Types of Policies and Riders Flashcards
What is the death benefit payable on the policy if the insured dies before the policy ends?
face amount
What are the two types of life insurance?
temporary (term) and permanent (whole life)
What is the death benefit also referred to?
limit of liability or the policy proceeds
Permanent policies provide ____ ____, which is cash accumulation in the policy that can be accessed through a policy loan or cancellation (surrender) of the policy
cash value. This is considered a living benefit in a permanent policy causing the premiums to be higher than term insurance
Which of the following is not a feature of term life insurance?
A
Cash value
B
Limited duration
C
Lower initial cost
D
Pure protection
Cash Value - Term life insurance has no cash value and is often referred to as providing pure protection. Compared to the same face amount of whole life insurance, term will cost less.
A “level term” policy means that the _________ remains the same throughout the entire policy period.
A
Cash value
B
Face amount
C
Loan value
D
Beneficiary
Face Amount
The death benefit or face amount of insurance remains level throughout the term of the policy. Term policies do not have cash value or loan value.
What are the two special features that a contract can have for life insurance?
- renewable: a benefit that will renew the contact on the renewal date without evidence of insurability
- convertible: the right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period specified on the contact
net amount at risk = face value - ______
cash value, in a traditional whole life policy, the net amount at risk is the face value minus the cash value
as the cash value increases over time, the ____ ____ at risk decreases
net amount
T/F: Traditional policies earn a specified guaranteed rate of return. once the cash value has accumulated for a certain number of years, the policy’s owner can borrow against the policy
TRUE
T/F: A whole life policy cannot be convertible or renewable. Only term (temporary) insurance can be convertible or renewable
TRUE
What age does ordinary whole life insurance provide protection to?
age 100, cash value accumulation to age 100, and fixed level premium payments
name the three tiers for premiums payments to be structured as
straight life or continuous premium
limited payment
single premium net amount
Which premium structure is level and payable to age 100 or insured’s death, whichever comes first. The face amount remains level throughout the life of the policy and this policy has the highest total premium outlay.
straight life or continuous premium
which premium structure is where the entire premium is paid in a lump sum at the time of purchase and creates immediate cash value? The face amount remains level and cash value continues to earn interest and mature at age 100. the policy has the lowest total premium outlay for the life of the policy.
single premium net amount
which premium structure has premiums for a specified period of time or to a specified age? the face amount remains level and cash value continues to earn interest and mature at age 100. This policy has the lowest total premium outlay for the life of the policy
limited payment
A producer is explaining the concept of limited-pay life insurance to a 40-year-old client. When comparing a straight life policy with a 10-pay life policy, which of the following statements is correct?
A
A straight life policy has immediate cash value
B
The cash value in a straight life policy will accumulate at a slower rate than the cash value in a 10-pay life
C
A 10-pay life policy will have a lower annual premium than a straight life
D
A policy fully paid up in 10 years will endow at the client’s age of 50
The cash value in a straight life policy will accumulate at a slower rate than the cash value in a 10-pay life
The actual amount of premium per year in a 10-pay life policy will be higher than straight life since the number of payments is reduced. Because of this, the cash value will accumulate faster in a 10-pay life and slower in a straight life policy. Both policies will endow at age 100. Neither a straight life or 10-pay life policy has immediate cash value.
Which type of term policy decreases the death benefit, but the premiums remain level for the policy term? often policies are sold as mortgage protection
decreasing policy