Alabama Life Health Insurance Exam Term Insurance verified answer Temporary protection because it only provides coverage for a specific period of time Also known as pure life insurance Term insurance provides what is known as verified answer pure death protection Term insurance provides the greatest amount of coverage for the verified answer lowest premium Term insurance has no verified answer cash value Three basic types of term coverage available based on how the face amount death benefit changes during the policy term verified answer 1 Level 2 Increasing 3 Decreasing Level term insurance verified answer 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 Level in level term insurance refers to the which does NOT change verified answer death benefit Annually Renewable Term ART verified answer the purest form of term insurance The death benefit remains level 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 verified answer provides a level death benefit and a level premium during the policy term Increasing term verified answer features level premiums and a death benefit that increases each year over the duration of the policy term Decreasing Term verified answer policies feature a level premium and a death benefit that decreases each year over the duration of the policy term Nonrenewable Renewable Provision verified answer allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability Convertible Provision verified answer provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability Re entry Option verified answer An option that gives the insured the opportunity for a discounted premium rate with proof of insurability Permanent Life Insurance verified answer 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 as long as the premium is paid Most common type of permanent insurance verified answer Whole Life Whole Life Insurance verified answer provides lifetime protection and includes a savings element or cash value Premiums for whole life policies usually are higher than for verified answer term insurance Level Premium verified answer The premium for whole life policies is based on the issue age therefore it remains the same throughout the life of the policy Death Benefit verified answer the death benefit is guaranteed and also remains level for life Cash Value verified 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 Living Benefits verified 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 provides lifetime permanent protection and accumulates cash value verified answer Whole life insurance 3 basic forms of whole life insurance verified answer 1 Straight whole life 2 Limited pay whole life 3 Single premium whole life Straight Life Ordinary Life Continuous Premium Whole Life verified answer basic whole life policy Policyowner pays the premium from the time the policy is issued until the insured s death or age 100 Of the common whole life policies will have the lowest annual premium verified answer straight life Limited Pay Whole Life verified answer Designed so that the premiums for coverage will be completely paid up well before age 100 Single Premium Whole Life SPWL verified answer Designed to provide a level death benefit to the insured s age 100 for a one time lump sum payment The policy is completely paid up after one premium and generates immediate cash Modified Whole Life verified answer type of whole life insurance that charges a lower premiums similar to term rates in the first few policy years usually the first 3 5 years and then a higher premium for the remainder of the insureds life The higher subsequent premium is higher than a straight life premium would be for the same age and amount of coverage For individuals that are just starting out with low fin means but will eventually grow in future Graded Premium Whole Life verified answer similar to modified life in that premiums start out relatively low and then level off at a point in the future Typically starts with a premium that is around 50 or lower than the premium of a straight life policy Premium then gradually increases each year for a period of usually 5 or 10 years then remains level thereafter Term Life Characteristics verified answer Temporary Level Premiums No living benefits Level increasing decreasing death benefits Whole Life Characteristics verified answer Permanent until age 100 Level Premiums Level Death Benefits Cash Values Policy Loans Nonforfeiture values Premiums are not verified answer tax deductible Cash value exceeding premiums paid verified answer Taxable at surrender Policy Loans are not verified answer income taxable Policy Dividends are not verified answer taxable Dividend Interest are verified answer taxable in the year earned Lump sum death benefit are verified answer not income taxable Taxes must be paid either upon contribution or upon distribution verified answer NOT both Endowment Insurance verified answer a type of insurance that pays the face value of the policy to beneficiaries if the insured dies before the endowment period ends Pure Endowments verified answer contracts that promise to pay a specific amount only if the contract holder survives the endowment period Pure endowment contracts have been under the laws of some states for many years verified answer illegal Endowment Period verified answer Period specified in an endowment policy during which if the insured dies the beneficiary receives a death benefit If the insured is still living at the end of the endowment period the insured receives the endowment as a living benefit Endowment Policy is an verified answer investment instrument What is the primary difference between a whole life policy and an endowment verified answer An endowment matures at an earlier age 7 Pay Test verified answer if premiums paid during the first 7