chapter 3

Joint Life

A single policy that is designed to insure two or more lives.(more common in whole life

Decreasing Term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

Juvenile Life

Any life insurance written on the life of a minor.

Jumping Juvenile Policy

Automatically increases in face amount at a given age, usually 21, but the premium remains level.

financial strength of group

Because group insurance is costly to administer, the underwriter should consider whether or not the group has the financial resources to pay the policy premiums, and whether or not it will be able to renew the coverage.

what does "level" refer to in level term insurance

Face amount

FINRA

Financial Industry Regulatory Authority

Turnover of the group

From the underwriting perspective, a group should have a steady turnover: younger, lower-risk employees enter the group, and older, higher-risk employees leave.

Term Insurance

Life insurance coverage for a specified period of time, less expensive than whole

NASD

National Association of Securities Dealers

death Benefit options

Option A - Pays the face amount of the policy and provides a level death benefit. As the cash value increases, the company's risk decreases. A universal life policy must include an amount at risk. If the cash value approaches the face amount, the death benefit must increase so as to provide for this amount at risk. This minimum separation between the cash value and the death benefit is called the "risk corridor." This corridor of insurance is automatic and does not require insurability. This prevents the policy from maturing too early. •Option B - Pays the face amount stated in the contract which is level term, plus any cash values accumulated over the years. This provides for an increasing death benefit. The mortality charge for Option B is greater than Option A. Individuals purchasing Option A will benefit from larger cash value accumulations while individuals purchasing Option B will benefit from greater death benefits.

regulation of variable products

SEC,FINRA,State

SEC

Securities and Exchange Commission

Level Term Insurance

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.

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.

Index Universal Life

Universal Life policy with equity index as it's investment feature ,cash value is dependent on performance of equity index,flexible premium, adjustable death benefit,investment component(does NOT REQUIRE SECURITIES LICENSE)

contract interest rate

Usually 3 to 6%

cash value

a policy's savings element or living benefit

cash value

accumulation of premium equaled toface amount when insured reaches 100 ,paid to policyowner

premium rates on joint life policy determined how?

averaging the ages of both insured

Nonforteiture Values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

accumulate

build up

group insurance ,master contract is for the employer

certificates of insurance are for individuals insured

converting

changing from term to whole,cash value of adjustable Life only develops when premiums paid are more than cost of policy

Variable Life Insurance

combines many features of whole+flexible premium =securities versions universal life insurance

variable life insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

Single Premium Whole Life(SPWL)

designed to provide level death benefit to insureds age 100 for one time lump sum -generates immediate cash

Securities

financial instruments that may trade for value (for example, stocks, bonds, options)

joint life=

first to die

purpose of groups

group must be created for a purpose other than to obtain insurance

Policy maturity

in life policies, the time when the face value is paid out

Increasing Term

increases each year over duration of policy(ideal to handle inflation and cost living

Level Premium

level death benefit and level premium during policy term

3 basic types term coverage

level, increasing, decreasing

whole life insurance

life protection =can be cash value

2 types of universal premiums

minimum premium, target premium

what happens if insured skips a payment on universal life policy?

missing premium may be deducted from policy's cash value,the policy will NOT Lapse

current interest rate

not guaranteed in the contract but may be higher because of current market conditions

decreasing term

policy face amount decreases as the amount of debt is reduced

lapse

policy termination due to nonpayment of premium

Universal Life Insurance(flexible)

policyowner has flexibility to increase amount of premium paid into policy and to later decrease it again

Limited Payment

premiums for coverage will be completely paid-up well before age 100; the shorter the pay period, the higher the premium

Group Life Insurance

provides life insurance on a group of people in a single master contract,annually renewable term

Target Premium

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

survivorship life=

second to die(last survivor)

a domestic insurer issuing variable contracts must establish one ore more...what?

separate accounts

Adjustable Life

term and permanent can make adjustments as needed

what insurance provides the greatest amount of coverage?

term insurance (no cash value)

Minimum Premium

the amount needed to keep the policy in force for the current year

Face Amount

the amount of benefit stated in the life insurance policy

Death Benefit

the death benefit is guaranteed and also remains level for life

Attained Age

the insured's age at the time the policy is issued or renewed

Size of group

the larger the number of people in the group, the more accurate the projections of future loss experience will be

Level Premium

the premium that does not change throughout the life of a policy

annually renewable Term(ART)

the purest form of term insurance,guaranteed renewable without proof of insurability, premium increases with age

endow

to have the cash value of a whole life policy reach the contractual face amount

the policyowner is entitled to policy loans in whole life policy

true

the premiums are invested in the insurers general account in a variable product

true

variable while life vs. Variable universal

variable universal may or may not have a minimum death benefit, variable whole guarantees minimal death benefit

deferred

withheld or postponed until a specified time or event in the future

ordinary straight life

-Until 100 or Death, whichever comes first -Permanent Protection -Rates & benefits based on law of large numbers (Mortality Rate) -Guaranteed, tax-deferred interest rate -Premium level, company's risk goes down as cash value goes up -Insurer keeps the cash value if death to offset risk -Lowest net cost in long run -Client has access to cash through cash surrender or policy loan -Rates are per unit of protection (1,000 is 1 unit)---TEST -Cash value is guaranteed -Cash value will equal face amount at policy maturity

Universal Life policy has 2 components

1. insurance component=always annually renewable 2.cash amount

2 components that distinguish group from individual insurance

1.evidence of insurability is usually not required 2.participants under plan do not recieve a policy because they do not own or control it

Variable Life Insurancehas components

1.flexibke premium that can go up or down 2.+-amount of insurance 3.cash withdrawals or policy loans

2 types of interest rates for universal life policy are?

1.guranteed 2.current

characteristics of group plans

1.purpose of group 2.size of grouo 3.turnover of group 4.financial strength

agents selling variable Life insurance must have 3 things

1.registered with FINRA 2.Licensed by state to sell insurance 3.have received securities license

survivorship life(second to passaway)

:last survivor policy,based on joint age,pays on last death not first

straight life policy has what type of premium

A level annual premium for the life of the insured