Life Insurance Policies
What is single-pay whole life?
A whole life policy with a one-time premium and coverage provided until age 100 or death
What is straight life or continuous premium life?
Additional ways to describe ordinary whole life
What life insurance policy pays a benefit at the earlier of death or the end of a specified period?
An endowment
At what age is a whole life policy's cash value assumed to equal its death benefit?
At age 100
Why is whole life insurance more expensive than term insurance?
Because of the building up of cash value
What is attained or actual age conversion?
Conversion where new policy premiums are based on a person's current age.
What type of insurance policy is most often used as a mortgage redemption policy?
Decreasing term insurance
____ pay a living benefit at end of a set timeframe or a death benefit should death occur during that timeframe
Endowments
What WL product has a guaranteed minimum return and opportunity for CV growth based on the performance of a stock index?
Equity-Index whole Life
For how long will the premium on a 20-year level term policy remain level.
For 20 years
Does a term life policy have cash value?
No. Term life is pure insurance.
Which WL payment option would have the lowest overall premium over the policy life-- 10-pay, 20-pay, or single-pay?
Single-pay
What is the target premium?
The initial premium established to fund a UL policy
Who is the owner of a juvenile insurance policy?
The parent or legal guardian
Identify the acronym: VL
Variable Life
What is an unbundled premium?
When a UL life policyowner receives an annual statement breaking down all of the policy expenses and charges
Whole life is a combination of term protection and ____.
cash value
Premiums on a VL policy are ____.
fixed
The premium on a universal life policy may be ____.
flexible
A VL policy has a ____ minimum death benefit, but the cash value is ____.
guaranteed, not guaranteed
Whole life premiums remain ____ for the life of the policy.
level
The cash value of a whole life policy grows at a minimum interest rate ____% to ____%
3, 4
A jumping juvenile policy has a death benefit that increases to ____ times its stated value with no premium increase.
5
____ Life Insurance is purchased to protect a borrower if a lender dies and cannot repay a loan.
Credit
What type of policy protects the bank in the event a borrower dies?
Credit life
What are the advantages of term insurance?
It is initially less expensive than whole life, it may offset debts, and ensures insurability.
What is another name for a "First to Die" policy?
Joint Life
What are the two UL death benefit options?
Options A and B
What is cash value?
The equity that grows inside a permanent policy
Who assumes the investment risk in a traditional insurance contract?
The insurance company
Describe a Family Policy.
The policy provides whole life benefits on the breadwinner, with level term insurance on spouse and dependents.
True or False: A whole life policy never requires renewal.
True
True or False: Term insurance is temporary, but whole life is permanent.
True
True or False: A 20-year family income policy will pay for 7 years if insured dies 13 years after policy issue.
True. The policy will pay the 7 years of remaining benefit as it uses decreasing term insurance.
The cash value of a single premium whole life policy will equal the death benefit at age ____.
100
Name the policy that combines whole life insurance and a level term rider providing coverage on the breadwinner.
A Family Maintenance plan
Which policy pays a death benefit and concludes or ends on the death of any insured party listed on the contract?
A Joint Life policy
A 10-year level term policy provides coverage for ____ years.
10
How long will coverage be provided under a 10-pay whole life product?
Coverage will continue until death or age 100
What is another name for interest-sensitive whole life insurance?
Current assumption whole life
Describe an endowment.
Endowments have heavy cash savings, intended for future uses such as retirement or college funding.
What are loan option and cash surrender?
Methods available to the policyowner to obtain or access the policy's cash value
What are the disadvantages of term insurance?
Temporary protection, no cash value, premiums increase with each renewal (level term)
Which type of insurance provides temporary protection?
Term insurance
What is the renewability feature?
The ability to renew a term policy without having to provide evidence of insurability
Can the death benefit of a variable life policy increase over time?
Yes, assuming the underlying investments outperform expectations and increase in value.
A jumping juvenile policy may also be called ____.
juvenile life insurance.
