Chapter 3: Life Insurance Policies
The group life policy can convert to any form of insurance issued by the insurer (usually whole life), except for:
term insurance
Face amount
the amount of benefit stated in the life insurance policy
Credit life insurance cannot pay out more than what?
the balance of the debt
Attained age
the insured's age at the time the policy is renewed or replaced
Level in level term insurance refers to the death benefit, which does _____ change
NOT
Term insurance is also known as
pure life insurance
Types of Eligible Groups
- Employer/Employee - Debtor Groups - Labor Union Groups - Trusts - Associations
A Straight Life Policy has what type of premium?
A level annual premium for the life of the insured
Group insurance is written as _______ term insurance
annually renewable
Deferred
withheld or postponed until a specified time or event in the future
When an employer pays all of the premiums, hte plan is referred to as:
a noncontributory plan
When converting from group life to individual life insurance, _____ is not required.
evidence of insurability
Another unique aspect of group underwriting is that the cost of coverage is based on what? (2 things)
the average age of the group and the ratio of men to women
purpose of the group
the group must be created for a purpose other than to obtain group insurance
Coverage under a group life insurance policy may be extended to insure the following dependents of the insured:
- the spouse and any child who is under the age of 19 or who is a dependent and a full-time student under 25 years of age - any other person in whom the insured group member has an insurable interest as may mutually be agreed upon by the insurer and the group policyholder
Debtor Groups
a policy issued to a a creditor or its parent holding company or to a trustee, trustees, or agent designated by two or more creditors, which are deemed to be the policyholder
Labor Union Groups
a policy issued to a labor union, or similar organization to insure members of the organization for the benefit of persons other than the union or organization
Cash value
a policy's savings element or living benefit
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
adjusted to the insured's age at the time of renewal
Premium rates on a joint life policy are determined by _______ the ages of both insureds.
averaging
Nonforfeiture values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
What are the two features that distinguish group insurance from individual insurance?
- Evidence of insurability is usually not required (unless an applicant is enrolling for coverage outside the normal enrollment period) - Participants (insureds) under the plan do not receive a policy because they do not own or control the policy.
What is true about variable products:
- policyowners bear the investment risk - the minimum death benefit is guaranteed - the cash value is not guaranteed
financial strength of the 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.
_____ insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.
Credit
Which policy component fluctutates depending on the policy type?
Death benefit
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.
What describes the coverage provided by term policies, as compared to any other form of protection?
Greatest amount of coverage
Conversion Privilege
If an. employee terminates membership in the insured group, the employee has the right to convert to an individual policy without proving insurability at a standard rate, Based on the individual's attained age.
When the premiums for group insurance are shared between the employer and employees, the plan is referred to as:
a contributory plan
If the insured dies during the conversion period...
a death benefit equal to the maximum amount of individual insurance which would have been issued must be paid by the group policy, whether or not the application for an individual policy was completed
Trusts
a group life policy may be issued to a credit union or to a trustee, or trustees or agent designated by two or more credit unions to insure members of such credit unions for the benefits of persons other than the policyholder
Term insurance has no _________
cash value
Variable life insurance products
contracts in which the cash value accumulate based upon a specific portfolio of stocks without guarantees of performance
Fixed life insurance products
contracts that offer guaranteed minimum or fixed benefits
In credit life insurance, the ___ is the beneficiary for the amount of benefit equal to the outstanding balance of the loan.
creditor
Term insurance provides _____ protection
death protection
Credit insurance is a special type of coverage written to insure the life of the debtor and pay of the balance of a loan in the event of the death of the _____
debtor
Credit life is usually written as:
decreasing term insurance, and it may be written as an individual policy or as a group plan
The amount of insurance on the life of a spouse, child, or other person may not:
exceed the amount of insurance for the insured group member.
Securities
financial instruments that may trade for value (for example, stocks, bonds, options)
Joint life = _____ to die Survivorship = ______ to die
first; second
Both Universal Life and Variable Universal Life have a
flexible premium
An employee has 31 days under the conversion privilege to convert to an _____ policy
individual
What are the 3 basic types of term life insurance?
level, increasing, and decreasing
Whole life insurance provides ______ (permanent) protection and accumulates ______
lifetime; cash value
In group insurance, the ____ contract is for the employer, and ______ of insurance are for individual insureds.
master; certificates
Lapse
policy termination due to nonpayment of premium
Regarding the length of coverage, all life insurance policies fall into 2 categories:
temporary and permanent protection
size of the 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 through the life of a policy
Employer/Employee
when a policy is issued to an employer, the employer or trustee will be the policyholder to insure employees of the employer for the benefit of persons other than the employer. A policy on which no part of the premium is paid by insured employees must insure all eligible employees, except those who reject such coverage in writing.
when would a whole life insurance policy mature?
when the insured dies or turns age 100, whichever is sooner
In a group life insurance policy, the employer may select all of the following:
- the amount of insurance - the premium payor - the type of insurance
All of the following statements are correct regarding credit life insurance:
- the amount of insurance permissible is limited per borrower - premiums are usually paid by the borrower - benefits are paid to the creditor
Which type of insurance policy would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?
Term insurance; It provides a death benefit only; cost per $1,000 of coverage is less than other types of policies that create cash values
what types of licenses do you need to sell variable products?
a life insurance producer license, and a securities license
Accumulate
build up
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a
convertible term policy
Characteristics of group plans:
- purpose of the group - size of the group - turnover of the group - financial strength of the group
In the event there is no beneficiary living at the time of death of insured person...
the maximum of $2,000 may be paid to any person showing evidence of incurred funeral or other expenses incident to the last illness or death of the insured person
Associations
a group life policy may be issued to an association whose principal purpose is to assist its members in financial planning for their funerals and burials as well as obtaining insurance for the payment, in whole or in part, for funeral, burial and other expenses. the policy may not be issued to an assoc. in which membership is conditioned upon the members designation at any time of a specific funeral director or cemetery as the beneficiary under the insurance, so as to deprive the representative or family of the deceased member from, or in any way control them in, obtaining funeral supplies and services in an open competitive market
Which of the following would be the beneficiary in credit life insurance?
creditor
A decreasing term policy's face amount decreases as the amount of ___ is reduced
debt
If an insured skips a premium payment on a universal life policy, the missing premium may be ____ from the policy's cash value. The policy will ____ lapse.
deducted; NOT
When an employee terminates coverage under a group insurance policy, coverage continues in force
for 31 days
Term policies provide for _____ amount of coverage for the ______ premium
greatest; lowest
There is no individual underwriting for what type of insurance?
group life insurance
Which of the following types of insurance policies is most commonly used in credit life insurance?
Decreasing Term
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
Decreasing term
Policy maturity
in life policies, the time when the face value is paid out
Endow
to have the cash value of a whole life policy reach the contractual face amount