Types of Policies
According to consumer guidance, when is cash value insurance likely to be more cost effective than term?
Answer and explanation
Answer: B. The NAIC Life Insurance Buyer's Guide explains that term insurance provides lower cost coverage for a specific period, and that where coverage is wanted for a longer period, such as for a lifetime, cash value insurance may be more cost effective. The other situations point toward term.Source: NAIC — Life Insurance Buyer's Guide — Buyer's Guide page 5, Term vs cash value
More types of policies questions
- An annuitant wants lifetime income but also wants payments guaranteed for at least 15 years if death occurs early. Which payout basis addresses both goals?
- An annuity buyer wants to select investment subaccounts and accepts that poor performance could reduce contract value below contributions. Which annuity is the direct match?
- An annuity owner wants income payments for as long as the owner lives, without adding a spouse or a minimum payment period. Which payout basis matches that request?
- An equity-indexed policy has an 80% participation rate and a 10% cap. If the underlying index grows by 15% in a policy year, what interest rate is credited?
- An indexed universal life policy's referenced index has a negative result for the crediting period. Which contract feature should the owner examine to determine the lowest credited rate?
- An individual purchases a life insurance policy that provides coverage for exactly one year. At the end of the year, the policyowner can renew the coverage without proving insurability, but the premium will increase based on their attained age. What type of policy is this?
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