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Michigan- Life Insurance Policies Exam Questions with correct Answers
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Michigan- Life Insurance Policies Exam Questions with correct Answers
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Michigan- Life Insurance Policies ExamQuestions with correct Answers
Term Life Insurance - Answer -is temporary protection because it only provides
coverage for a specific period of time. It is also known as pure life insurance. Term
policies provide for the greatest amount of coverage for the lowest premium as
compared to any other form of protection. There is usually a maximum age above which
coverage will not be offered or at which coverage cannot be renewed.
Pure Death Protection - Answer --If the insured dies during this term, the policy pays the
death benefit to the beneficiary;
-If the policy is canceled or expires prior to the insured's death, nothing is payable at the
end of the term;
-There is no cash value or other living benefits.
Reasons to Purchase Term Insurance - Answer -may be purchased for several different
reasons, it is most generally purchased to provide temporary coverage, a large amount
of coverage for a relatively small premium, or both. It would make little sense to
purchase permanent insurance to insure a short-term debt if that is all the coverage is
needed for.
What Term Insurance Offers - Answer -term insurance can provide a significant amount
of coverage for a relatively small outlay of premium, when compared to the premium
that is charged for a permanent form of insurance. Term insurance has been
instrumental in introducing young people to the habit of obtaining life insurance in order
to provide various forms of protection, mainly because of its affordability. Young
professionals who are just starting their practices and have not reached their earnings
potential may still have a need for a large amount of coverage. For them, term
insurance provides protection in the early years of their careers, until they can afford to
purchase some form of permanent insurance.
Level Term Insurance - Answer -is the most common type of temporary protection
purchased. The word level refers to the death benefit that does not change throughout
the life of the policy.
, Annually Renewable Term (ART) - Answer -is the purest form of term insurance. The
death benefit remains level (in that sense, it's a level term policy), and the policy may be
guaranteed to be renewable each year without proof of insurability, but the premium
increases annually according to the attained age, as the probability of death increases.
Level Premium Term - Answer -provides a level death benefit and a level premium
during the policy term. For example, a $100,000 10-year level term policy will provide a
$100,000 death benefit if the insured dies any time during the 10-year period. The
premium will remain level during the entire 10- year period. If the policy renews at the
end of the 10-year period, the premium will be based on the insured's attained age at
the time of renewal.
Permanent Life Insurance - Answer -is a general term used to refer to various forms of
life insurance policies that build cash value and remain in effect for the entire life of the
insured (or until age 100) as long as the premium is paid. The most common type of
permanent insurance is whole life.
Whole Life Insurance - Answer -provides lifetime protection, and includes a savings
element (or cash value). Whole life policies endow at the insured's age 100, which
means the cash value created by the accumulation of premium is scheduled to equal
the face amount of the policy at age 100. The policy premium is calculated assuming
that the policyowner will be paying the premium until that age. Premiums for whole life
policies usually are higher than for term insurance.
Key Characteristics of Whole Life Insurance- Level Premium - Answer -the premium for
whole life policies is based on the issue age; therefore, it remains the same throughout
the life of the policy.
Key Characteristics of Whole Life Insurance- Death Benefit - Answer -the death benefit
is guaranteed and also remains level for life.
Key Characteristics of Whole Life Insurance- Cash Value - Answer -created by the
accumulation of premium, is scheduled to equal the face amount of the policy when the
insured reaches age 100 (the policy maturity date), and is paid out to the policyowner.
(Remember: the insured and the policyowner do not have to be the same person.) Cash
values are credited to the policy on a regular basis and have a guaranteed interest rate.
Key Characteristics of Whole Life Insurance- Living benefits - Answer -the policyowner
can borrow against the cash value while the policy is in effect, or can receive the cash
value when the policy is surrendered. The cash value, also called nonforfeiture value,
does not usually accumulate until the third policy year and it grows tax deferred.
Whole Life Insurance Basic Forms - Answer -re straight whole life, limited-pay whole life
and single premium whole life; however, other forms and combination plans may also
be available.
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