Life Insurance Policy Types Flashcards

Which type of life insurance policy combines a savings component with permanent death benefit protection?

Answer: Whole life

Whole life insurance combines a level death benefit with a cash value savings component that grows on a tax-deferred basis.

A universal life insurance policy's flexible premium feature allows the policyowner to do which of the following?

Answer: Vary premium amounts within policy limits

Universal life's flexible premium feature lets policyowners pay varying amounts as long as the cash value remains sufficient to cover the cost of insurance.

What distinguishes variable life insurance from whole life insurance?

Answer: Variable life cash value is invested in separate accounts

Variable life insurance directs cash value into separate investment accounts (subaccounts), subjecting it to market risk unlike whole life's guaranteed cash value.

An indexed universal life (IUL) policy credits interest based on which of the following?

Answer: Performance of a stock market index

IUL policies link interest credits to the performance of a stock market index (such as the S&P 500), subject to caps and floors.

A 20-pay whole life policy differs from a straight whole life policy in that the:

Answer: Premiums are paid over 20 years instead of for life

A 20-pay whole life policy requires premium payments for only 20 years while providing permanent coverage for the insured's entire life.

Which policy type is most appropriate for an individual who wants permanent coverage with the lowest initial premium outlay?

Answer: Whole life (straight life)

Straight whole life (ordinary whole life) spreads premiums over the insured's entire lifetime, producing the lowest annual premium among permanent policies.

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

Answer: The last surviving insured dies

A survivorship life policy insures two people and pays the death benefit only upon the death of the second (last surviving) insured.