Chapter 12 Life Insurance Policies

Sarah will receive $100,000 from the policy. The Joint Life policy covers both Arnold and Sarah, and in the event of Arnold's death, the policy pays out the death benefit to the surviving spouse, which in this case is Sarah. Therefore, Sarah will receive the full amount of the policy, which is $100,000.

Decreasing term is known as Mortgage Protection because it is a type of life insurance policy that is designed to cover a decreasing amount of debt, such as a mortgage, over a specific period of time. As the policyholder pays off the debt, the coverage amount decreases accordingly. This type of policy is commonly used to ensure that if the policyholder dies before the debt is fully paid off, the remaining balance will be covered, protecting the family or beneficiaries from financial burden.

A family policy is a type of insurance that covers the entire family under a single contract. This means that all members of the family, including the spouse and children, are included in the coverage. It provides financial protection to the entire family in case of any unfortunate event. This type of insurance is beneficial as it simplifies the insurance process by consolidating coverage for all family members into one policy.

Variable Universal Life is the correct answer because it offers all three key features that the insured wants. It allows for flexible premium payments, provides death benefits, and gives the insured the choice of how the cash value will be invested. This type of policy allows the insured to allocate their premium payments into various investment options, such as stocks, bonds, or mutual funds, giving them the potential to earn higher returns on their policy's cash value.

Limited Pay Whole Life insurance would be the right policy for this client. This policy provides both protection and savings as it offers lifelong coverage and accumulates cash value over time. The client is willing to pay premiums until retirement, and with Limited Pay Whole Life insurance, the premiums are paid for a limited period, such as 10, 15, or 20 years, after which the coverage remains in force for the client's entire life. This policy ensures that the client has protection throughout their lifetime and also builds cash value that can be accessed if needed.

A Universal Life insurance policy has two types of interest rates: guaranteed and current. The guaranteed interest rate is the minimum rate of return that the policyholder will receive, regardless of market conditions. The current interest rate, on the other hand, is determined by the insurance company based on market performance and can fluctuate over time. These two rates provide policyholders with different options for earning returns on their policy's cash value.

Universal Life policies do not typically have a cash value account at a guaranteed interest rate and endowment insurance. This means that the statement "The policy has a cash value account at a guaranteed interest rate and endowment insurance" is not a characteristic of a Universal Life policy.