Individual Life Insurance Planning Flashcards
7 cards from real CLU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Individual Life Insurance Planning flashcards as text
A 45-year-old client wants permanent life insurance but is concerned about premium flexibility. Which policy type best addresses this need?
Answer: Universal life insurance
Universal life insurance allows flexible premium payments within policy guidelines while providing permanent death benefit coverage.
What is the primary purpose of a policy's 'free look' provision?
Answer: To give policyowners a period to return a policy for a full refund
The free look provision gives new policyowners (typically 10-30 days) to review their policy and return it for a full premium refund if unsatisfied.
When calculating the human life value approach to life insurance needs, which factor is NOT typically included?
Answer: Investment portfolio balance of the surviving spouse
The human life value approach focuses on the present value of future earnings minus personal consumption, not the surviving spouse's existing assets.
A policy issued with a rated premium due to a health impairment means the applicant:
Answer: Pays a higher-than-standard premium to reflect increased risk
A rated (or substandard) policy is issued with an additional premium charge to compensate the insurer for the applicant's above-average mortality risk.
Which settlement option provides the largest monthly income payment to a beneficiary?
Answer: Life income only (straight life annuity)
The life income only (straight life) option pays the highest monthly amount because payments cease at death, with no guaranteed minimum payout period.
Under the incontestability clause, after what period may an insurer generally NOT contest a life insurance policy based on misrepresentation?
Answer: 2 years
Most states require a two-year incontestability period, after which an insurer cannot void a policy for misrepresentation except in cases of fraud.
A client owns a $500,000 whole life policy with a $75,000 cash value. What is the net amount at risk to the insurer?
Answer: $425,000
The net amount at risk equals the face amount minus the cash value ($500,000 − $75,000 = $425,000), representing the pure insurance element.