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IL Life and Health Insurance > Types of Life Insurance > Flashcards

Types of Life Insurance Flashcards

1
Q

Term Life Insurance

A

Lasts for a set period and then expires

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2
Q

Terms tend to last anywhere from…

A

1 to 30 years

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3
Q

Term might be renewable up to…

A

A certain age

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4
Q

Renewed term will have increased premium due to…

A

Age

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5
Q

Term is often the highest death benefit for…

A

Lowest price

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6
Q

Pure Insurance

A

No cash value

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7
Q

Term might be convertible into perm insurance without…

A

No new medical exam

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8
Q

Term conversion might result in…

A

Increased premium based on person’s new attained age

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9
Q

Level Term

A

Unchanging death benefit

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10
Q

Decreasing Term

A

Decreases the death benefit over time, even as premium stays the same

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11
Q

Credit Life Insurance

A

Decreasing term insurance designed to insure a borrower for a loan balance

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12
Q

Credit LI: Who is the owner and beneficiary?

A

Lender

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13
Q

Credit LI: Who is insured and pays the premium?

A

Borrower

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14
Q

Credit LI: Original face amount can’t be more than…

A

Original loan balance

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15
Q

Credit LI: If loan is repaid at death…

A

Any extra might be paid to borrower’s chosen beneficiary

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16
Q

Credit LI typically cannot…

A

Convert to permanent

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17
Q

Increasing Term

A

Term insurance with a death benefit that goes up over time as premiums stay the same

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18
Q

Increasing term is sometimes layered on top of perm LI to…

A

Provide special benefits

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19
Q

Deposit Term

A

Increases premium for first year to offset cost of buying more insurance later

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20
Q

Permanent Life Insurance

A

Meant to insure someone for life

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21
Q

Perm technically might mature/stop at…

A

100 or more, with money going to owner

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22
Q

Perm premiums are often…

A

Level by default

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23
Q

Perm is used when there is…

A

Permanent need for death benefit

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24
Q

Perm is used to avoid or defer various taxes and…

A

Escape the probate process

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25
Q

Perm policies have…

A

Cash value

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26
Q

Perm policies might allow loans from…

A

Insurer

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27
Q

Perm policies might allow for partial…

A

Withdrawals of cash value

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28
Q

Perm policies might apply…

A

Interest to the cash value

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29
Q

Perm policies might result in…

A

Cash surrender value or free insurance if the policy is cancelled

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30
Q

Cash Value

A

Provides an asset while the insured is still alive

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31
Q

CV: Premiums will be split to cover…

A

Risk of death, insurer expenses, and to fund CV slowly over time

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32
Q

CV: Can be used by the policyholder for…

A

Loans, withdrawals, or left alone to collect interest

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33
Q

CV: Surrender charges…

A

May apply

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34
Q

CV: As long as premium is paid, the beneficiary gets…

A

Death benefit, not the cash value

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35
Q

Policy Illustrations

A

Intended to visualize and explain the expected changes in the premiums, death benefits, or cash value

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36
Q

Policy illustrations must be clear about…

A

Which aspects are projections vs. guarantees

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37
Q

Policy Loans: Policyholders can borrow against…

A

Cash value

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38
Q

Policy Loans: Interest might be…

A

Fixed or variable

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39
Q

Policy Loans: If death occurs…

A

Unpaid balance comes out of the death benefit

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40
Q

Policy Loans: If policy is cancelled without death…

A

Unpaid balance comes out of cash surrender value paid to owner

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41
Q

Policy Loans: If loan and interest are greater than cash value…

A

Possible cancellation by insurer

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42
Q

Non-Forfeiture Options

A

Allow policyholders to utilize cash value even if they want to cancel

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43
Q

Cash Surrender Value

A

Cash value minus overdue premium and unpaid loans

44
Q

Temporary Extended Term Insurance

A

Same death benefit and no needed payments, but not available for high-risk insureds

45
Q

Paid-Up Permanent Insurance

A

Lower death benefit but no needed payments

46
Q

If converting, cost of insurance will be based on…

A

Person’s attained age

47
Q

Traditional/Ordinary Whole Life Insurance

A

Basic perm insurance with level premium, level death benefit, guaranteed, fixed rate of growth in cash value

48
Q

Interest-Sensitive/Current Assumption Whole Life

A

Whole life insurance with premiums and crediting of interest that might fluctuate with the economy

49
Q

Interest-Sensitive/Current Assumption WL: High interest rate

A

Lower premiums and/or more credited to cash value

50
Q

Interest-Sensitive/Current Assumption WL: Low interest rate

A

Higher premiums or less credited to cash value or a lower death benefit

51
Q

Interest-Sensitive/Current Assumption WL: Includes minimum guarantees of interest and…

A

Maximum guarantees of premium

52
Q

Universal Life

A

Permanent life insurance that offers flexibility to change premium or death benefit as needed

53
Q

UL: Interest on cash value can fluctuate but…

A

Has a minimum guarantee

54
Q

UL: More likely to allow…

A

Partial withdrawals of cash value

55
Q

UL: Option A

A

Has level death benefit

56
Q

UL: Option B

A

Can increase the death benefit as the cash value rises

57
Q

UL: Premiums

A

Annual statements disclose how premium is divided

58
Q

UL: Premium divided into…

A

Insurer admin expenses, cost of death benefit, cash value

59
Q

UL Limits: Too much reduction in premium can…

A

Eat into cash value

60
Q

UL Limits: If premium and cash value are too low…

A

Death benefits can be reduced

61
Q

UL Limits: If premium is too high and too much goes to cash value…

A

Policy becomes modified endowment contract

62
Q

Modified Endowment Contract

A

Loses favorable tax status

63
Q

UL Limits: Increase death benefits might require…

A

Proof of good health

64
Q

UL Limits: Partial or full withdrawals are possible but…

A

Might require a surrender charge

65
Q

Adjustable Life

A

Permanent life insurance that lets policyholder change 2 of 3 and have the third automatically adjusted

66
Q

AL: Options to Adjust

A

Premium, death benefit, or duration of coverage

67
Q

AL: Interest will only be earned…

A

Single, fixed rate throughout the contract

68
Q

AL: No itemized report of…

A

Insurer expenses vs mortality cost vs cash value

69
Q

AL: No allowance for…

A

Missed premium

70
Q

Variable Life

A

Permanent insurance that exposes cash value to market risk in exchange for possibly higher returns

71
Q

VL: Policyholder makes decision about investment of…

A

Cash value

72
Q

VL: Guaranteed minimum death benefits but…

A

Not guaranteed cash value

73
Q

VL: Full and partial surrenders might require…

A

Surrender charge

74
Q

VL: General Account

A

Variable life premiums for mortality cost and insurer expenses belong to insurer

75
Q

VL: Separate Account

A

Variable life premiums for cash value

76
Q

VL: Money in a separate account can be put into any of several options chosen by the owner and…

A

Won’t be taxed until paid to the owner

77
Q

Variable life can’t be sold without…

A

Securities license

78
Q

Producers who sell variable life are also regulated by…

A

FINRA

79
Q

Before variable life purchase, must provide…

A

Prospectus that explains history of investment performance

80
Q

Variable Universal Life

A

Combines flexibility of universal life and investment options of variable life

81
Q

VUL allows for flexible premium and…

A

Death benefits

82
Q

VUL allows cash value to be invested by…

A

Policyholder in a separate account

83
Q

VUL doesn’t guarantee…

A

Cash value

84
Q

VUL requires what license?

A

Securities

85
Q

Modified Whole Life

A

Permanent life insurance with artificially low premium for a few years and higher premium thereafter

86
Q

Modified Whole Life is often intended for families who expect…

A

Major increase in income after a few years

87
Q

Joint Life

A

Compensates a surviving spouse when the other dies

88
Q

Joint life is also known as…

A

“First to die” insurance

89
Q

Joint life premiums are based on…

A

Average life expectancy of 2 lives

90
Q

Survivorship Life

A

Pays after both spouses have died

91
Q

Survivorship life is also known as…

A

“Second to die” insurance

92
Q

Industrial Life Insurance

A

Small permanent life policies; often no medical exam but relatively high per-dollar cost

93
Q

Pre-Need Life Insurance

A

Permanent life insurance sold for funerals

94
Q

For pre-need LI, who is the beneficiary?

A

Funeral Home

95
Q

Pre-Need LI: Excess amounts go to…

A

Insured’s chosen beneficiary

96
Q

Pre-Need LI: Might have increasing death benefit to account for…

A

Inflation

97
Q

Family Policies

A

Intended for spouses with children and differing incomes

98
Q

Types of Family Policies

A

Family Income, Family Maintenance, Family Protection

99
Q

Family policies are blended policies that combine…

A

Term and perm insurance

100
Q

Family Protection Policy

A

Intended to insure a whole household

101
Q

Family protection policies combine…

A

Perm LI on top earner; High amount of convertible term insurance on other adult; smaller amount of convertible term insurance on children

102
Q

Family Protection Policies: Children are covered automatically at no extra cost with no medical underwriting if they live beyond…

A

15 days

103
Q

Jumping Juvenile Policy

A

Perm LI on a child with level premium

104
Q

Jumping juvenile policy death benefits multiply by what when they turn 18 or 21?

A

5 times

105
Q

Endowment Insurance

A

Policyholder gets the policy’s face value amount if the insured person doesn’t die during a certain time

106
Q

EI: Beneficiary gets the death benefit if…

A

Insured dies during that time

107
Q

EI: Loses tax benefits of…

A

Traditional LI

IL Life and Health Insurance (29 decks)

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