LOMA 281 Module 2
Indexed Universal Life (IUL) Insurance
A type of universal life insurance that offers certain principal value and earnings guarantees, but also offers the possibility of additional earnings by linking the cash value to a published index. Also called equity indexed universal life (EIUL) insurance.
last survivor life insurance
A variation of joint whole life insurance under which the policy benefit is paid only after both people insured by the policy have died. Also known as second-to-die life insurance.
Limited-Payment
A whole life insurance policy for which premiums are payable only for a stated period of time or until the insured's death, whichever occurs first.
Modified-premium whole life policy
A whole life insurance policy for which the annual premium amount changes after a specified initial period (typically 5 or 10 years).
Continuous
A whole life insurance policy under which premiums are payable until the death of the insured. Also known as straight life insurance or ordinary life insurance.
modified coverage whole life policy
A whole life insurance policy under which the amount of insurance provided decreases by specific percentages or amounts either when the insured reaches certain stated ages or at the end of stated time periods.
Select the type of policy based on the description. Choose all that apply. Death benefit can remain level or vary with changes to cash value a. UL b. IUL c. VL d. VUL
A, B, & D
Select the type of policy based on the description. Choose all that apply. Flexible premiums a. UL b. IUL c. VL d. VUL
A,B, & D
Select the type of policy based on the description. Choose all that apply. separate pricing factors a. ul b. IUL c. VL d. VUL
A,B, & D
A 5-year term life insurance policy that pays a $100,000 benefit during the policy's first year, a $105,000 benefit during the second year, and so on. The benefit during the fifth year is $120,000. Increasing term insurance Level term insurance Decreasing term insurance a. increasing term insurance b. level term insurance c. decreasing term insurance
A.
Assume Blythe Owens purchased a convertible term insurance policy instead of a renewable term policy. During the conversion period, Blythe's health declined to the point where she would no longer be considered insurable. Can Blythe convert her term policy to a cash value policy? a. Yes b. No c. Can't tell. Need more information.
A.
How do you think the annual premium for Carter's modified coverage policy would compare to the annual premium for a $250,000 traditional whole life policy? a. The premium would be less for the modified coverage policy b. The premium would be more for the modified coverage policy c. The premium would likely be the same for both policies
A.
Insurers sell an annuity product, which pays income to the contract owner in exchange for a premium. Do you think annuities are life insurance products according to U.S. regulations? a. yes b. no c. maybe
A.
immediate annuity
An annuity that provides periodic income payments that generally are scheduled to begin one annuity period after the date the contract is issued.
General Account
An investment account in which an insurer maintains funds that support its contractual obligations to pay benefits under its guaranteed insurance products, such as whole life insurance and other nonvariable products.
Separate account
An investment account the insurer maintains separately from its general account to isolate and help manage the funds placed in its variable products. Also known as a segregated account.
Which type of whole life insurance policy will best be able to give Arabella lifetime protection without straining her retirement income? Single-premium whole life policy Limited-payment whole life policy Continuous-premium whole life policy
B
When a term life insurance policy is CONVERTED, the amount of coverage can ... a. increase b. decrease c. remain the same
B & C
When a term life insurance policy is RENEWED, the amount of coverage under the policy can ... a. increase b. decrease c. remain the same
B & C
When a term life insurance policy is RENEWED, the coverage period can ... a. increase b. decrease c. remain the same
B & C
Select the type of policy based on the description. Choose all that apply. Death benefit varies according to investment perfomrance a. UL b. IUL c. VL d. VUL
C & D
Select the type of policy based on the description. Choose all that apply. Policy owner assumes investment risk a. UL b. IUL c. VL d. VUL
C & D
Conversion Period
The specified period of time following policy issue during which the owner of a convertible term life insurance policy can convert the coverage to cash value life insurance.
Flexibilty to his death benefit for UL
- An increase in face amount generally requires evidence of insurability, because it increases the insurer's risk on the policy. - A decrease in face amount requires verifying that the policy still qualifies as life insurance and not as an investment.
In the United States, a cash value policy offers certain tax advantages to the policyowner, who pays
- NO current income tax on interest or other earnings credited to the policy's cash value - NO income tax on funds borrowed from the cash value through a policy loan
Financial needs life insurance can meet
- paying household expenses - covering outstanding debts - Paying outstanding medical, hospital, and funeral expenses, - providing financial support for the family - funding a child's education
annuites can meet your needs if you want
- to accumulate assets over time - protection against financial risk - an asset distribution tool
A cash value life insurance policy provides insurance protection for the insured's entire lifetime. a. True b. False
A
Traditional Whole Life Insurance
A type of cash value life insurance that provides lifetime insurance coverage usually at a level premium rate that does not increase as the insured ages
Credit Life Insurance
A type of term life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid.
