Certification- Types of Life Policies

agents selling variable life insurance must: (3)

1. Be registered with FINRA 2. have a securities license 3. be licensed by the state to sell life insurance

variable universal life insurance, like universal life itself, has the following features and characteristics: (3)

1. a flexible premium that can be increased, decreased, or skipped as long as there is enough value in the policy to fund the death benefit 2. increasing and decreasing the amount of insurance 3. cash withdrawals or policy loans

Interest sensitive whole-life 1. the insurer sets the initial premium based on... 2. if the actual values change, the company will...

1. current assumptions about risk, interest, and expense 2. lower or raise the premium at designated intervals

a fixed annuity provides the following features: (3)

1. guaranteed rate of interest to be credited to the purchase of payments 2. income (annuity) payments that do not vary from one payment to the next 3. the insurance company guarantees the specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant

Term insurance provides what is known as "pure death protection" which means that... (3)

1. if the insured dies during this term, the policy pays the death benefit to the beneficiary 2. if the policy is cancelled or expires prior to the insured's death, nothing is payable at the end of the term 3. there is no cash value or any living benefits

As the insured's needs change, the policy owner can make adjustments in his or her policy. Typically, the policymaker has the following options: (3)

1. increase or decrease the premium or the premium-paying period 2. increase or decrease the face amount 3. change the period of protection

the annuity income amount is based upon the following: (4)

1. the amount of premium paid or cash value accumulated 2. the frequency of the payment 3. the interest rate 4. the annuitants age and gender

the target premium is...

a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

joint life is

a single policy that is designed to insure two or more lives

annuities are not life insurance, but rather...

a vehicle for the accumulation of money and the liquidation of an estate

under option B, the death benefit includes the __________________________ so that the death benefit gradually increases each year by _________________________________________.

annual increase in cash value the amount that the cash value increases

straight life will have the lowest _______ ___________.

annual premium

survivorship life

basically the same as joint life, but the death benefit is paid upon the second death only

Single premium whole life (SPWL) is designed to...

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.

In whole life policies, the premium is __________, assuming that....

calculated the policy owner will be paying the premium until that age

adjustable life premium:

can be increased or decreased by policy owners

adjustable life key features

can be term or whole life; can convert from one to the other

adjustable life policy loans:

can borrow cash value

universal life policy loans:

can borrow cash value

variable life policy loans:

can borrow cash value

variable face amount:

can increase or decrease to a stated minimum

annuities also purchased for help funding

college tuition

variable universal life insurance is a type of insurance that...

combines many features of the whole life with the flexible premium of universal life and the investment component of variable life, making it a securities version of the universal life insurance.

The convertible provision provides the policy owner with the right to _______ the policy to a ___________ insurance policy without evidence of insurability. The premium will be based on the insured's attained age at the time of __________.

convert permanent conversion

The renewable provision allows the policy owner the right to renew the _________ at the ______________ _____ without ____________ ___ _________________.

coverage expiration date evidence of insurability

the interest-sensitive whole life, aka ______ __________ life, is...

current assumption a whole life insurance policy that provides a guaranteed death benefit to age 100.

interest sensitive whole life policies credit the cash value with the ________________________ that is usually comparable to ________________________, and can be higher than _______________________.

current interest rate money market rates the guaranteed levels

under option A, the ________ _________ remains level while the _____ ________ gradually increases, thereby lowering the _____ _______ with the insurer in the later years.

death benefit cash value pure insurance

unlike universal life, most of the investment vehicles in variable universal life policies...

do not guarantee return

Variable life insurance products are ______ ___________ by the state and federal government.

dually regulated

Indexed life: the policy's _______________ increases annually to keep pace with inflation without requiring evidence of insurability.

face amount

variable life premium:

fixed (if whole life); flexible (if universal life)

like traditional forms of life insurance, variable life policies have...

fixed premiums and a guaranteed minimum death benefit

adjustable life cash value:

fixed rate of return; general account

Universal life insurance is also known as

flexible premium adjustable life

universal life premium:

flexible; minimum or target

adjustable life face amount:

flexible; set by policy owner with proof of insurability

universal life face amount:

flexible; set by policy owner with proof of insurability

Term policies provide the _________ amount of coverage for the _________ premium as compared to any other form of protection.

greatest lowest

universal life cash value:

guaranteed at a minimum level ; general account

Premiums for whole life policies usually are _________ than for term insurance

higher

Return of premium life insurance is an ____________ ______ insurance policy that pays an additional _______ _________ to the ____________ equal to the amount of the premiums paid.

increasing term death benefit beneficiary

a universal life policy has two components: an _______ _________ and a _____ _________. The insurance (death protection) component of a universal life policy is always ________ ____________ _____ ____________.

insurance component cash account annually renewable term insurance

There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term, they are:

level increasing decreasing

what are four key characteristics of whole life insurance

level premium death benefit cash value living benefits

periodic payment annuities can be either level premium- or flexible premium-

level premium- annuitant/owner pays a fixed installment flexible premium- the amount and frequency of each installment varies

variable life insurance is a...

level, fixed premium, investment based product

Whole life insurance provides __________ ___________. and includes a ________ _________ (or cash value).

lifetime protection savings element

the basic function of an annuity is that of

liquidating a principle sum, regardless of how it was accumulated

For term insurance, there is usually a _______ ____ above which coverage will not be offered or at which coverage cannot be renewed

maximum age

decreasing term coverage is commonly purchased to ensure the payment of a _____________ or _______________ if the insured dies prematurely.

