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Life And Health Insurance TX > Type of Insurance Policies > Flashcards

Type of Insurance Policies Flashcards

1
Q

Ordinary life

A

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

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2
Q

Term life

A

-pure death protection
-only pays a death benefit if the
insured dies during the policy term

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3
Q

Term life characteristics

A

• does not accrue cash value.
•greatest amount of life insurance for a specified period of time/lowest premium
• The initial premium of term insurance is lower than for an equivalent amount of
whole life insurance

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4
Q

Whole life

A

-provides death benefits for the entire life of the insured.
-provides living benefits in the form of cash values
-matures at age 100 and normally has a
level premium.

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5
Q

What insurance type issues small face amounts and is paid weekly?

A

Industrial life

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6
Q

Group life

A

-for members of a group, ex. employment,
association, or a union
-one master contract.
- no evidence of insurability required.

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7
Q

What are the types of term life?

A
  • Level term
  • Decreasing term
  • Increasing term
  • Convertible term
  • Renewable term
  • Annual renewable term
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8
Q

Level term (premium level term)

A
  • level face amount and level premiums.
  • higher premiums than annual renewable term because they are level throughout the policy period.
  • premiums increase at each renewal.
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9
Q

Decreasing term

A
  • annually decreasing face amount over time with level premiums
  • usually used for mortgage protection.
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10
Q

Which Term life insurance provides an increasing face amount over time based on specific amounts or a percentage of the original face amount?

A

Increasing term

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11
Q

Convertible term

A

-can concert insurance into permanent policies without showing proof of insurability.

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12
Q

Mike wants to be able to continue term coverage after the expiration of his initial policy period without having to prove insurability. Which term life insurance is best for him?

A

Renewable term

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13
Q

Annual renewable term

A
  • provides a level face amount that renews annually.

- guaranteed renewable annually without proof of insurability.

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14
Q

What is Whole Life Insurance?

A

Insurance with:

  • living and death benefits
  • permanent life insurance
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15
Q

Advantages of whole life insurance

A
  • Covers the entire life of the insured
  • Living benefits - cash value and policy loans
  • Fixed premiums
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16
Q

Drawbacks of whole life insurance

A
  • Protection is more expensive because of living benefits

* Premium paying period may extend beyond the income-earning years

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17
Q

What are the types of Whole Life insurance?

A
  1. straight whole life
  2. limited pay whole life
  3. single-premium whole life
  4. modified whole life
  5. graded whole life
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18
Q

straight whole life

A

-basic whole life insurance
-level face amount
-fixed premiums
-Premium payments made until death of insured or age 100 (maturity
of policy)

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19
Q

limited pay life

A
  • premiums are paid for a limited time

- As the premium payment period shortens, cash values increase faster and the fixed premiums are higher.

20
Q

single-premium whole life

A

-pay the entire premium in one lump-sum and have
coverage for the insured’s entire life.
• An immediate nonforfeiture value is created
• An immediate cash value is created
• A large part of the premium is used to set up the policy’s reserve

21
Q

What begins with low premiums than jumps(once) to higher premium in later years?

A

Modified Whole Life Insurance

22
Q

Graded whole life

A
  • typically the premium increases yearly

for a stated number of years, then remains level.

23
Q

Special Use Policies

A
  • combination or “packaging” of different policy types,

- designed to serve a variety of needs.

24
Q

Family Plan Policies

A

Family Head-permanent(whole life) insurance
spouse/children- level term life riders (family term riders)
+term coverage usually convertible without evidence of insurability
+children covertible typically at 18 or 21
-premium remains same regardless of the number of children

25
Q

Family income policy

A

whole life decreasing term insurance (begins date of purchase).

  • monthly income to a beneficiary if death occurs during a specified period after date of purchase.
  • If the insured dies after the specified period, only the face value is paid to the beneficiary since the decreasing term insurance expired.
26
Q

Family Maintenance policy

A

Whole life and level term (begins date of death)
-Provides income to a beneficiary for a selected period of time if an insured dies during that period.
-At the end of the income paying
period, the beneficiary also receives the entire face amount of the policy.
-If an insured dies after the
end of the selected period, the beneficiary receives only the face value of the policy.

27
Q

Multiple protection policies

A

-Pays a benefit of double or triple the face amount if death occurs during a
specified period.
-after the period has expired, only the policy face amount is paid
-period can be specified years or age
-combinations of permanent insurance and level term insurance.

