Life Insurance

Understand the main difference between a Policy Option and a Policy Rider, Policy Option is simply a choice that the

policy owner is given of several different options which have to be selected

how are premiums handle in the Variations in a Whole Life Policy: Limited Pay Policies?

premiums are paid for a shorter time

The contingent or secondary beneficiary receives benefits after the

primary

Juvenile Life policies provides?

provide term or permanent coverage from birth until 15 or 16) The adult is the owner

ENDOWMENTS POLICIES PROVIDE ?

provided guaranteed cash growth and a tax sheltered investment tool, popular in the 1970s and early 1980s, when interest rates were high

Cash Surrender- surrenders the value and pays the cash value in a lump sum to the policy owner if the policy owner has not selected an option the

Extended Term is used

For example that income ending date is 20 years from now then there is a 20 year decreasing term writer attached to the policy if the insured dies in 10 years there will only be 10 years remaining in income payments before the income ends.

Family Income Policy is featured with a date in the future that will be the ending date of income should the insured died at any point between now and that date.

Group Life is owned and sponsored by the?

Group such as an employer, association or labor union.

This form of life insurance provides with permanent life insurance for the coverage of the insured

Whole Life Insurance

A Surrender is slightly different, it surrenders a portion of policy coverage causing a proportionate reduction in the

death benefit

Non-Contributory groups Life Insurance is?

in which the employer pays all of it and it must cover 100% of all eligible members

The difference between the Family Income Policy and the Family Maintenance Policy

So a FIP pays a policy to a specific date while a FMP maintains a level amount of income for a specified period of time whenever death occurs

Family Maintenance Policy is similar to Family Income Policy but provides?

instead of decreasing term and the term portion of the death benefit begins when the insured dies

The Common Disaster Provision allows for the life insurance proceeds to pass the contingent beneficiary if the primary beneficiary does not survive the insured for a minimum period of time which can be

30 days or more depending on the state

Four main types of Flexible Whole Life Policies:

Adjustable Life Insurance Universal Life Insurance Variable Universal Life Insurance Equity Index Life Insurance

LIFE INSURANCE OPTIONS AND RIDERS POLICY NONFORFEITURE OPTIONS

All Permanent Life Insurance Policies provide a living benefit or in other words a cash value if the policy owner fails to keep the policy in force

Family Income Policy and the Family Maintenance Policy both featured?

Both features a permanent life policy and a term life insurance policy on the other side as a writer that provides for income in the event of the insured death. But that Term Insurance Writer is design for one purpose to provide a stream of income to the survivors

Nonforfeiture options do not required an additional premium, there are three Nonforfeiture options

Cash Surrender Extended Term- Reduced paid-up insurance

Family Income Policy combines?

Combines Whole Life with Decreasing Term- the term period proportion of the term benefit begins when the contract is issued.

When the primary beneficiary and the insured die in the same accident and it is unclear who die first those dictating who gets the proceeds the

Common Disaster Provision directs that the beneficiary is presumed to have died first

Premiums for GLI can be?

Contributory or Non-Contributory

THE 6 TYPES OF SPECIALIZED LIFE INSURANCE POLICIES ARE?

Joint Life or first to die policies Survivorship or Second to Die policies Juvenile Life policies Family Life Policies Family Income Policy Family Maintenance Policy

The 3 primary types of Term Life Insurance are?

Level, Increasing and Decreasing

The Variations in a Whole Life Policy are?

Limited Pay Policies, Limited Pay Policies, Modified Premium Policies, Graded Premium Policies, Determinate Premium Policy, Interest-sensitive and current assumption policy

POLICY RIDERS PROVISIONS OPTIONS AND EXCLUSIONS Based on

NNIA model laws

to qualify for a Group Life Insurance the group must be a ?

Natural Group; cannot have a group that just calls themselves a group for the need of life insurance

So if when you look at a Option 1 (decreasing term life insurance, option 2 is?

Option 2 (Level Term Life Insurance).

How does a term life insurance pay a death benefit?

Pays a death benefit if and only if the insured dies during the policies term.

in Group Life Insurance the creditor is the?

Policy Owner and beneficiary

TERM LIFE INSURANCE PROVIDES

Provides temporary protection

How is Term life insurance purchased?

Purchased as stand alone coverage or as a rider in an existing policy

During the provision process it is Important benefit is the ability to designate the Beneficiary Design by weather the beneficiary is

Revocable or Irrevocable

For the most part an owner would want to name the beneficiary as

Revocable which means that the owner has the right to change that beneficiary designation without the beneficiaries permission

What is the difference between the Term Life and Permanent Life Insurance?

