Life Insurance Policies Exam FX

2 components of universal life policy

1. Insurance component 2. Cash Account

Build up

Accumulate

The group insurance is written as an ___ insurance

Annually renewable term

The insured's age at the time the policy is renewed or replaced

Attained age

A policy's savings element or living benefit

Cash Value

In variable universal life insurance, to what policy component does the term variable refer?

Cash Value and Death benefit

The ___ of an adjustable life policy only develops when the premiums paid are more than the cost of the policy.

Cash value

Changing a policy from term to whole life or vice versa

Converting

Guaranteed and also remains level for life

Death Benefit

A level premium and death benefit that decreases each year over the duration of the policy term.

Decreasing term

Withheld or Postponed until a specified time or event in the future

Deffered

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

Endow

What is the main advantage of converting from group life insurance to individual coverage?

Evidence of insurability not required

The amount of benefit stated in the life insurance policy

Face Amount

In group insurance the ___ is for the employer, and the ___ are for individual insureds.

Master contract Certificate of Insurance

Amount needed to keep policy in force for current year, creates annually renewable term product.

Minimum Premium

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

Nonforfeiture value

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

Policy Maturity

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Agents selling variable life insurance products must:

1. Be registered with FINRA 2. Licensed by state to sell life insurance 3. Received securities license

3 basic forms of whole life insurance

1. Continuous Premium (Straight Life) 2. Limited-pay 3. Single Premium

4 characteristics of whole life insurance

1. Level Premium 2. Death Benefit 3. Cash Value 4. Living Benefits

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years, what will the premium be?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

First to die =

Joint Life

Single policy that is designed to insure two or more lives.

Joint life (First-to-die)

___ has no cash value

Term

___ keep up with inflation and are determined by the value of securities backing it.

Variable annuities

What does level refer to in level term insurance?

Face amount

What are term insurance coverage based on?

How the face amount (death benefit changes)

Level premiums and a death benefit that increases each year over the duration of the policy term.

Increasing term

Group underwriting characteristics

1. Purpose or nature of the group 2. Size of the group 3. Turnover of group 4. Financial strength of group

3 basic types of term insurance coverage

1.Level 2.Increasing 3. Decreasing

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

Policyowner pays the premium from the time the policy is issued until insureds death or age 100. Lowest premium for whole life policies

Straight Life

Recommend 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.

Target Premium

What type of insurance policy offers pure death protection?

Term

What are the two types of universal life policy interest rates?

Guaranteed and Current

The cash value is dependent upon the performance of the equity index (ex: S&P 500), with a guaranteed min interest rate. Face amount increases with annually with inflation.

Indexed whole life

Policy termination due to nonpayment of premium

Lapse

Term insurance where the death benefit (face amount) does not change throughout the life of the policy.

Level

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

Level Premium

Coverage determined by how much coverage is needed and the affordable amount of the premium. As insured needs change the policyowner can make adjustments to the policy.

Adjustable Life

What elements of an adjustable life policy can be changed by the policyowner?

Amount Premium payment period Face Amount Protection Period

___ life insurance cannot pay out more than the balance of the debt.

Credit

Contracts that offer guaranteed minimum or fixed benefits

Fixed life insurance products

Policies that allow the policyowner to pay more or less than the planned premium.

Flexible Premium Policies

Flexibility to increase the amount of premium paid into the policy and to later decrease it again.

Flexible premium adjustable life

When converting from __ life to individual life insurance, evidence of insurability is not required.

Group life

Level death benefit and level premium during the policy term

Level Premium Term

Premiums for coverage will be completely paid up well before age 100. Usually within 20 years or by age 65

Limited-Pay

The premium of a survivorship policy compared with that of a joint life policy would be

Lower

Refer to various forms of life insurance policies that build cash value and remain in effect for the entire life on insured or until age 100 as long as premium is paid.

Permanent life insurance

What is the most common difference in different types of whole life policies?

Premium Payment mode

___ on a joint life policy are determined by averaging the age of both insureds

Premium rates

Insured may qualify for a discounted premium rate with proof of insurability during terms end.

Re-enty option

Life insurance is an increasing term insurance policy that paus an additional death benefit to the beneficiary equal to the amount of the premiums paid.

Return on Premium (ROP)

Financial instruments that may trade for value (Ex: stocks, bonds, options)

Securities

Provides a level death benefit to the insured for a one time lump-sum payment. Completely paid-up after one premium and generates immediate cash value.

Single Premium

___ insurance is temporary protections because it only provides coverage for a specific period of time. AKA Pure Insurance

Term

___ insurance provides the greatest amount of coverage for the lowest premium

Term

The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.

Universal Life - Option B

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Variable

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

Variable Life insurance products

Contracts where the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.

Variable Life or Annuities

An insurance type that combines whole life, universal life, and variable life

Variable universal life insurance

Provides lifetime protection, and includes a savings element/cash value.

Whole Life insurance

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. Doesn't usually accumulate until the third policy year and it grows tax deffered.

Living benefits

Cash value of policy is not guaranteed and fluctuates with portfolio performance in which premiums have been invested. Policyowner bears risk.

Variable Life/ Variable whole life

In Indexed whole life if the policyowner assumes the risk the policy premiums will___ with increases in face amount. If the insurer assumes the risk the premium ___.

Increases Remains level

Purest form of term insurance where death benefits remains level, but premium increases annually according to the attained age. * May be guaranteed to renew without insurability proof

Annually Renewable Term

The death protection component of Universal Life Insurance is expressed as what type of coverage?

Annually Renewable Term

How is joint life insurance premium determined?

Average age of both insureds

Contracts that offer guaranteed minimum or fixed benefits that are stated in the contract.

Fixed Life or Annuities

Second to die =

Survivorship life

If an insured skips a payment on an ___ life policy, the missing premium may be deducted from the policy's cash value. The policy will not lapse.

Universal

The death benefit remains level while the cash value gradually increases, consequently lowering pure insurance with the insurer for later years.

Universal Life - Option A