Types of Life Policies

Question 1

cash value

Answer 1

a policy’s savings element or living benefit

Question 2

deferred

Answer 2

withheld or postponed unit a specified time or event in the future

Question 3

endow

Answer 3

to have the cash value of a whole life policy reach the contractual face amount

Question 4

face amount

Answer 4

the amount of benefit stated in the life insurance policy

Question 5

fixed life insurance products

Answer 5

contracts that offer guaranteed minimum or fixed benefits

Question 6

lapse

Answer 6

policy termination due to nonpayment of premium

Question 7

level premium

Answer 7

the premium that does not change throughout the life of a policy

Question 8

nonforfeiture values

Answer 8

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Question 9

policy maturity

Answer 9

in life policies, the time when the face value is paid out

Question 10

securities

Answer 10

financial instruments that may trade for value

Question 11

variable life insurance products

Answer 11

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Question 12

term insurance

Answer 12

provides the greatest amount of coverage for the lowest premium
no cash value

Question 13

level term insurance

Answer 13

the most common type of temporary protection purchased. the word level refers to the death benefit that does not change throughout the life of the policy

Question 14

level premium term

Answer 14

provides a level death benefit and a level premium during the policy term

Question 15

credit life

Answer 15

the most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period
credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor

Question 16

adjustable life

Answer 16

the owner of an adjustable life policy has the following privileges:
increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection

Question 17

modified life

Answer 17

charge lower premiums (similar to term rates) during the first few policy years, 3-5 years, and then higher level premiums for the remainder of the insured’s life. the higher subsequent premiums are typically higher than straight life premiums would be for the same age and amount of coverage

Question 18

group life insurance

Answer 18

written as a master policy, issued to the sponsoring organization, covering the lives of more than one individual member of that group. in group insurance, individual participants typically do not need to provide proof of insurability
receive a certificate of insurance from the master policy when individuals are covered by group life insurance

Question 19

universal life option b

Answer 19

under option b the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. at any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value

Question 20

graded-premium whole life

Answer 20

when graded-premium whole life policy begins, the premium amounts are typically 50% lower than premiums for straight life policies. the premium then gradually increases each year for a period of usually 5-10 years and then remains level thereafter

Question 21

straight whole life

Answer 21

policies have a level guaranteed face amount and a level premium for the life of the insured

Question 22

payor benefit

Answer 22

only pays if the owner, is disabled for at least 6 months

Question 23

annually renewable term (ART)

Answer 23

the purest form of term insurance. the death benefit remains level (in the sense, it’s a level term policy) and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases