Life Insurance Policies Flashcards

1
Q

Industrial life insurance

A

issues very small face amounts, such as $1,000 or $2,000.

Premiums are paid weekly and collected by debit agents.

They were designed for burial coverage.

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2
Q

Ordinary Life Insurance

A

life insurance of commercial companies not issued on the weekly premium basis.

made up of several types of individual life insurance, such as temporary (term), permanent (whole).

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3
Q

Group Life Insurance

A

insurance written for members of a group, such as a place of employment, association, or a union.

Coverage is provided to the members of that group under one master contract.

The group is underwritten as a whole, not on each individual member.

One of the benefits of group life coverage is usually there is no evidence of insurability required.

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4
Q

Term life insurance

A

gives you the greatest amount of coverage for a limited period of time.

Term insurance is only good for a limited period of time because it has a Termination date.

Term insurance is an inexpensive type of insurance, making it an attractive option for large policies.

Term life is the CHEAPEST type of pure life insurance, and due to having a termination date and not having any cash value, it will ALWAYS be cheaper than a whole life policy with the same face value.

It provides a pure death protection since it only pays a death benefit if the insured dies during the policy term

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5
Q

Level term

A

called level premium level term, has a level face amount and level premiums.

premiums tend to be higher than annual renewable term because they are level throughout the policy period.

However, the premiums will increase at each renewal.

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6
Q

Level Term Insurance

A

Life insurance written to cover a need for a specified period of time at the lowest premium

provides a fixed, low premium in exchange for coverage which lasts a specified time period.

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7
Q

Decreasing term

A

provides an annually decreasing face amount over time with level premiums.

used for mortgage protection

Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off.

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8
Q

Credit policies

A

typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the declining loan balance.

e, if you wanted an insurance policy to protect a $20,000, 5-year auto loan, you would use a 5-year decreasing term life insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the 5-year term of the policy. The face value will start out at $20,000 and change according to a schedule (the decreasing balance of the auto loan). After 5 years, the car will be paid for and the insurance policy will no longer be needed.

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9
Q

Increasing term

A

is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

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10
Q

Convertible term

A

allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.

Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and the policy’s lower premium, but want the option convert the policy to a permanent one for final expense benefits once your finances improve, you would want a convertible term life policy. The conversion privilege of a group term life policy allows an individual to leave the group term (temporary) plan and convert his or her insurance to an individual (permanent) policy without providing evidence of insurability.

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11
Q
  • Renewable term
A

guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.

, if you have a 10-year renewable and convertible term; After the 10 years are up, the policy terminates or you can renew it. If you renew it the premium price will go up, and you will have the policy for another 10 years. This cycle continues until you are too old to renew or it’s too expensive. All TERM insurance has a final TERMINATION date where you can no longer renew it.

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12
Q

Annual renewable term

A

provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.

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13
Q

Term Rider

A

is a type of life insurance product which covers children under their parent’s policy.

A term rider is always level term.

This is cheaper than every family member getting their own policy. For example, the main policy may be on Dad, then mom and the children are riding on (attached to) dad’s policy as term riders.

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14
Q

Whole life insurance

A

provides death benefits for the entire life of the insured.

It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium.

All whole life lasts until death or age 100, has a fixed premium, and level benefit with cash value accumulation, regardless of how it is paid. Whole life is often compared to BUYING; like BUYING a house.

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15
Q

With Whole Life - Straight Life insurance

A

premiums are payable throughout the insured’s lifetime, and coverage continues until the insured’s death.

straight whole life provides fixed premiums, a level death benefit, and cash value. Whole life also requires the face amount to be paid out to the insured at age 100 (when the policy matures), provided a death benefit has not already been paid.

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16
Q

With Whole Life - Limited Pay

A

the coverage remains on a limited-pay life policy until age 100 or death, whichever happens first.

Even though the premium payments are limited to a certain period, the insurance protection extends until the insured’s death, or to age 100. For example, if you were to purchase a 20-pay policy, premiums would need to be paid for 20 consecutive years. After that, you would not be required to make any additional premium payments, and your coverage would be guaranteed until death or age 100.

17
Q

Whole Life - Modified

A

is a policy where the premium stays fixed for the first 5 years, and then increases in year 6 and stays level for the remainder of the policy

Modified whole life has all of the same features of any other whole life except the insurance company cuts you a break on premium for the first few years.

18
Q

Whole Life - Modified Endowment Contract (MEC)

A

policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. A MEC does not meet the 7-pay test and is considered over-funded, according to the IRS.

the policy will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven-year period.