Securities
A certificate that represents either an ownership interest in a business (for example, a share of stock) or a debt owed by a business, government, or agency (for example, a bond).
annuity contract
A contract under which an insurer promises to make a series of periodic payments to a named individual in exchange for a premium or a series of premiums.
attained age conversion
A conversion of a term life insurance policy to a cash value life insurance policy in which the premium rate for the cash value policy is based on the insured's age at the time the policy is converted. Contrast with original age conversion.
Original age conversion
A conversion of a term life insurance policy to a cash value life insurance policy in which the premium rate for the cash value policy is based on the insured's age when the original term life insurance policy was issued. Contrast with attained age conversion.
Variable Life Insurance
A form of cash value life insurance in which premiums are fixed, but the death benefit and other values may vary, reflecting the performance of investment subaccounts that the policyowner selects.
Universal life (UL) Insurance
A form of cash value life insurance that is characterized by its flexible premiums, its flexible face amount and death benefit amount, and its separation of the three primary policy elements.
Return of Premium (ROP)
A form of term life insurance that provides a death benefit if the insured dies during the term of coverage and promises a return of premiums if the insured does not die during the term of coverage.
policy loan
A loan a policyowner receives from an insurer using the cash value of a life insurance policy as security.
Mortgage Insurance
A plan of decreasing term insurance designed to provide a benefit amount that corresponds to the decreasing amount owed on a mortgage loan.
Family Income Coverage
A plan of decreasing term life insurance that provides a stated monthly income benefit amount if the insured dies during the term of coverage.
joint whole life insurance
A plan of whole life insurance that has the same features and benefits as individual whole life insurance, except that it insures two people under the same policy; the death benefit is payable when the first insured dies.\ Also known as first-to-die life insurance.
The face amount of coverage changes at stated intervals; usually highest face amount in early policy years, and lowest face amount in later policy years. The premium amount remains the same. a. Modified coverage whole life insurance b. Last survivor life insurance c. Traditional whole life insurance d. Joint whole life insurance e. Modified premium whole life insurance
A.
What happens if Ethan fails to pay a renewal premium for his UL policy? a. The policy could remain in force b. The policy will lapse immediately for nonpayment of premium
A.
When a term life insurance policy is CONVERTED, the premium rate can ... a. increase b. decrease c. remain the same
A.
When a term life insurance policy is CONVERTED, the type of coverage .... a. changes b. remains the same
A.
When a term life insurance policy is CONVERTED,the coverage period can .. a. increase b. decrease c. remain the same
A.
When a term life insurance policy is RENEWED, the premium rate (for the same amount of coverage) can ... a. increase b. decrease c. remain the same
A.
Which type of whole life insurance policy will provide Ethan with a sizeable cash value immediately? a. Single-premium whole life policy b. Limited-payment whole life policy c. Continuous-premium whole life policy
A.
annuitant
The person whose lifetime is used to determine the amount of benefits payable under an annuity contract.
A 5-year term life insurance policy that provides a $100,000 death benefit if the insured dies at any time during the 5-year policy term. a. increasing term insurance b. level term insurance c. decreasing term insurance
B.
A cash value policy with a policy loan outstanding can't be surrendered. a. true b. false
B.
Caitlin Miller, age 35, purchased a $ 150,000 20-year return of premium (ROP) term insurance policy from the Karat insurance company. Ms. Miller paid annual premiums of $300. Ms. Miller paid all required premiums and was alive at the end of the 20-year term when the policy expired. This information indicates that a. Ms. miller's policy expired without Karat making any payment to anyone b. Karat paid $ 6,000 to Ms. miller c. Karat paid $ 150,000 to <s. Miller
B.
Carlos mendoza purchased a 250k insurance policy on his life that requires him to pay equal annual premium payments. If Mr. Mendoza keeps the policy in force by paying the annual renewal premiums, and if he dies anytime within 20 years after purchasing the policy, then the policy will provide a 250k death benefit. The policy provides no coverage beyond the 20 - year period, and Mr. Mendoza will not receive anything if he lives to the end of the policy term. This information indicates that the type of insurance policy Mr. Mendoza owns is a. an increasing term life insurance policy b. a level term life insurance policy c. a decreasing term life insurance policy d. an attained age conversion term life insurance policy
B.
Carter is considering purchasing either a traditional whole life insurance policy or a modified-premium whole life insurance policy. If the initial annual premium for both policies is $2,000, which policy do you think will provide Carter with the most life insurance coverage? a. The traditional whole life policy b. The modified-premium whole life policy c. Both policies will provide the same amount of coverage
B.
