Life Insurance Policies

Level Premium Term

provides a level death benefit and a level premium during the policy term

Universal life offers 2 death benefits

Option A and Option B

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Option B

3 basic types of term coverage

level, increasing, decreasing

Whole life insurance provides:

lifetime (permanent) protection and accumulates cash value

Straight life has the ________ annual premium

lowest

If the group is large enough there are generally no:

medical questions

Single Premium Whole Life

one-time lump sum premium payment to provide a level death benefit to the maturity of the policy. Single premium policies generate immediate cash value due to the size of the lump sum premium payment.

The creditor is the ________ and _______ of the policy

owner and beneficiary

Variable Universal Life

product that blends many features of whole life, universal life, and variable life. Key features are premium flexibility, cash value investment control, and death benefit flexibility.

Agents selling variable life insurance products must:

1. Be registered with FIRNA 2. Be licensed by the state to sell life insurance 3. Have received a securities license

In an adjustable life policy, the Policyowner has the following options:

1. Increase or decrease the premium or premium paying period 2. Increase or decrease face amount 3. Change the period of protection

Juvenile Life

"jumping juvenile" premium remains level, face amount increases at predetermined age, often 21

Option A

(Level Death Benefit option), the death benefit remains level while the cash value gradually increases. There must be a specified corridor or gap maintained between the cash value and the death benefit in a life insurance policy.

Key Characteristics of whole life insurance

1. Level Premium 2. Death Benefit- Guaranteed and remains level for life 3. Cash Value- to equal face amount of the policy when insured reaches age 100 4. Living Benefits- Policyowner can borrow against cash value while the policy is in effect, or receive it when policy is surrendered. Does not accumulate until 3rd policy year and grows tax deferred.

Since the premium can be adjusted, the insurance companies may give the policy owner a choice to pay either of the two types of premiums:

1. Minimum Premium: Amount needed to keep policy in force for the year. 2. Target premium: Recommended amount to be paid on a policy to keep in force for a lifetime

Characteristics of group health plans

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

3 basic forms of whole life insurance

1. straight whole life 2. limited pay whole life 3. single premium whole life

If any individual insured is not notified of the right to an individual policy within _____ days, the insured will be granted an additional period within which to exercise that right.

15

The employee has a period of _____ days to convert from group policy to individual policy after being terminated

31

If the master contract is terminated, every individual who has been on the plan for at least ___ will be allowed to convert to individual permanent insurance of the same coverage.

5 years

Regarding taxation, how does the cash value of a universal life policy accumulate?

Tax deferred

Decreasing Term

Term life insurance in which the face amount of the policy decreases over time in scheduled steps. Most often used to cover a debt obligation (mortgage).

What policy provides the greatest amount of coverage for the lowest premium?

Term policies

Who must approve each policy before it can be delivered or issued for delivery?

The director

Limited Pay Whole Life

specifies a set number of years during which the policy-owner must pay premiums. After premium is paid up, the policy remains in force for the insureds lifetime. Limited pay policies have higher premiums than straight life policies because the premium payment period is condensed. (20 pay whole life or life paid up at 65)

Term insurance

temporary life insurance protection for a specified period of time; sometimes called pure life insurance

The cash value of an adjustable life policy only develops when?

the premiums paid are more than the cost of the policy

Annually Renewable Term

the purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.

Underlying assets of a variable account must be kept in:

a separate account

A domestic insurer issuing variable contracts must establish one or more

Separate accounts

A domestic insurer can not change the investment policy of a separate account without first filing the change with _____________. That change will become effective _____ days after it was filed.

The Director/60

Group insurance is written as

annually renewable term insurance

the insurance component of a universal life policy is always

annually renewable term insurance

Credit life insurance cannot pay out more than the balance of the

debt

Joint Life (First to Die)

Whole life policy that is written to cover 2 or more lives. The death benefit is paid upon the first insured to die. Can be term or perm coverage.

Is a decreasing term policy convertible?

Yes

Variable Whole Life

A life insurance policy which contains cash values that vary according to its investment performance of stocks. These policies have a level fixed premium and a guaranteed minimum death benefit.

Flexible Premium

A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.

Credit Life Insurance

A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.

Indexed Whole Life

A whole life insurance policy whose death benefit increases according to the rate of inflation. Such policies are usually tied to the Consumer Price Index (CPI).

Straight Whole Life

Also called Continuous Premium Whole Life, is a basic whole life policy, where the policy owner pays a fixed premium for the time the policy is issued until the insured's death or age 100.

Adjustable Life Insurance

Combines features of both term and perm (whole) life coverage with the length of coverage and amount of accumulated cash value as the adjustable factors. Premiums may be increased or decreased to fit the specific needs. Such adjustments are not retroactive and apply only to the future.

"Level" in level term insurance refers to what?

Death benefit (face amount)

Credit life is usually written as

Decreasing term insurance

Premiums for whole life insurance are _______ than term

Higher

Option B

Increasing death benefit option; 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

Who does credit life insurance insure?

It insures the life of a debtor

To sell variable life insurance policies, an agent must receive all of the following EXCEPT

SEC registration

In variable whole life policies, is the cash value guaranteed?

No, it fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

Is decreasing term insurance renewable?

No, since the death benefit is $0 at the end of the policy term.

Universal Life Insurance

Policy owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again. May even skip a payment and policy will not lapse as long as there is sufficient cash value at the time.

Who bears the investment risk in a variable contract?

Policyowner

Indexed whole life policies are classified based off of if the Policyowner or insurer accepts the inflation risk

Policyowner: The policy premiums increase with the increases in the face amount Insurer: the premium remains level

Term policies provide

Pure death protection

Re-entry option

The insured, upon the end of a term policy with guaranteed renewable option, may qualify for a discounted premium rate with proof of insurability.

Level Term Insurance

The most common type of temporary protection purchased.

Who regulates variable life insurance products?

The state and the federal government

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

What is the most common type of permanent insurance?

Whole life

Pure Death Protection

if insured dies during term, the policy pays death benefit, no cash value or other living benefits

A universal life policy has 2 components:

insurance component and cash account

Survivorship Life (Second to die)

similar to joint life except benefit isn't paid 'til last death; lower premium than joint life; often used to offset the liability of the estate tax upon death of 2nd spouse