Life policies
Universal Life Insurance
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) life policy.
K's wife does at age 66
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT
Variable Universal Life Policy
Policy owner controls where the investment will go and selects the amount of premium pmts
Straight Life policy
Premiums are payable for as long as there is insurance coverage in force
Whole Life Insurance (permanent insurance)
Provides lifetime protection and includes savings element known as cash value. Endowment at age 100, and cash value created by the pmt of premiums is scheduled to equal the face amount of the policy at age 100. (Policies that remain in effect to age 100 as long as the premium is paid.)
Living Benefits
The policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. (Cash Value also know as Nonforfeiture values)
Consideration Clause
The policy owners promise to make premium pmts
AD&D
This following policy pays a benefit if the insured goes blind?
Decreasing Term
This policy may NOT have the Automatic Premium Loan provision attached to it?
Term Life
Type of insurance that gives the greatest amount of coverage for a limited period of time
Insuring clause
Is the insurance company's agreement and promise to pay the death benefit.
Modified Whole Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the sameWhat kind of policy is this?
level
K is looking to purchase Renewable Term insurance. What type of Term insurance may be renewable ?
Modified Whole Life
Level premiums for designated timeframe (typically 5 years); higher premiums thereafter
Key Characteristics of Whole Life Insurance
Level premiums, Level Death Benefit, Cash Value, & Living Benefits
Family Maintenance Policy
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of \$20, at the end of that 20 year period. What type of policy should P purchase ?
Special Features of Term Policy's
Renewable, Convertible, and Renewable/Convertible
Equity index insurance
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or riskWhich product would S be advised to purchase?
Child term rider
S is covered by a whole life policyWhich insurance product can cover his children?
Universal Life
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Entire Contract Provision
Stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract
3 Basic Types of Whole Life Insurance
Straight Whole Life, Limited Pay Whole Life, and Single Premium Whole Life
Level Term Insurance
Term insurance where the face value of policy remains the same from the date the policy is issued until the date the policy expires.
Increasing Term Insurance
Term life insurance in which the death benefit increases periodically over the policy's term. Usually purchased as a cost of living rider to a whole life policy. (See cost of living rider)
Rights of Ownership
The assignment provision specifies the policy owner's right to transfer ownership of the policy.
Level Death Benefit
The death benefit is guaranteed and remains level for the entire lifetime of the policy.
Premiums may be applied as a credit against income tax
The following actions is NOT possible with a Universal Life policy
Collateral Assignment
The policyowner temporarily assigns a life insurance policy to a creditor as collateral for a loan. (Once debt or loan is repaid, the rights are returned to the policy owner).
Increase face amount
This action require a policyowner to provide proof of insurability in an Adjustable Life policy?
Modified Whole Life
This insurance product does not require an agent to have proper FINRA securities registration in order to sell them.
Adjustable premiums, adjustable premium payment period, and combination of term and whole life insurances
characteristics of an Adjustable Life policy
Cash value
created by the accumulation of premiums is scheduled to equal the face amount of the policy when the insured reaches age 100.
Absolute Assignment
involves transferring all rights of ownership to another person or entity. (Permanent and total transfer of policy rights, and doesn't need to have insurance interest).
Term Life Insurance
temporary protection that lasts only for a specified period of time. if the insured dies during the specified timeframe, the policy pays the death benefit to the beneficiaries. Term policies provide the greatest amount of coverage for the lowest premiums. It is pure death protection
Decreasing Term Insurance
term insurance in which the annual premium remains constant but the face amount of the policy declines each year. Used when the amount of protection needs to decrease over a period of time.
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
Will lose many of its tax advantages
A policy that becomes a Modified Endowment Contract (MEC):
Expense charges
A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the earned, cost of insurance, and the
Change the policy's rate
A company that owns a life insurance policy on one of its key employees may not
Variable Universal Life policy
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
2 Types of Policy Assignment
Absolute Assignment Collateral Assignment
The premiums can be lowered or raised, based on investment performance
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT
Convertible
Allows policy owner the right to convert coverage to a permanent whole life insurance policy without evidence of insurability. (Premiums based on the insured's current attained age)
Renewable
Allows policy owner the right to renew coverage at the expiration date without evidence insurability.(premiums based only the insured's attained age).
Straight Whole Life
Also called Continuous Premium Whole Life, is basic whole life policy, where the policy owner pays a fixed premium for the time the policy is issued until the insured's death or age 100.
Term (decreasing)
What type of life insurance are credit polices issued as?
10 years
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. G were to die at age 50how long would G's family receive an income?
Without evidence of insurability
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew
Level premiums
Based on the age of the individual, when originally purchased. Premiums remain the same the entire life of the policy.
A Modified Endowment Contract (MEC) is best described as
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Limited Pay Whole Life
Unlike Straight life, limited pay life is designed so that the premiums for the coverage will be completely paid well before age 100. Most versions of limited pay life are 20 year pay. Whereby coverage is completely paid for in 20 years. Or life paid up at 65 whereby the coverage is completely paid up by the insured at age 65.
Universal life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Survivorship
What type of life policy covers two people and pays upon the death of the last insured?
Universal Life Policy
Which of the following Life insurance policies combine term insurance with an investment element?
Modified Whole Life
Which of these life products is NOT considered interest-sensitive?
Variable Life
Which of these types of life insurance allows the policyowner to have level premiums and to choose from a selection of investment options?
Variable Life
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling?
Standard Policy Provisions
While there is not a set standard of policy provision in life insurance, the standard policy provisions adopted by the (NAIC) National Association of Insurance Commissioners does create uniformity amongst life insurance policies.
Single Premium Whole Life
With single premium whole life a onetime lump sum payment is made, which will provide a level death benefit to the insured at age 100. The policy is completely paid up and will generate cash value immediately.