Dolly Varden purchased a new home and obtained a 30-year mortgage loan from the sanguine bank. To insure her mortgage loan. Dolly purchased from the Valiant Insurance Company a mortgage insurance policy that named her husband, William, as the beneficiary. The following statements are about this situation select the answer choice containing the correct statement. a. In the event of dolly's death, William is required to use the policy proceeds of the mortgage insurance policy to repay the mortgage loan b. the amount of the policy benefit payable at any given time under dolly's mortgage insurance policy generally equals the amount owed on the mortgage c. The sanguine bank is a party to the mortgage insurance contract that dolly purchased d. Valiant is a party to the mortgage loan contract that dolly obtained.
B.
If Michael names his wife as the policy beneficiary, does she have to use the policy proceeds to repay the mortgage loan? a. yes b. no
B.
If the contract owner names someone besides herself as annuitant or payee, are these other people parties to the contract? a. yes b. no
B.
If the variable policyowner's subaccount investments perform well, the policy's death benefit and cash value [increase / decrease]. If the subaccount's investments perform poorly, the death benefit and cash value [increase / decrease]. a. increase / increase b. increase / decrease c. decrease / increase d. decrease / decrease
B.
Insures two or more lives with one policy, for one premium. The death benefit is payable upon death of the last insured. a. Modified coverage whole life insurance b. Last survivor life insurance c. Traditional whole life insurance d. Joint whole life insurance e. Modified premium whole life insurance
B.
Suppose Blythe renews her $100,000 20-year renewable policy at the end of the policy term. Do you think the amount of coverage is automatically cut in half to $50,000? a. Yes b. No c. Can't tell. Need more information.
B.
Suppose Carter buys a renewable term insurance policy. Do you think he can renew the policy as many times as he wants? a. Yes b. No c. Can't tell. Need more information.
B.
The policyowner of a cash value life insurance policy can borrow against the policy by taking out a policy loan. Such a policy loan (does/does not) reduce policy values. Another option that the policyowner has is to elect to receive the policy's entire cash surrender value. In such a circumstance, the policy coverage (continues / terminates) a. does/continues b. does/terminates c. does not/continues d. does not/ terminates
B.
When Michael bought a house, he obtained a mortgage loan from the Archway Bank. He also bought a mortgage insurance policy from Able Life. Is Archway Bank a party to Michael's mortgage insurance contract with Able Life? a. yes b. no
B.
When a term life insurance policy is RENEWED, the type of coverage ... a. changes b. remains the same
B.
Which type of whole life insurance policy will best be able to give Arabella lifetime protection without straining her retirement income? a. Single-premium whole life policy b. Limited-payment whole life policy c. Continuous-premium whole life policy
B.
Mortality charges
The insurer periodically deducts from the cash value an amount to cover the mortality risk the insurer assumed by issuing the policy.
beneficiary
The party designated to receive the policy proceeds following the death of the insured. Also known as first beneficiary.
Decide whether the statements below describe increasing term insurance, level term insurance, or decreasing term insurance. A 5-year term life insurance policy that offers a death benefit of $50,000 for the first year of the policy term, $40,000 for the second year, and so on. The benefit for the fifth year is $10,000. a. Increasing Term Insurance b. Level Term Insurance c. Decreasing Term Insurance
C.
Gabriel Haredale purchased a whole life insurance policy that insures both him and his wife, Martha. The policy specifies that the death benefit will be paid only after both Gabriel and Martha have died. This information indicates that the type of insurance policy Gabriel purchased is a. family income coverage b. a joint whole life insurance policy c. a last survivor life insurance policy d. a first to die life insurance policy
C.
In comparing cash value life insurance coverage and term life insurance coverage, the following statments(s)can correctly be made: a. both cash value life insurance and term life insurance provide a savings element b. Cash value life insurnace provides coverage for the insured's lifetime, whereas term life insurance provides coverage for a specified term only a. both a and b b. a only c. b only d. neither a nor b
C.
Most basic type of cash value policy; level death benefit, level premium rate a. Modified coverage whole life insurance b. Last survivor life insurance c. Traditional whole life insurance d. Joint whole life insurance e. Modified premium whole life insurance
C.
Select the type of policy based on the description. Choose all that apply. Fixed Premiums a. UL b. IUL c. VL d. VUL
C.
The following statements are about credit life insurance and family income coverage. Select the answer choice containing the correct statement. a. The proceeds of a credit life insurance policy may be paid to a beneficiary other than the lender, or creditor, if the insured borrower dies during the policy's term. b. The amount of the benefit payable under a credit life insurance policy usually remains level over the duration of the loan c. Family income coverage provides a stated monthly income benefit amount to the beneficiary if the insured dies during the term of coverage d. Family income coverage is a plan of increasing term life insurance
C.