19
Q

A Joint Life policy

A

covers the lives of 2 individuals and save on premium cost by averaging the ages of the two insureds

Joint Life policies pay the face amount after the first person covered on the policy dies.

The policy is shared between two people, and when one person dies, the other receives the entire account. If B and M were insured under a joint life policy and B were to die, M would receive the entire benefit and would also no longer be insured.

20
Q

A Joint Survivor or Last Survivor Life Policies

A

cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds.

Joint Life Survivor or Last Survivor policies only pay the death benefit upon the death of the last insured person. For example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no benefits would be paid out from the policy until M died.

A Joint Life and Survivor policy covers two lives but only pays benefits after the death of the last insured.

21
Q

A Family Maintenance policy

A

pays a monthly income from the date of death of the insured to the end of the preselected period.

The payment of the face amount of the policy is payable at the end of such preselected period.

22
Q

A Family Income policies

A

pay an income beginning at the insured’s death and continues for a period specified from the date of policy issue.

23
Q

Adjustable Life policy

A

owner is usually looking for a policy offering flexible premiums. As financial needs and objectives change, the policyowner can make adjustments to the premium and/or face amount of an Adjustable Life insurance policy.

Adjustable life policies are able to provide these features by combining whole life and term life into a single plan. If a policyowner was looking for a policy in which they could control the amount and frequency of payments with a death benefit that can be adjusted as their life needs change, they would want an adjustable life policy.

24
Q

Universal life insurance policy

A

incorporates flexible premiums and an adjustable death benefit

The investment gains from a Universal Life Policy usually go toward the cash value.

The policyowner can use the cash value to manipulate the flexible aspects of a universal life insurance policy.

25
Q

Variable life insurance policies

A

require a producer to have proper FINRA and National Association of Securities Dealers (NASD) securities registration prior to selling any variable policy contract, whether it be life insurance or an annuity, as they include regulated securities.

These policies are also known as interest sensitive policies.

The policies usually have a fixed level premium, but the cash value and death benefits of a Variable Life policy can fluctuate according to the performance of its underlying investment portfolio.

A typical Variable Life Policy investment account grows through mutual funds, stocks, and bonds. This includes Variable Life, Universal Variable life, Variable Whole Life, and Variable Annuity.

26
Q

Variable Universal Whole Life, (VUL)

A

the policyowner controls the investment of cash values and selects the timing and amount of premium payments. Variable Universal Life policies give a policy owner the best of both Variable Life and Universal Life. If a policy owner was looking for a policy that allowed them to control how much and when premium was due, what investment accounts were used for funding, and where the returns from those investment accounts went, they would be looking for a Variable Universal Life Policy.

27
Q

Equity Index Universal Life Insurance

A

Equity Index Universal Life Insurance or Equity Indexed Life 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.

this plan allows policyholders to link accumulation values to an outside equity index like S&P 500. 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index.

These policies are characterized by a guaranteed minimum interest rate, tax deferral of interest accumulations, and policy loan access.

28
Q

nvestor (or stranger) originated life insurance policy S(I)OLI

A

when the insured dies, the policyowner (investor) benefits. In normal circumstances, it is a beneficiary with insurable interest who benefits from the death of an insured. An investor originated life insurance policy is when an investor purchases a policy on the life of someone else to profit upon that person’s death.

Usually, this is in exchange for a monetary living benefit for the insured. For example, L, the Investor, has taken out a $100,000 life insurance policy on E, the insured. L is the policyowner who will receive the $100,000 upon E’s death. E is the insured, and in exchange for allowing the policy on his life, receives $500 a month to help with bills.

29
Q

Cash Value

A

is the equity amount or “savings” accumulation in a whole life policy.

30
Q

The Endowment Policy

A

is a contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the insured’s death before the end of the stated period.

31
Q

A face amount plus cash value policy

A

s a contract that promises to pay at the insured’s death the face amount of the policy plus a sum equal to the policy’s cash value.

32
Q

Juvenile Insurance

A

is written on the lives of children who are within specified age limits and generally under parental control.

33
Q

Non-Medical Life Insurance

A

typically does not require a medical exam and tends to be more expensive than medically underwritten policies.

34
Q

Target premium

A

is a suggested premium used in Universal Life policies. It does not guarantee there will be adequate funds to maintain the policy to any time, especially to life. It may give an indication of what will be needed (under conservative estimates), to maintain the policy.