whole Life

A

80% to 90% of the premium invested in traditional fixed income securities and the remainder of the premium is invested in contracts or tied to stocks

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11
Q

Graded Premium Whole Life

A
  • Premiums are lower than typical
  • Gradual increase over the first five to ten years
  • Level premiums after this period
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12
Q

Endowments

A
  • Cash values that grow at a rapid pace
  • Paid to beneficiary if the insured dies within a specific period of time
  • Endowment policies have high premiums
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13
Q

Modified Endowment Contracts

A
  • Amount to be paid after endowment period is greater than face value of policy
  • Taxable by IRS
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14
Q

Family Plan Policies

A
  • Insure all family members under one policy
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15
Q

Family Income Policies

A
  • Contains both whole life and decreasing term insurance

- Provides monthly income

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16
Q

Family Maintenance Policy

A
  • Both whole and level term

- Provides income for a specific period of time

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17
Q

Joint Life Policies

A
  • Covers two or more people
  • Pays benefits when first insured dies
  • The survivor can then purchase a single individual policy
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18
Q

Joint Life and Survivor Policies

A
  • Second to die policy
  • Normally covers two lives
  • Useful in estate to provide money to pay taxes on assets
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19
Q

Juvenile Insurance

A
  • Insures life of a minor
  • Adult is the premium payor until the child reaches a certain age
  • Usually contains a payor benefit rider (waives premiums if person dies before juvenile reaches certain age)
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20
Q

Credit Life Insurance

A

Covers the life of a debater and pay the amount due on a loan if they die before the loan is paid off

21
Q

Non-Traditional : Interest Sensitive Whole Life

A
  • Premiums vary based on the insurers changing expense factors
22
Q

Non-Traditional: Adjustable Life Insurance

A
  • Insured Determines how much face protection is needed and how much premium they want to pay
  • Insurance company selects a plan to meet those needs
23
Q

Non-Traditional : Universal Life

A
  • Flexible premiums and an adjustable death benefit
  • Subject to interest rates
  • Policy specifies the percentage of each premium that goes to the insurance protection and what percentage goes to build cash value
24
Q

Entire Contract Provision

A
  • Found at the beginning of the policy that states the policy document, applications attached and riders attached constitute the entire contract
25
Q

Insuring clause

A

Describes the company’s basic promise to pay benefits upon the insureds death

26
Q

Owners Rights Provision

A

Defines the person who may name and change beneficiaries, select options available under the policy and receive any financial benefits

27
Q

Free- Look Provision

A

Required by most states, gives policy owners the right to return the policy for s full premium refund within a limited period of time

28
Q

Consideration Clause

A

States that the policyowners Consideration consists of completing the application and paying the initial premium

29
Q

Policy Loan Provision

A

Policyowners may borrow money from the cash values of their policies

30
Q

Incontestable Clause

A
  • Allows an insurance company to contest a claim during the contestable period but after two years they cannot deny coverage
31
Q

Absolute Assignment

A
  • Transfer is complete and irrevocable and the assignee receives full control over the policy and full rights to its benefits
32
Q

Collateral Assignment

A

Policyowner temporally gives up ownership of policy

The policy is assigned to a creditor as collateral for debt

33
Q

Suicide Provision

A

Protects the insurer against the purchase of a policy when the insured plans to commit suicide

They will not pay death benefit within two years only premiums paid

34
Q

Automatic Premium Loan Provision

A

Authorizes the insurer to withdraw from the policy’s cash value the amount of overdue premium if the premium has not been paid by the end if the grace period

35
Q

Discretionary Provisions

A

Some states have enacted against this type of provision because they protect only the insurance company

36
Q

Types of exclusions (to protect insurance companies reserves)

A 
War
Aviation
Hazardous job/hobbies
Commission of a felony
Suicide
37
Q

Nonforfeiture

A

An insured party can receive full or partial benefits or refunds of premiums paid after a lapse due to non-payments

38
Q

Nonforfeiture Options (switches from whole to term)

A

Cash Surrender: Cash surrender for ordinary whole life insurance after the first three years

Reduced Paid-Up Option: Take a Paid-up policy for a reduced face amount of insurance

Extended Term: Use the policies cash value to purchase a level term insurance policy

39
Q

Describe/name three times of term insurance coverage

A

Level: Death benefits and premiums do not change

Decreasing: level Premiums and decreasing death benefits each year to $0. (Mortgage payments)

Increasing: Level premiums and a death benefit that increases each year

40
Q

Grace Period Provision

A

Usually 30 days

- protects the policyowner against an unintentional lapse of policy

41
Q

Reinstatement Provision

A

Allows lapsed policy to be put back in place

  • Provide evidence of insurability
  • pay back all premiums
  • may be required to pay outstanding loans
42
Q

Dividends options

A
  • Take in cash
  • Apply to premium payments
  • Allow to accumulate interest
  • Buy paid up additions (which is a whole life policy)
  • Purchase one year term insurance
43
Q

Policy riders

A
  • Added to an insurance policy

- Customizations that come at an additional cost in premiums

44
Q

Guaranteed Insurability Rider

A
  • Allows insured to purchase additional coverage at specific future dates
  • without evidence of insurability
  • the new premiums will be calculated on the persons attained age
45
Q

Waiver of premium rider

A
  • Waives premium if the insured becomes permanently disabled
  • six month waiting period
  • waived until the person returns to work
  • permanently waived if person never returns to work
46
Q

Cost of living rider

A
  • Addresses inflation by automatically increasing the amount of insurance
47
Q

Double Indemnity Clause

A

Provision that requires insurer to pay twice the face value of the policy

48
Q

Reduction of premium dividend option

A

Uses dividend to pay all or part of the next premium due

Life Insurance (10 Chapters) (10 decks)

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