Life Insurance Policy Types Flashcards
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Read the first 7 Life Insurance Policy Types flashcards as text
Credit life insurance is typically issued as which policy type and is designed to cover:
Answer: Decreasing term; the outstanding balance of a loan
Credit life is typically decreasing term insurance where the death benefit declines as the loan balance is paid down, paying off the remaining debt upon the borrower's death.
Which of the following is a characteristic unique to variable universal life (VUL) insurance?
Answer: Both flexible premiums and investment subaccounts
Variable universal life combines universal life's flexible premiums with variable life's separate investment subaccounts, making it the most flexible permanent policy type.
Which statement about interest-sensitive whole life insurance is correct?
Answer: Current interest rates affect the cash value growth rate
Interest-sensitive whole life credits cash value at a current interest rate that may be higher than the guaranteed minimum, allowing for potentially faster accumulation.
A juvenile life insurance policy issued on a child often includes a payor benefit rider, which:
Answer: Waives premiums if the premium-paying parent dies or becomes disabled
The payor benefit rider waives future premiums on the juvenile policy if the parent or guardian responsible for paying premiums dies or becomes totally disabled.
What is the primary purpose of a family maintenance policy?
Answer: To pay level monthly income from the date of death for a specified period
A family maintenance policy pays a level monthly income for a fixed period beginning at the insured's death, regardless of when during the policy term the death occurs.
Under a graded death benefit whole life policy, the full face amount is not paid if the insured dies:
Answer: During the graded benefit period, typically the first 2–3 years
Graded death benefit policies pay a limited benefit (often return of premiums plus interest) if the insured dies during the initial graded period, making them suitable for higher-risk applicants.
Which policy type offers the insured the ability to skip premium payments without lapsing the policy, provided sufficient cash value exists?
Answer: Universal life
Universal life allows premium payment flexibility; if the policyowner skips a payment, the cost of insurance is deducted from accumulated cash value, keeping the policy in force.