Lesson 3 Quiz

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Life Insurance Categories

Most new life insurance policies are purchased by _____________ from life insurance agents.

There are three basic categories of coverage upon which the life insurance world revolves. Match the following with their respective descriptions.

Only participating policies pay dividends.

Term Insurance

Term life insurance premiums are based on:

When the death benefit escalates periodically over the policy's term, it is a(n) ____________ term contract.

In a(n) ________________ term policy, the face value slowly declines in scheduled steps from the date the policy comes into force to the date the policy expires, while the premium remains level.

In a(n) _________________ term policy, the face value remains unchanged from the date the policy comes into force to the date the policy expires.

There are no cash values in term life insurance.

Most term insurance policies contain the option to renew and/or the option to convert.

The option to renew is most popular on policies that are renewable on an annual basis.

Building cash value does not apply if a term policy is converted to a whole life policy.

Whole Life Insurance

Whole life insurance policies typically mature at age:

Match the following Whole Life insurance features with their respective policies.

a)	Lower premiums for designated timeframe (typically 5 years); higher premiums thereafter.
b)	Provides permanent level protection and level premiums until insured's death or age 100.
c)	Face amount increases with the CPI.
d)	Cash values begin immediately and are used to pay future premiums (partially or in full).
e)	Mutual insurers issue policy with lower premium and face amount that diminishes after a few years. Dividends are used to purchase paid-up additions.
a) Modified Whole Life b) Straight Whole Life c) Indexed Whole Life d) Minimum Deposit Whole Life e) Enhanced (Economatic) Whole Life (Lesson 3.4)

Match the following Whole Life insurance features with their respective policies.

a)	Level premiums limited to certain time period, less than life.
b)	Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off.
c)	Paid up for life with one large premium payment.
d)	Funds invested in general accounts.
e)	Lower premium rate initially (2-3 years) and adjusted (up or down) according to the insurer's mortality, expense and investment projections.
a) Limited Pay Whole Life b) Graded Premium Whole Life c) Single Premium Whole Life d) Traditional Whole Life e) Indeterminate Premium Whole Life (Lesson 3.4)

Endowment Policies

To "endow" means to:

In an endowment policy, if the insured is still living at the end of the endowment period, the ___________ is entitled to receive the policy benefits.

There are no cash values in endowment insurance.

Endowment policies can be compared to _______________ insurance.

Special Use Policies

Match the following special use policies with their respective descriptions.

a)	All family members are covered under one plan. Newborns are covered automatically at no extra premium. Children's coverage is usually convertible without evidence of insurability.
b)	Combination of Whole Life and Decreasing Term covering a select period of years. The specified income Term period starts when the policy is issued.
c)	Pays a benefit of double or triple the face amount if death occurs during a specified period. Insureds are "averaged" and a single premium is charged for each life.
d)	Combination of Whole Life and Level Term insurance covering a select period of years. The specified income period begins on the date of death.
e)	Covers two or more people. Using some type of permanent insurance, it pays the death benefit when one of the insureds dies. The survivor then has the option of purchasing a single individual policy without evidence of insurability.
a) Family Plan Policies b) Family Income Policies c) Multiple Protection Policies d) Family Maintenance Policies e) Joint Life Policies (Lesson 3.6)

Match the following special use policies with their respective descriptions.

a)	Decreasing Term insurance that covers the life of a debtor and pays the amount due on a loan if the debtor dies before the loan is repaid. Face amount decreases as balance decreases.
b)	Covers two lives; benefit is paid upon the death of the last surviving insured.
c)	Covers children ages 1 to 15. At age 21, coverage increases to five times the face amount, premiums remain the same and no evidence of insurability is required.
d)	Covers children age 14 or 15+. If an insured adult dies, premiums are waived until the child reaches a specified age.
a) Credit Life b) Last Survivor Policy c) Jumping Juvenile Policy (Junior Estate Builder) d) Juvenile Insurance (Lesson 3.6)

Policy Provisions

If a policy is transferred under an absolute assignment, the assignee cannot change the beneficiary if the beneficiary had been originally designated as irrevocable without the beneficiary's permission.

Florida law restricts an insurance company from charging a fixed interest rate higher than ________ annually.

The provision whereby policyholders have a stipulated amount of days to examine their newly proposed policies at no obligation is the __________ provision.

The ____________ provision states that the application and policy contain all provisions and constitute the whole agreement.

The period of time after the due date of a premium has passed during which the policy remains in force without penalty is the ____________ provision.

The _______________ provision exempts the insured from paying premiums after becoming disabled for a specified period of time.

The ____________ provision provides that for certain reasons the company may void a policy after it has been in force, typically limited to one or two years after issue.

The ____________ provision puts a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums required.

Nonforfeiture Options

Privileges allowed under terms of a life insurance contract after cash values have been created are referred to as nonforfeiture options. Match the following nonforfeiture options with their respective descriptions.

a)	When the policyowner requests that the cash value of the policy be used to pay for the policy itself.
b)	When the policyowner relinquishes the value of the policy for cash.
c)	Does not allow the policy to continue to earn interest, increase cash value or pay dividends. Allows the face amount of the policy to remain the same for a specified period of time.
d)	Enables the insurer to withdraw funds from the policy if any cash value has accumulated to pay for any premiums that may not be paid by the policyowner. The amount withdrawn becomes a loan against the cash value.
e)	Dividends are left within the policy to accrue with interest for future withdrawal.
a) Reduced Paid-Up b) Cash Surrender Value c) Extended Term d) Automatic Loan Provision e) Dividend Accumulations (Lesson 3.11)

Dividends

Match the following dividend options with their respective descriptions.

a)	Dividends are used to pay policy premiums and lessen the policyowner's out-of-pocket expenses.
b)	Dividends are distributed through a company check.
c)	Dividend funds are left in the account to accrue with interest and withdrawn at a later date.
d)	Dividends are used to purchase one-year Term insurance at net rates, usually limited to no more than the current cash value on the contract.
e)	Dividends are used to purchase additional life insurance of the same kind. Premium rates may be higher.
a) Dividends Against Premium Payments b) Cash in Hand c) Dividends to Accumulate at Interest d) Dividends to Purchase One-Year Term Insurance e) Dividends to Buy Paid-Up Additions (Lesson 3.12.1 )

Riders

Match the following riders with their respective descriptions.

a)	Allows cash value to pay premiums.
b)	Permits insureds to buy specified amounts of additional insurance at specified intervals (usually 3 years) without evidence of insurability.
c)	Provides coverage for more than one family member, usually as a term rider.
d)	Provides additional amount usually equal to face amount if death occurs under stated conditions.
e)	Prevents a policy from lapsing for nonpayment of premiums while insured is disabled.
f)	Extends until insured child reaches a specified age. Evidence of insurability required.
a) Automatic Premium Loan b) Guaranteed Insurability c) Other Insureds d) Accidental Death Benefit e) Waiver of Premium f) Payor Provision (Lesson 3.13)

Using riders to decrease coverage will typically increase premium payments.

The cost of living adjustment (COLA) rider is based on:

LESSON 3: LIFE INSURANCE POLICIES, PROVISIONS, OPTIONS AND RIDERS