28
Q

Joint Life Policy

A

-covers two or more people.
-age of the insureds are “averaged” and
a single premium is charged
-uses permanent insurance
-pays a death benefit when one of the insureds dies
-survivors then have the option of purchasing an individual
policy without evidence of insurability.
-premium for a joint life policy < the premium for
separate, multiple policies

29
Q

Juvenile Insurance

A

-written on the lives of a minor
-adult applicant is usually the premium payor until the child comes of age and is able to take
over the payments.
-payor provision typically attached It provides that
-in the event of death or disability of the adult premium payor, the premiums will be waived until the child
reaches a specified age

30
Q

Credit life insurance

A 
is 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
-issued in an amount not to exceed the
outstanding loan balance
-paid entirely by the borrower.
-A decreasing term policy is
most often used.
31
Q

Nontraditional Life Policies

A

1980s

-designed to keep up with
inflation and are interest-sensitive

  • interest-sensitive whole life
  • adjustable life
  • universal life
  • variable life
  • variable universal life
32
Q

Adjustable life policies

A

-flexibile
-combines term and whole
life insurance

• The policyowner determines how much face amount protection is needed and how much
premium the policyowner wants to pay
• allows you to vary your coverage as your needs change without requiring evidence of insurability
• no new policy needs to be issued when changes are desired
•has all the usual features of level premium cash value life insurance

33
Q

Universal life

A
  • variation of whole life insurance,
  • considerable flexibility
  • Changes may be made with relative ease
  • allows its policyowners to determine the amount and frequency of premium payments which will adjust the policy face amount
  • Cash value accumulations are subject to a minimum interest guarantee
  • Any surrender charges of a universal policy must be disclosed
34
Q

Equity Index Universal Life lnsurance (EIUL)

A

-permanent life insurance policy
-allows policyholders
to tie accumulation values to a stock market index
-typically contain a minimum guaranteed
-fixed interest rate component
account option
-security of fixed universal life insurance with the growth potential of a variable policy linked to indexed returns.

35
Q

Modified Endowment Contracts (MEC)

A

-A policy that is overfunded

must meet 7-pay test(limit on how much you can pay on your policy the 1st 7 years)

36
Q

MEC Taxation

A

• If withdrawn prior to age 59 ½, there is a 10% penalty.
• Taxation only occurs when cash is distributed
• Funds withdrawn are subject to last-in first-out (LIFO) tax treatment, which assumes that the investment or earnings portion of the contract’s values is withdrawn first (making these funds fully taxable as ordinary income).
• Penalty taxes on premature distributions normally apply to
policy loans

37
Q

Variable insurance products

A

-are considered securities contracts as well as insurance contracts

required to register with the National Association of Securities Dealers to sell variable products.

38
Q

Variable whole life insurance

A

-created to help offset the effects of inflation on death benefits

  • permanent life insurance
  • policy values are invested in the insurer’s separate accts (common stock, bond, money market, and other securities investment)
39
Q

Variable universal life (VUL)

A

combines all the characteristics of a
universal life and variable life

‘variable’ = ability to invest in separate accounts whose
values vary

‘universal’ = flexibility the owner has in making premium payments

Evidence of insurability can be required for an individual
covered by a variable universal life policy when the death benefit is increased.

40
Q

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

A

Variable universal life (VUL)

41
Q

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

A

Renewable

42
Q

What Insurance Polices are interest sensitive?

A
  • interest-sensitive whole life
  • adjustable life
  • universal life
  • variable life
  • variable universal life
43
Q

Name the 6 types of Term Life.

A
  • Level
  • Decreasing
  • Increasing
  • Convertible
  • Renewable
  • Annual Renewable
44
Q

A 20-pay life policy, the insured only pays for 20 years and is in effect until the insured’s death or they reach age 100 is an example of what?

A

Limited Pay Life Insurance

45
Q

What type of policy can start out low and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy?

A

Graded Whole Life

graded like grad-ual{increase}

46
Q

What policy has flexible premiums, flexible benefits, no minimum
death benefit, and cash value withdrawals?

A

Universal Life

47
Q

Fixed premiums, a guaranteed minimum
death benefit which fluctuates over the minimum, and cash values which fluctuate and are not guaranteed are basic characteristics of …..

A

Variable whole life insurance

Life And Health Insurance TX (13 decks)

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