Ch. 5 L&H Troy

Which of the following proposed insureds would be most suitable for a Variable Universal Life policy? - A 40 year old who wants life insurance to pay off the mortgage in case of death. - A 55 year old truck driver not willing to assume any market risks. - A 30 year old professional with a professional spouse and two children. - A 65 year old retired office worker.

- A 30 year old professional with a professional spouse and two children.

An Adjustable Life policy allows for the policyowner to do all of the following EXCEPT - choose the investment vehicle - choose the period of protection. - set the premium. - choose the face amount.

- choose the investment vehicle

All of the following statements about Universal Life are true EXCEPT - It can be described as Renewable Term insurance with a separate cash value fund. - Growth of cash value that exceeds the guaranteed interest rate is taxed as current income. - The death benefit is adjustable. - Premiums are flexible.

Growth of cash value that exceeds the guaranteed interest rate is taxed as current income.

Universal Life policies:

Have a flexible premium...minimum or target • A flexible death benefit • A cash value growth rate which is interest sensitive • A death benefit which is Annually Renewable Term to 95

Which of the following policies requires a Life license and a Securities license? -Adjustable Life -Interest Sensitive Whole Life -Universal Life -Variable Life

Variable Life

At any time, the policyowner can:

increase/decrease face amount increase/decrease premium amount of payment period lengthen or reduce protection period

Adjustable Life policies:

• Can be Term or Whole Life • The premium is flexible • The death benefit is flexible (within limits) • And when functioning as Whole Life, the cash value growth rate is guaranteed

Variable Universal Life policies:

• Have a flexible premium...minimum or target • A flexible death benefit • A cash value growth rate which is not guaranteed • A death benefit which is Annually Renewable Term to 95

A Variable Universal Life policyowner can be assured that the contract will remain in force as long as - the target premium is paid within the grace period - cash value is sufficient to meet each month's deductions. - premiums are paid according to the fixed schedule. - the cash value is undisturbed

- cash value is sufficient to meet each month's deductions.

Variable Whole Life policies differ from Whole Life policies in that: - investments match the insurer's contractual guarantees and liabilities. - the insurer assumes the premium investment risk. - premiums are invested in the insurer's general account. - cash values are not guaranteed.

- cash values are not guaranteed.

All of the following statements about Universal Life are true EXCEPT A. the policyowner has the right to increase or decrease the policy's death benefit. B. the mortality costs and operating expenses are deducted from the cash value fund each month. C. the policyowner has the right to increase or decrease the interest rate credited to the cash value fund. D. as long as the cash value fund is sufficient to pay for the cost of insurance and operating expenses, the policy remains in force, whether or not premiums are paid.

C. the policyowner has the right to increase or decrease the interest rate credited to the cash value fund.

-based on insurer's actual experience compared to expected experience -contract allows the company to establish long term guarantees - initial premium for set # of years, then premium can be adjusted

Current Assumption Whole Life (interest sensitive whole life)

Variable Whole Life policies:

Have a premium which is fixed • A flexible death benefit but with a minimum guarantee • A cash value growth rate which is not guaranteed • Are, as the name implies, Whole Life contracts

C is 25 years old. She wants to take advantage of variable interest rates and to vary her premium payments throughout the year. Which policy would you recommend? - Joint Life - 30 Year Level Term - Whole Life - Variable Universal Life

Variable Universal Life

All of the following are guaranteed with Variable Life EXCEPT the - period of protection. - cash value - death benefit - premium

cash value