Chapter 5: Flexible Feature Life Policies

Adjustable Life policies

-Can be Term or Whole -Premium Flexible -Death benefit is flexible -Cash Value growth rate is guaranteed (when functioning as Whole Life)

Universal Life policies

-Premium is flexible (minimum, target, or skip) -Death benefit is flexible -Cash value growth rate is interest-sensitive -Death Benefit is ART to 95

Variable Whole Life policies

-The premium is fixed -Death benefit is flexible, but with a minimum guarantee -Cash value growth rate is not guaranteed -are Whole life contracts

Variable Universal Life policies

-The premium is flexible (minimum or target) -Death benefit is flexible -Cash Value growth rate not guaranteed -Death benefit which is ART to 95

1. Amount of protection 2. Amount of affordable premium 3. Period of coverage

3 choices in any life insurance purchase

Variable Whole Life

A variation of Whole Life; both have fixed premiums, permanent protection, and guaranteed death benefit; BUT these have a minimum guaranteed death benefit, no guarantee of cash value, and separate account choices for the policyowner.

Universal Life

Addressed flexibility and return issues by allowing itself to be treated more like a Term or a Whole Life, depending on the amount of premiums, and whether it accumulates Cash Value

Universal Life

Allows the Policyowner to increase, decrease, or even skip a premium payment (flexible premium)

Variable Universal Life

Allows the owner to direct investments within the framework of a UL policy; flexible premium, adjustable death benefit, separate account choices

1. Option A: A level death benefit (made up of increasing cash values and decreasing Term insurance) 2. Option B: An increasing death benefit (made up of increasing cash values and Level Term insurance)

At the time of application in a Universal Life policy, the policyowner has two options concerning the death benefit :

Yes, with proof of insurability

Can the Death Benefit be raised in a Universal Life policy?

Interest Sensitive Whole Life

Coverage provides flexible premiums based on changing interest rates. The company can adjust the premium or cash value growth rate or face amount to reflect their actual experiences in the marketplace.

Option B, increasing death benefit option

In Option ___, the policy pays the death benefit PLUS the cash value

General Account

In a typical policy, the insurer's investment account for premiums has been called the:

Securities license

In addition to a Life Insurance license, the agent must also possess a ___________ license to sell Variable Life products

Insurance Corridor

Insurer raises the death benefit, keeping the relationship between Cash Value and Death Benefit within bounds. Prevents policy from becoming a MEC

Adjustable Life

Life insurance which permits changes between Term and Whole Life as needed

Cash Value grows disproportionately large compared to insurance protection

The IRS can declare the contract to be a MEC if the:

Mortality costs and Operating expenses

The two monthly deductions from the cash value fund:

Variable Products

These are a whole different ballgame than the rest of your insurance product line.

Safety Guarantees Risk

Three key words to remember when dealing with Variable Products:

"Unbundled"

Universal Life is considered "_________," since the protection, the cash value, and the operating expenses are all separate.

Target Premium

Universal premium that gives both protection and Cash Value--basically Whole Life insurance

Minimum Premium

Universal premium that gives protection, but no equity--basically Term Insurance

Securities contracts

Variable Life and Variable UL are considered _________ contracts as well as insurance contracts, since the policyowner assumes the premium investment risk.

Option B Universal Life

Which death benefit option breaks the normal rule by paying out the death benefit PLUS the cash value?

Variable

With ____________ products, the policyowner directs the investment of premium into separate accounts

Interest-Sensitive Whole Life

With this sort of Life Insurance, there's a minimum guarantee on the growth of cash value, but if the company's investment does better, so do you. There's a floor, but no ceiling.

Variable Whole Life

addressed rate of return problems by allowing the policyowner to control the investment vehicle of the Cash Value