Chapter 3- Life Insurance Policies
Be registered with FINRA Be licensed by the state Have received a securities license
Agents selling variable life insurance products must:
Increasing Death Benefit Option
Annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases
Equity Indexed Whole Life
Cash value is dependent upon the performance of the equity index, such as S&P 500 Guaranteed minimum interest rate
Providing evidence of insurability
Death benefit can be increased by
Annually renewable term
Least expensive first year premium
Modified Life
Lower premium (first 3-5 years) Higher premium after that For people just starting out Level at beginning then increases
Level Term Insurance
Most common type of temporary protection
Annually Renewable Term
The purest form of term insurance Death benefit remains level Policy may be guaranteed to be renewable each year without proof of insurability Premium increases annually according to the attained age and as probability of death increases
15, 5
A producer taking an application for a universal life insurance policy must provide a statement of policy information for the applicant in a form approved by the Commissioner, must be delivered within ___ working days after application is submitted and sooner than ___ days before the policy is delivered
Target Premium
A recommended amount that should be paid on a policy in order to cover the cost of insurance
Option B
Annual increase in cash value so that the death benefit increases each year by the amount the cash value increases ------------------------Collect Both cash and death benefit upon death of the insured
Current Assumption Life
Another name for interest sensitive whole life insurance
Variable Contracts
Any domestic insurer issuing ________ must establish one or more separate accounts (stocks/bonds)
Adjustable Life
Best of both term and permanent coverage Can increase/decrease the premium Change period Option of whole life or not Fixed rate of return Can borrow cash value
Universal Life (Flexible Premium Adjustable Life)
Can adjust premium Permanent Can borrow cash value Can skip a payment as long as there is sufficient cash value Interest sensitive (3-6%) Insurance component (renewable) and a cash account Level/Increasing Death Benefit Option
Level Death Benefit Option
Death benefit remains level while the cash value increases, lowering the pure insurance
Death Benefit
Guaranteed and also remains for life
Interest Sensitive Whole Life (Current Assumption)
Guaranteed death benefit at age 100 Minimum guaranteed rate of interest
31 days
How long does an employee have to find a new insurance policy after leaving a group policy while still being covered
Require evidence of insurability
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
Variable Life
Permanent Insurance Premium fixed (if whole), flexible (if universal) Can increase or decrease premium Cash value not guaranteed, separate account Can borrow cash value
Level Premium Term
Provides a level death benefit and a level premium
Whole Life Insurance
Provides lifetime protection Includes a savings element (cash value) Higher premium/ stops at age 100
Level
Refers to the death benefit that does not change throughout the life of the policy
State and Federal Government
Variable life insurance products are dually regulated by the __________
Group's medical history
What is not considered in a group insurance plan?
Group Life Insurance
Written as annually renewable term insurance Issued to a sponsoring organization Insured do not own or control the policy Employer-employee Can convert to individual insurance Based on ratio of men and women Evidence of insurability is not required
5 years of being on the plan
You can convert from group to individual insurance after
Cash Value
Created by the accumulation of the premium Is scheduled to equal the face amount of the policy when the insured reaches age 100 and is paid out to the policyowner
Single Premium Whole Life
Designed to provide a level death benefit to the insured's age 100 for a one-time, lump-sum payment Policy is completely paid up after one premium and generates immediate cash
Limited Pay Whole Life
Premiums paid up before 100 LP-65 (Paid by age 65) Cash value builds up faster due to higher premium
Graded Premium Whole Life
Premiums start low and level off in future Starts with premium 50% or lower than straight life Premium increases for 5-10 years then becomes level
Term (Pure) Insurance
Temporary protection because it only provides coverage for a specific period of time Greatest amount of coverage for the lowest premium Pure death protection, no cash value
Minimum Premium
The amount needed to keep the policy in force
Straight Whole Life (continuous premium)
The basic whole life policy Lowest annual premium Pay till death or age 100 Level Premium
Option A
The death benefit remains level while cash increases lowering pure insurance-----------------Corridor or gap between cash value and death benefit
Living Benefits
The policyowner 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 (nonforfeiture) does not accumulate until the third policy year and it grows tax deferred
Level Premium
The premium for whole life policies is based on the issue age; therefore it remains the same throughout the life of the policy
Permanent
When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually
In Variable Contracts
___________ the policyowner bears the investment risk