mortgage or other debts

the cash value of a variable life policy is...

not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

variable cash value

not guaranteed; separate account

survivorship life is a policy that is often used to...

offset the liability of the estate tax upon the death of the last insured

what are the two death benefit options for Universal life

option A- level death benefit option B- increasing death benefit

an annuity protects a person from...

outliving his or her money

the three parties of an annuity

owner- purchases the annuity contract annuitant- receives benefits or payments from the annuity beneficiary- receives annuity assets if the annuitant dies during the accumulation period

Joint life death benefit is...

paid upon the first death only

the annuity period, aka the _____________, is...

pay out or liquidation period the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant. It may last for the lifetime of the annuitant

the accumulation period, aka the ____________, is...

pay-in period the period of time over which the owner makes payments into an annuity

variable life key features:

permanent insurance

universal life key features:

permanent insurance with renewable term protection component

the ___________ bears the investment risk in variable contracts

policy owner

All other factors being equal, limited pay policy has a shorter _______-__________ ____________ than straight life insurance, so the _______ __________ will be higher.

premium-paying period annual premium

Term insurance is also known as

pure life insurance

annually renewable term (ART) is the purest form of term insurance. The death benefit remains level (in that sense, its a level term policy), 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

annuities are purchased, for the most part, to provide or supplement ___________________.

retirement income

Due to the element of investment risk, the federal government has declared that variable contracts are ______, and are thus regulated by the _________________________, and the __________________________, formerly known as the National Association of Securities Dealers

securities Securities and Exchange Commission (SEC) Financial Industry Regulatory Authority (FINRA)

in variable life insurance, the assets of the contract are held in a ___________ ________, which invests in stocks, bonds, and other securities investment options.

separate account

two payment options for annuities

single premium- (one-time lump-sum payment) periodic payments

annuities are also used to provide what is known as ______

structured settlements

Term insurance is __________ protection because it only provides coverage for a specific period of time.

temporary

an adjustable life policy can assume the form of either ________ insurance or _________ insurance.

term permanent

The policy owner also has the option of converting from ______ to ________ or vise versa. However, increases in the _____ ________ or changing to a lower ______ type of policy will usually require proof of insurability.

term whole-life death benefit premium

a disadvantage to fixed annuities is...

that the purchasing power that they afford may be eroded over time due to inflation.

the minimum premium is...

the amount needed to keep the policy in force for the current year. Paying the minimum premium will make the policy perform as an annually renewable term product.

"Whole life policies endow at age 100" explain this

the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100.

The main feature of indexed whole life insurance is that...

the cash value is dependent upon the performance of the equity index

explain "cash value" in regards to whole life insurance

the cash value, 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 policy owner. (remember the insured and the policy owner don't have to be the same person). *****Cash values are credited to the policy on a regular basis and have a guaranteed interest rate*****

explain "death benefit" in regards to whole life insurance

the death benefit is guaranteed and also remains level for life

Since the premium can be adjusted in universal life insurance, the insurance companies may give the policy owner a choice to pay either of the two types of premiums:

the minimum premium the target premium

level term insurance is... The word "level" refers to what?

the 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

explain "living benefits" in regards to whole life insurance

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. The cash value, aka nonforfeiture value, does not usually accumulate until the third policy year and it grows tax deferred.

describe universal life insurance

the policy owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again.

Straight life aka ordinary life or continuous premium whole life is the basic whole life policy where...

the policy owner pays the premium from the time the policy is issued to the insured's death or age 100.

explain "level premium" in regards to whole life insurance

the premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy

limited pay whole life is designed so that...

the premiums for coverage will be completely paid up well before age 100.

Although adjustable life policies contain most of the common features of other whole life policies, the cash value of an adjustable life policy only develops when...

the premiums paid are more than the cost of the policy

the annuitization date is...

the time when the annuity benefit payouts begin.

in universal life insurance, the policy owner may skip paying a premium and the policy will not lapse as long as...

there is sufficient cash value at the time to cover the monthly deductions for cost of insurance

universal life option A- "statutory definition of life insurance"

there must be a specified "corridor" or gap maintained between the cash value and the death benefit in a life insurance policy

Permanent life insurance is a general term used to refer to...

various forms of life insurance policies that BUILD CASH VALUE and remain in affect for the entire life of the insured (or until age 100) as long as the premium is paid.

the most common type of permanent insurance is..

whole life

level benefit payment amount

with fixed annuities, the annuitant knows the exact amount of each payment received from the annuity during the annuity period

an annuity is...

a contract that provides income for a specified period of years, or for life.

a variable annuity serves as...

a hedge against inflation and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity

Joint life premium is based on

a joint average age that is between the ages of the insureds

level premium term, as the name implies, provides...

a level death benefit and a level premium during the policy term

decreasing term policies feature...

a level premium and a death benefit that decreases every year over the duration of the policy term

Regardless of the type of term insurance purchased, the ___________ is level throughout the term of the policy; only the amount of the ______ ________ may fluctuate, depending on the type of term insurance. Upon selling, renewing, or converting the term policy, the premium is figured at _________ ____ (the insured's age at the time of transaction).

Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy; only the amount of the death benefit may fluctuate, depending on the type of term insurance. Upon selling, renewing, or converting the term policy, the premium is figured at attained age (the insured's age at the time of transaction).