Life Insurance and Annuities Flashcard

Front

What is a key feature of an Ordinary Whole Life policy?

Back

Cash value grows at a fixed rate

Answer explanation

A key feature of an Ordinary Whole Life policy is that the cash value grows at a fixed rate, providing a stable investment component. This distinguishes it from other options where premiums may increase or benefits decrease.

Front

Which type of life insurance policy allows for flexible premiums and adjustable death benefits?

Back

Universal Life

Answer explanation

Universal Life insurance offers flexible premiums and adjustable death benefits, making it distinct from other types like Decreasing Term or Ordinary Whole Life, which have fixed structures.

Front

In a Variable Whole Life policy, what determines the cash value and death benefit?

Back

Investment performance

Answer explanation

In a Variable Whole Life policy, the cash value and death benefit are primarily influenced by investment performance, as the policyholder's premiums are invested in various options, affecting the overall value.

Front

What is a characteristic of a Limited Pay Life policy?

Back

Premiums are paid up in a shorter period

Answer explanation

A Limited Pay Life policy requires premiums to be paid over a shorter period, unlike whole life policies where premiums are paid for the entire life of the policyholder. This allows for coverage to be in place without lifelong payments.

Front

Which type of term life insurance policy has a death benefit that decreases over time?

Back

Decreasing Term

Answer explanation

The correct choice is Decreasing Term, as this type of term life insurance policy features a death benefit that decreases over time, unlike Level Term which remains constant.

Front

What is the main advantage of a Return of Premium (ROP) Term policy?

Back

Refund of premiums if the insured outlives the term

Answer explanation

The main advantage of a Return of Premium (ROP) Term policy is that it refunds the premiums paid if the insured outlives the term, providing a financial safety net unlike standard term policies.

Front

How does an Indexed Life policy credit interest to the cash value?

Back

Based on the performance of a market index

Answer explanation

An Indexed Life policy credits interest based on the performance of a market index, allowing the cash value to grow in relation to market trends, rather than through fixed rates or direct stock investments.

Front

What is a feature of an Annually Renewable Term (ART) policy?

Back

Coverage is renewable annually without proof of insurability

Answer explanation

A feature of an Annually Renewable Term (ART) policy is that coverage is renewable annually without proof of insurability, allowing policyholders to maintain their coverage without needing to requalify for insurance.

Front

Which type of annuity starts payouts within 12 months of purchase?

Back

Immediate Annuity

Answer explanation

An Immediate Annuity begins payouts within 12 months of purchase, providing immediate income. In contrast, Deferred, Variable, and Indexed Annuities delay payouts beyond this timeframe.

Front

What is the primary purpose of a Survivorship Life policy?

Back

To pay estate taxes after both insured individuals have passed

Answer explanation

The primary purpose of a Survivorship Life policy is to provide funds to pay estate taxes after both insured individuals have passed, ensuring that the estate can be settled without financial burden.