Chapter 4 - Types of Life Insurance Flashcards
What are the 5 characteristics of Term Life Insurance?
Pure insurance protection, pays death benefit if the insured dies during a specified term.
Coverage ceases at the end of the term unless renewed.
Premiums may increase annually or remain constant for a set period, then increase.
Generally level face amount with no cash value, savings, or investment component.
Inexpensive at young ages.
Regarding Term Life Insurance, what are 2 provisions?
Renewable: Can renew without evidence of insurability (usually limited to age 70); premiums increase with age.
Convertible: Can convert to a permanent policy without evidence of insurability; premium based on age at conversion.
Finish the sentence.
Term Life insurance is suitable for covering…
temporary insurance needs or for those who cannot afford permanent insurance.
What are the 3 policy types of Term Life Insurance?
Annual Renewable Term: Level face amount, increasing annual premiums.
Level Term: Fixed premiums for the term selected (5, 10, 15, 20, 25, or 30 years), then increase if renewed.
Decreasing Term: Level premiums, decreasing face amount, often used for mortgage protection.
In planning considerations for Term Life Insurance, it is used for ____. It provides a ______.
temporary life insurance needs
large death benefit with low initial cost compared to permanent policies.
List 2 limitations of Term Life insurance.
Exponentially increasing premiums with age.
May not meet permanent insurance needs if the insured outlives the renewability period.
Detail 2 Endowment Life Insurance policies.
Pure Endowment Policies: Pay face value only if the insured survives the endowment period (not sold in the US).
Regular Endowment Policies: Pay face value as death benefit if insured dies within the endowment period, or as an annuity if insured survives beyond the period.
Describe the 5 characteristics of Whole Life Insurance.
Provides lifetime protection.
Cash value accumulation with earnings credited to the policyholder.
Cash values can be used for loans, to pay premiums, or received if policy is surrendered.
May be participating (policyholders receive dividends) or nonparticipating.
Suitable for long-term insurance needs or those desiring a savings/investment feature.
List the 4 policy types for Whole Life Insurance.
Whole (Ordinary, or Straight) Life: Level premiums paid for life, constant face amount.
Limited-Pay Life: Premiums paid for a specific term, face amount remains constant for life.
Graded Premium Whole Life: Low initial premium that increases each year for early years, then levels off.
Modified Premium Whole Life: Lower premiums for the first few years, then increase to a higher, level premium.
What other types of Whole Life Insurance are there?
Variable Life: Fixed premiums, variable face amount, no guarantee of cash value.
- Wide investment options.
- Suitable for higher risk tolerance clients.
Current Assumption Whole Life (CAWL): Interest-sensitive, premiums may be adjusted based on insurer’s investment experience.
- May have initially low or high premiums that adjust later.
- Suitable for clients with flexible premium needs.
List 3 characteristics of Universal Life insurance.
Flexible premium, adjustable death benefit.
Policyholder can adjust premiums and death benefits.
Not suitable for fixed income individuals or those who cannot manage policy flexibility.
What are the 2 types of Unversal Life insurance?
Universal Life A (Option 1): Level death benefit.
Universal Life B (Option 2): Increasing death benefit (face amount plus cash value).
List 3 characteristics of Variable Universal Life.
Combines universal life with investment options.
No guaranteed minimum return.
Suitable for higher risk tolerance clients with investment experience.
List 3 characteristics of First-to-Die Life Insurance.
Pays death benefit when the first insured dies.
Cost-effective for couples with specific financial needs at the first spouse’s death.
May include optional guaranteed insurability provision.
Study this chart.
