Life Insurance Product Types Flashcards

What is the key feature that distinguishes universal life insurance from traditional whole life insurance?

Answer: Universal life offers flexible premiums and an adjustable death benefit

Universal life insurance is distinguished by its flexibility, allowing policyholders to adjust both premium payments and death benefit amounts within certain limits.

What does the 'convertibility' feature in a term life insurance policy allow?

Answer: Converting the term policy to a permanent policy without providing medical evidence

Convertibility allows term life policyholders to convert their policy to a permanent life insurance product without providing evidence of insurability.

What is a 'participating' whole life insurance policy?

Answer: A policy that pays dividends to policyholders based on the insurer's financial performance

A participating whole life policy pays dividends to policyholders based on the insurance company's investment returns, mortality experience, and expense management.

What is 'decreasing term' life insurance and when is it most commonly used?

Answer: A term policy where the death benefit decreases over the term period, often used for mortgage protection

Decreasing term life insurance has a death benefit that decreases over the term period, commonly used to cover a declining obligation like a mortgage.

What is the 'exempt test' under the Income Tax Act as it applies to life insurance policies in Canada?

Answer: A test to determine if a life insurance policy qualifies for tax-exempt accumulation of investment income

The exempt test under the Income Tax Act determines whether a life insurance policy's investment component qualifies for tax-exempt growth of accumulated income.

What is 'term to 100' life insurance and how does it differ from traditional whole life?

Answer: It provides coverage to age 100 with level premiums but typically has no cash value or dividends

Term to 100 (T100) provides permanent-like coverage to age 100 with level premiums but typically does not accumulate cash value or pay dividends, making it less expensive than whole life.