Term life has no Cash Value as in Permanent life insurance, the difference between the two is like Renting a house vs Owning a house

For example may it provide a stream of income for 20 years whenever death occurs, assuming the death occurs in the next 20 years, if the insured dies in 10 or 19 years or any year within those 20 years then the insured will receive payments for the next 20 years

The Family Maintenance Policy in the other hand has a Level Term Write

the difference between the Family Income Policy and the Family Maintenance Policy

The difference is that a Family Income Policy is based on a Decreasing Term Writer where as a Family Maintenance Policy uses a Level Term Writer. FIP Decreasing Term means that as time goes on there will be less and less money available to provide a stream of income while a FMP with a Level Term writer is going to provide the same amount of money whenever death occurs to provide a stream of income.

LIFE INSURANCE POLICY BENEFICIARIES

The primary beneficiary is first in line to receive the benefits

What term life insurance provides extra features? What is the extra feature?

a convertible term policy can be converted into permanent protection without having to undergo additional underwriting

if the insured's age or sex is found to be misstated in the application the insurer

address the amount of premium or the death benefit base on the correct age and sex even after the policy has become incontestable

A Policy Rider in the other hand is a truly optional features that cost a little extra money but to the policyowners view point its worth the money because it

adds value to the policy

the Incontestability clause states that

after a policy has been in force for a set time period the insured cannot contest the claim for any reason except for non payment of premiums

A policy owner can remove an Irrevocable beneficiary if that beneficiary

agrees to be removed

1984 Federal Legislature discourage the use of endowments policies because?

all endowments after 1986 no longer had tax deferred cash growth, that is why they no longer are popular today

understand beneficiaries; can be changed from time to time

and the beneficiary has no rights to the policy until the death of the insured

A Revocable beneficiary can be removed from the policy owner at

any time

POLICY EXCLUSIONS AND PROHIBITIONS are created to protect the insured from policy misused and from

assuming too much risk

Group Underwriting does not look at Individuals risk but look?

at the collective body of the organization

Important points; Anyone or anything can be designated as a beneficiary this is important to know that there does not need to be an insurable interest between the

beneficiary and the insured

With a Per Capita designation benefits are paid to the named

beneficiary only

Beneficiaries can also be designated according to how proceeds will be paid out and a Per Stirpes designation where

benefits are paid to the beneficiaries children if the named beneficiary dies

People used endowments to?

build cash quickly and to pay a living benefit by a specific date long before age 100

When a UL is purchased the additional money goes to?

build the cash value which actually has a result of increasing the death benefit because the Level Minimum amount at risk with the additional cash value going on top of it yields an Increasing death benefit

To designate the beneficiary as Irrevocable beneficiary effectively takes away one of the rights of the policy ownership which is again the ability to

change the beneficiary, the owner cannot change even to sign the policy to somebody else without that beneficiary's permission

Exclusions are typically made for perils of war, aviation as a crew member, hazardous occupations and hobbies, as well as

commission of a felony

The primary beneficiary must be diseased or removed for a

contingent to be able to receive the benefits

Family Life Policies covers?

cover the entire family under a single premium and are useful to provide income to the family if the primary income provider die

A Withdraw from a policy's cash value permanently reduces the cash value and death benefit on a

dollar for dollar basis

So UL Option 2; if option 1 effectively has a Decreasing Term policy underlying that is Decreasing amount at Risk. option 2 is?

effectively has a level term policy underlying it or literally it has a level amount at risk throughout the life of the contract.

in Group Life Insurance Underwriting is performed under the?

entire group not individually

One thing that it must be considered with backdating is that backdating back to 6 months the insurance company is

entitled for that premium during that period

Its important to know the process of backdating which is

establishing an effective date of the policy that is prior to the signing of the application

If a policy premium is not paid by its due date or during the grace period the reinstatement provision gives

guidance on how the policy owner can put the last policy back in force

They do that for what we call Living Benefit which is

if insured is alive and the policy is in force and you withdraw that money is presumably for some kind of a living purpose as supposed to a death benefit

Minimum Participation Requirement of Noncontributory and Contributory are ?

if the group is Noncontributory meaning that the group pays the premium the 100% of the participants must participate in the plan. If the group is Contributory then at least 75% must participate in the plan. With these regulations companies are protected against Extreme Adverse Selection

The cash value equals the face amount when the insured reaches the highest age in the current mortality table, usually 100

in Permanent Whole Life Insurance

Reduced paid-up insurance-uses the cash value to buy a Paid Up Policy of the same type of the last policy but one that is based on the

insured currents age

An individual must survive the

insured to qualify for the benefits

Joint Life or first to die policies insures?

