Life Insurance Product Types Flashcards

Which type of life insurance policy combines a death benefit with a tax-deferred savings component that earns interest at a rate tied to a market index?

Answer: Indexed universal life insurance

Indexed universal life (IUL) insurance links the cash value growth to a market index like the S&P 500, offering potential upside with a floor protecting against losses.

A 'graded benefit' whole life policy typically means:

Answer: The full death benefit is not paid if death occurs within the first few policy years

Graded benefit policies pay a reduced death benefit (often return of premiums plus interest) if the insured dies within the first 2-3 policy years, then the full benefit applies.

What distinguishes a modified premium whole life policy from a standard whole life policy?

Answer: Premiums are lower in the early years and higher thereafter

Modified premium whole life charges lower premiums during an initial period (typically 3-5 years), then higher level premiums for the remainder of the policy.

Which policy feature allows a whole life policyholder to receive the policy's cash value minus any loans as a lump sum by surrendering the policy?

Answer: Cash surrender value

The cash surrender value is the amount the policyholder receives upon voluntarily terminating a whole life policy before death or maturity.

A 'survivorship' (second-to-die) life insurance policy pays the death benefit when:

Answer: Both insureds have died

Survivorship life insurance covers two lives and pays the death benefit only after both insureds have died, commonly used for estate planning.

Which of the following best describes a 'joint first-to-die' life insurance policy?

Answer: Covers two people and pays upon the death of the first insured

A joint first-to-die policy insures two lives and pays the death benefit upon the death of whichever insured dies first, often used to protect a surviving business partner or spouse.

Which type of life insurance product is most commonly used to provide pure death benefit protection for a specific debt obligation like a mortgage?

Answer: Decreasing term insurance

Decreasing term insurance has a death benefit that declines over time, mirroring the outstanding balance of a mortgage or other amortizing debt.