Types of Life Policies (18%)

Question 1

Attained Age (defined)

Answer 1

age at the time the policy is issued/renewed

Question 2

Cash Value

Answer 2

Policy’s savings element or living benefit. Whole life cash value is created by the accumulation of premium.

Question 3

Face Amount

Answer 3

amount of banefit stated in the life insurance policy

Question 4

Endow

Answer 4

Cash value of a whole life policy has reached the contractual face amount

Question 5

Level premium

Answer 5

Premium that does not change throughout the life of a policy

Question 6

Nonforfeiture values

Answer 6

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

Question 7

Policy maturity

Answer 7

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

Question 8

Term life

Answer 8

temporary protection that includes pure death protection

Question 9

Three types of term life coverage

Answer 9

1. Level (death benefit does not change)
2. Increasing
3. Decreasing

Question 10

True or false: Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy.

Answer 10

True

Question 11

Annually renewable term (define)

Answer 11

A level term policy in which the premium increases every year. Purpose is to guarantee renewability each year without proof of insurability

Question 12

Decreasing term life

Answer 12

Face amount decreases each year over the policy term. Used to protect against debts/mortgage that decrease every year.

Usually not renewable, but is convertible.

Question 13

Return of Premium policy

Answer 13

An increasing term policy that pays additional benefit equal to the amount of premium paid. Significantly higher premiums. Insurers invest the increased premiums in order to cover the cost of returning the premiums.

Question 14

Renewable provision

Answer 14

allows term life policy to be renewed at the end of the term without evidence of insurability. New premium is calculated based on attained age.

Question 15

Convertible provision

Answer 15

allows term life policy to be converted into pernament insurance policy without evidence of insurability. New premium is calculated based on attained age.

Question 16

Whole Life Insurance

Answer 16

Permanent insurance as long as policy is paid (until age 100). Has cash value

Question 17

Whole Life Cash Values

Answer 17

1. Equal to face value at age 100
2. Paid out to policyowner
3. Credited to policy on a regular basis and have guaranteed interest rate.

Question 18

Living benefits

Answer 18

Benefit while living. Policyowner can borrow against the cash value or receive the cash value when policy is surrendered.

Question 19

Three types of whole life

Answer 19

1. Straight life (“ordinary”)
2. Limited Pay (matures before age 100)
3. Single premium (

Question 20

Adjustable Life

Answer 20

• Can be Term or Whole
• Flexible Premiums
• Flexible Face Amount
• Fixed rate of return on cash value (in a general account)
• Can borrow against cash value

Question 21

True or False: In an adjustable policy, face values and premiums can be adjusted without requiring proof of insurability

Answer 21

False. Increasing benefits or decreasing premiums will usually require proof of insurability.

Question 22

Universal Life

Answer 22

• Permanent with renwable term protection
• Flexible Premiums (minimum or target)
• Flexible Face amount
• Cash Value guaranteed at a minimum level (general account)
• Can borrow against cash value

Question 23

What two types of premiums are features of a Universal Life policy?

Answer 23

1. Minimum Premium (amount needed to keep the policy in force for the year)
2. Target Premium (recommended amount to keep the policy in force for the lifetime)

Question 24

Two death benefit options in Universal Life

Answer 24

1. Level Death Benefit (until cash value meets death benefit)
2. Increasing Death Benefit (maintains pure insurance gap between death benefit and cash value)

Question 25

Difference between Variable Whole Life and Variable Universal Life

Answer 25

Variable Whole Life has a cash value.

Question 26

What additional license must producers obtain to seel Variable products?

Answer 26

Securities License

Question 27

Variable Life

Answer 27

• Permanent Insurance
• Fixed premium (whole) or flexible (universal)
• Flexible face amount (defined minimum)
• Cash value not guaranteed (separate account)
• Can borrow against cash value

Question 28

Joint Life vs. Survivorship Life

Answer 28

Joint = paid upon first to die
Survivorship = paid upon last to die

Question 29

Types of payments into an annuity

Answer 29

1. Single Premium
2. Periodic Payments (Level or Flexible)

Question 30

Two types of annuity investment options

Answer 30

1. Fixed (guaranteed interest)
2. Variable (includes risk of loss)