Types of Life Insurance Policies

Question 1

Universal Life (loans)

Answer 1

if a loan is taken, it is subject to interest and, if unpaid, both the interest and the loan amount will reduce the face amount of the policy. Many UL policies continue to credit the outstanding loan amount at the guaranteed interest rate and the remaining cash value amount at the current interest rate. (more beneficial than whole life)

Question 2

Universal Life (cash withdrawals)

Answer 2

aka partial surrender. not treated as a loan. not subject to interest and will reduce the total cash value in the account (rather than the face amount). if later repaid, it is treated as a premium payment.

Question 3

Universal Life Option 1

Answer 3

level death benefit equal to the policy’s face amount. as cash value increases, net death protection actually decreases over the life of the policy, making it similar to a Whole Life contract

Question 4

Universal Life Option 2

Answer 4

provides for an increasing death benefit equal to the policy’s face amount plus the cash account. similar to a combination of level term insurance and increasing cash value than whole life insurance.

Question 5

Variable Life

Answer 5

death protection and investment. have a guaranteed minimum death benefit (may be higher depending on success of investments), cash values are not guaranteed (vary based on success of investments), and they are regulated as securities.

Question 6

Variable Universal Life

Answer 6

blends a combination of the variable and universal life insurance concepts. backed by equity investments, and death benefit/premium are adjustable.

Question 7

Equity Indexed Life Insurance

Answer 7

face amounts are linked to an equity index.

Question 8

Ordinary Whole Life

Answer 8

fixed level premiums.

Question 9

Industrial Life

Answer 9

premiums paid frequently, benefits are usually less than $2k, premiums collected by agent at insureds home or workplace. all family members are covered from birth to age 65 or 70. usually medical exam not required.

Question 10

Credit Life Insurance

Answer 10

designed to insure the lives of debtors for the benefit of a creditor (who is the policyowner). may not be written for an amount greater than total debt. usually the insured pays the premium along with financing.

Question 11

Family Income Policy

Answer 11

provides an income to be paid upon the death of the bread winner. combines decreasing term insurance with a permanent policy. income payments begin when the insured dies and continue for a period specified from the date of policy issue (not from the date of the insureds death)

Question 12

Family Maintenance Policy

Answer 12

combines ordinary life insurance and level term insurance. affords the payment of monthly income during a stated period of 10, 15, or 20 yrs or to age 65 as preselected by the insured. income is payable from the date of death to the end of the preselected period.

Question 13

The Family Policy (Family Protection Policy)

Answer 13

consists of whole life on the breadwinner and convertible term on the spouse and children. once issued, additional children are included at no extra cost. these are also known as “spouse term rider”, and “family rider”

Question 14

Joint Life Policy

Answer 14

whole life contract written with two or more persons named as insureds. insured amount payable upon the death of the first insured

Question 15

Survivorship Life Policy

Answer 15

similar to joint life in that it insures two people, but pays the insured amount upon the death of the last surviving insured.

Question 16

Juvenile Life insurance

Answer 16

any form of coverage written on a the lives of minors.

Question 17

Jumping Juvenile policy

Answer 17

automatically increases in face amount at a given age, usually 21, but premium remains level

Question 18

Minimum deposit or financed insurance

Answer 18

a method of paying for insurance and not a type of policy. high cash and loan value whole life policy. cash value of a permanent policy is used to pay the premiums on that policy through the use of policy loans. 4 of 7 payments must be made from other sources other than cash value

Question 19

Modified Whole Life Policies

Answer 19

distinguished by premiums that are lower than typical whole life premiums during the first few years (usually 3-5) and then higher than typical thereafter. during initial period, coverage and premium are based as if it was a term life policy. afterward, the premium is higher than that of a typical whole life policy

Question 20

Graded Premium Whole Life Policies`

Answer 20

gradual increase in premiums compared with Modified Life. premium increases each year during the early years of the contract (usually 5 years) and remains the same after that time

Question 21

Mortgage Redemption Policy or Rider

Answer 21

simply decreasing term insurance. benefit amount of the term element is intended to be sufficient to pay off the unpaid remainder of the mortgage loan if the insured dies before paying it off.

Question 22

Multiple Protection Policies

Answer 22

combinations of whole and term life in which the amount of protection is higher in the early years of the policy and less in the later years.

Question 23

Index-Linked Policies

Answer 23

policies with a face amount that increases by the amount of inflation. generally linked to the CPI.

Question 24

Deposit Term Insurance

Answer 24

level term insurance policy that has a much higher premium for the first year than for subsequent years. initial premium is significantly higher than the average premium needed to cover the cost of mortality during the term period. essentially, paying a portion of the premium in advance.

Question 25

Preneed Funeral Insurance

Answer 25

type of life insurance used to pay for an insured funeral (usually a particular funeral home). pays face amount upon death. policy will have an increasing face amount so that the funeral will be fully funded, even if burial costs increase.

Question 26

universal life policy and insured pays premium of $1k what happens to cash value

Answer 26

front end load is deducted from the premium, premium added to cash value, cost of insurance deducted from cash value, interest rate credited to cash value

Question 27

variable policy federal requirement

Answer 27

one a year the face amount must be higher than the cash value by a certain percentage to be defined as life insurance

Question 28

Endowment does not have…

Answer 28

tax free death benefit under current tax laws

Question 29

cash values of whole life…

Answer 29

grow to an amount equal to the face amount when the insured reaches age 100

Question 30

whole life and limited pay life endow…

Answer 30

at age 100

Question 31

interest sensitive whole life insurance (aka current assumption whole life policies)

Answer 31

whole life insurance policies that do not pay dividends. cash value grows in an accumulation account from the premium payments paid in and interest credited. cash value fluctuates in accordance with interest rates. During high interest rates premiums could be reduced.