The following statements are about variable universal life (VUL) insurance in the US. Select the answer choice contain the correct statement a. most customer choose vul insurance polices for the guaranteed investment earrings provided by those polices b. the insurance company alone assumes the investment risk of a vul insurance policy c. vul insurance policyowners are allowed to invest part of their premiums in a fixed fund d. the death benefit provided by a vul insurance policy remains constant thought the life of the policy.
C.
Which type of whole life insurance policy will provide Kimiko with the most insurance coverage for the most affordable premium? a. Single-premium whole life policy b. Limited-payment whole life policy c. Continuous-premium whole life policy
C.
Who can Michael name as the beneficiary of his mortgage insurance policy? a. His Wife Only b. Archway Bank Only c. His Wife, Archway Bank, or Someone Else
C.
payee
The person or entity who receives the periodic income payments according to the terms of an annuity contract.
Variable Universal Life Insurance
Cash value life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance. Also called flexible-premium variable life insurance. - flexible premiums - choices regarding underlying investment accounts flexible death benefit
Convertible term life insurance policies contain features that allow the policyowner to convert the coverage to a cash value life insurance policy. In order to convert such a term life insurance policy, evidence of insurability (is/is not) required. due to potential antselection, insurers will typically charge (lower/higher) premiums for convertible polices than for comparable term polices that are not convertible. a. is/lower b. is/higher c. is not/lower d. is not/higher
D.
Geneva Watson purchased a $100,000 15-year renewable term insurance policy on her life. At the end of the 15-year term, the renewal provision is Ms. Watson's policy most likely gives her the right, within specified limits, to renew her insurance coverage. a. for a one-year term, but not for another 15- year term b. after first undergoing a required medical examination c. at the same premium rate she was charged for the original 15-year term policy d. Without having to submit evidence of her insurability
D.
Insures two lives with one policy, for one premium; death benefit payable upon the death of the first insured a. Modified coverage whole life insurance b. Last survivor life insurance c. Traditional whole life insurance d. Joint whole life insurance e. Modified premium whole life insurance
D.
contract owner
The person or other entity who owns and exercises all the rights and privileges of an annuity contract.
Smaller premium for an initial period, followed by a larger premium for the remainder of the insured's lifetime; death benefit remains the same a. Modified coverage whole life insurance b. Last survivor life insurance c. Traditional whole life insurance d. Joint whole life insurance e. Modified premium whole life insurance
E.
Single-Premium
For life insurance products, a form of premium payment in which one lump sum covers all of the financial considerations for the life of the contract; one-year term life insurance policies are purchased with a single premium.
section 7702 corridor
In the United States, the difference between an insurance policy's death benefit and the policy's cash value. This amount is used to determine whether the policy qualifies as a life insurance policy rather than an investment product under federal tax laws.
Term Life Insurance
Life insurance that provides a death benefit only if the insured dies during the period specified in the policy.
Cash value life insurance
Life insurance that provides insurance coverage throughout the insured's lifetime and provides a savings element, known as the cash value. Sometimes known as permanent life insurance.
subaccounts
One of several alternative pools of investments to which the owner of a variable life insurance policy or variable annuity allocates the premiums he has paid and the cash values that have accumulated under his policy. Also known as a variable subaccount.
Evidence of insurability
Proof that a given person is an insurable risk.
Renewable Term Insurance
Term life insurance that gives the policyowner the option to continue the policy's coverage at the end of the specified term without presenting evidence of insurability.
Convertible Term Insurance
Term life insurance that gives the policyowner the right to convert the term policy to a cash value life insurance policy without providing evidence of insurability.
Increasing Term Life Insurance
Term life insurance that provides a death benefit that starts at one amount and increases by some specified amount or percentage at stated intervals over the policy term.
Decreasing Term Life Insurance
Term life insurance that provides a policy benefit that decreases in amount over the term of coverage
level term life insurance
Term life insurance that provides a policy benefit that remains the same over the term of the policy.
Attained Age
The age an insured has reached (attained) on a specified date.
cash surrender value
The amount of the cash value that a policyowner is entitled to receive upon surrender of the policy.
expenses and fees
The insurer deducts stated expenses and fees from the cash value. Examples of deductions include: A percentage of each premium (such as 4%) to cover expenses Specific charges for policy withdrawals (deducted from the cash value)
Interest rate
The insurer invests a portion of each premium and credits interest from these investments to the policy's cash value. The insurer guarantees a certain minimum return and credits a higher interest rate if the investments perform well.
one true statement about universal life insurance policy is that
policyowner decides, within certain limits, what the policy's face amount will be, the amount of the death benefit payable, and the amount of premiums he will pay for that coverage