A WL death benefit and premium both remain ____ for the life of the policy.
level
The death benefit and premium in a whole life contract are ____ throughout the owner's lifetime.
level
Decreasing term insurance has a ____ premium and a ____ death benefit.
level, decreasing
A level term policy has a ____ death benefit and premiums will increase at the ____ period.
level, next renewal
A VL policy has a ____ premium and a cash value that is ____.
level, not guaranteed
A 5-year level term policy will renew every 5 years subject to ____.
maximum age limitations
In a group credit policy, the bank is both the ____ and the ____.
policyowner, beneficiary
Straight life has a ____ and ____ premium.
predetermined, level
Cash value increases with every ____ payment after the ____ year.
premium, third
The death benefit of a term policy is payable only if death occurs during the ____ period.
term coverage
Cash value generally begins to build within a whole life policy sometime in the ____ year.
third
True or False: Upon death, the cash value is payable in addition to the whole life death benefit.
False
True or False: A 20-year family maintenance income policy pays for 5 years if insured dies 15 years after policy issues.
False. Regardless of the date of death, the policy will pay for 20 years since it uses level term insurance.
When converting policies, what must remain constant?
Generally, the death benefit must remain constant.
What whole life product has lower premiums that increase each year for the first 3 to 5 years of the policy?
Graded premium whole life
What whole life product has lower premiums for the first 3 to 5 years of the contract, with a one-time premium increase?
Modified premium whole life
What is another name for a Second or Last to Die policy?
Survivorship Life
Which policy pays a death benefit, but only after the last remaining policy insured dies?
Survivorship life
What policy combines whole life insurance and a decreasing term rider providing coverage on the breadwinner?
A Family Income policy
what two licenses are required to sell variable products?
A life insurance and FINRA license
What is 10-pay whole life?
A whole life policy with premiums paid for 10 years and coverage provided until age 100 or death
What happens at age 100?
Age 100 is the age at which many insurers calculate the policy's cash value as equal to its death benefit.
Which life policy has cash value gains that mirror or are tied to a stock market index, such as the S&P 500?
An Indexed Life Insurance policy
Name the ability to change from a term policy to a whole life policy without providing evidence of insurability?
Convertibility
True or False: Term insurance builds cash value.
False
As a client ages, what happens to her premium payments in a variable life policy?
Payments in a variable life policy remain fixed (level).
What does term insurance provide?
The maximum amount of protection with the lowest initial outlay of premiums
What policy combines variable life with flexible premiums?
Variable Universal Life
Which whole life payment option would have the highest annual premium - 10, 20, or 30 pay?
10 pay. The fewer the payments, the greater each payment must be for the policy to mature.
A 20-year endowment will mature at the end of ____ years.
20
Describe a whole life policy
A policy providing death benefit protection for life or to age 100, cash value, level death benefit, and level premium.
Describe an Adjustable Life Policy
A policy that offers the ability to change the death benefit based on a person's needs
What is original age or retroactive conversion?
A type of conversion that uses the age of the original policy purchase.
What nontraditional life insurance policy has a flexible death benefit and a rate of return that is interest-sensitive?
A universal life policy
Which life insurance policy has a crash value that is invested in securities and has the potential for greater growth?
A variable life policy
What life insurance policy uses dividends to purchase one-year term insurance to supplement a reducing death benefit?
Enhance ordinary or economatic life
What is policy equity?
The cash value in a whole life policy
What is predetermined in a whole life contract?
The death benefit, cash values, premiums, nonforfeiture and surrender values.
True or False: A universal life policy allows for partial withdraws of the cash value.
True
Does a variable life policy have a guaranteed minimum death benefit?
Yes. Regardless of account performance, the minimum DB is paid (typically, the initial DB listed on the policy's face)
The cash value and potential death benefit of a VL policy vary____.
daily
A VL contract has a guaranteed minimum ____.
death benefit
Decreasing term insurance has a ____ death benefit.
decreasing
Generally, credit insurance uses ____ term
decreasing
Most credit life policies utilize ____ term insurance and coverage may not exceed the ____.
decreasing, amount of the loan
The premium on an annually renewable level term policy increases ____.
each year.
Term insurance is described as ____ protection.
pure
What age is used to determine level term policy renewals?
Premiums are based on a person's actual age, and renewal premiums will increase.
Whole life premium rates are based on a rate per $____ of coverage.
1,000
What is a lump-sum premium?
Another name for single-pay whole life
At what age does a whole life policy mature?
At age 100
True or False: Regardless of cash value performance, VL policies have a guaranteed minimum death benefit.
True
Describe an Equity Index Life policy.
Usually a UL policy with cash value tied to an equity index account; offers a guaranteed minimum rate of return