insures two or more people under the same policy, only one premium is required and the death benefit is paid when the first insured dies

This basic Whole Life Policy called Ordinary or straight life insurance has what type of level premiums and face amount?

it has level premiums and provides face amount

Survivorship or Second to Die policies insured's?

it insured more than one person but the death benefit is paid when the second insured dies

POLICY LOAN AND WITHDRAWAL PROVISIONS are

living benefits available for policyowners of Permanent Life Insurance, these are ways can use a cash value and a policy through Loans, Surrenders and Withdrawals.

how are premiums handle in the Variations in a Whole Life Policy: Graded Premium Policy?

lower initial premiums then gradually increased to a higher level

how are premiums handle in the Variations in a Whole Life Policy: Modified Premium Policy?

lower premiums are paid first then increased to a higher level

So the applicant needs to understand that will be some additional premium needed up front to cover that mandated period but once issued the policy will have a premium that is

one year less in amount you might say than otherwise

In Whole Life premiums are paid

paid until the insured dies or reaches 100

One exclusion refers specifically to suicide, if the insured commits suicide within the first two years the insurer will not pay the death benefit, however after the suicide exclusion period ends the insurer must

pay the death benefit even suicide is the cause of death

The insuring clause states the company's promise to

pay the policy's face amount (death benefit) to the named beneficiary if the insured dies while the policy is in force.

GROUP LIFE INSURANCE covers many unrelated?

people under one policy

GLI is subject to many stipulations under the NAIC monolog, for example each person insured must ?

received a certificate of coverage, must be able to designate a beneficiary and must assign the death benefit, individuals must be able to convert the coverage to individual coverage when they leave the group

most companies allow for a policy to be backdated for up to 6 months; the purpose is simply to

reduce the issue age of the policy by one year

how are premiums handle in the Variations in a Whole Life Policy: Interest- sensitive and Current Assumption Policies?

similar policies with different guarantees

An example is the Nonforfeiture option meaning that the cash value is always an asset to the policy owner and if the policy surrenders the cash value is payable to the policy owner. The company does not dictate how the money is going to be given away, it gives several options to receive them, they can take it as a Cash Payment,

slect an Extended Term, or select a Reduce Paid Up option

But companies are not entirely defenseless against Adverse Selection which is the?

tendency for those who are uninsurable or those who need insurance to be more incline to try to seek coverage

how is coverage and face amount handle in Increasing Term means?

the coverage is level but the coverages face amount increases as the term progresses

what is the face amount and how are premiums handle in Level Term insurance?

the face amount and the premiums are level and coverage is usually renewable and convertible

The difference between Universal Life and Whole Life is?

the flexibility. Where Whole Life is a bundle package where the mortality charge and the interest credit and the expense charge are all bundle together. With Universal Life Insurance all those charges are unbundle and can be handle in various separate ways

in Decreasing Terms Life Insurance how are the premiums, face amount, and convertibility?

the premiums are level but the policies face amount decreases as the face amount progresses also coverage is usually convertible but is not renewable

A great benefit of Group Life Insurance is that?

those who normally could not qualify for individual life insurance can qualify under a Group Life insurance

All policies have a free look provision which specifies the

time granted to the policy owner to review and decide weather to keep the policy

Life insurance as property, as such that they have the right to

time granted to the policy owner to review and decide weather to keep the policy

Contributory groups Life Insurance is?

where the employer and employee each contribute to the premium payment and it must cover at least 75% of its members

Flexible Whole Life Policies type; Universal Life Insurance is?

which allows the policy owner to raised the lower premiums, pay no premium, and raise or lower the death benefit

Flexible Whole Life Policies type; Adjustable Life Insurance is?

which can be manipulated function like term, ordinary or limited pay based on the interaction of premium, cash value and death benefit

how are premiums handle in the Variations in a Whole Life Policy: In-terminate Premium?

which have fluctuated interest rate

Flexible Whole Life Policies type; Variable Universal Life Insurance is?

which is a dual security insurance product that combines the best aspects of universal life such as premium and death benefits disability with the investment potential of Variable Life. It gives the policy owner the greatest control over premiums, death benefits and the cash values

how are premiums handle in the Variations in a Whole Life Policy:Variable Life Policy?

which is just like basic whole life except that the policy owner bears the investment risk

how are premiums handle in the Variations in a Whole Life Policy: Indexed Policies?

which ties a death benefit to the consumer price index

Flexible Whole Life Policies type; Equity Index Life Insurance is?

which ties cash value growth to an equity index instead of to a specific interest rate

A really popular featured with any type of Permanent Life Insurance; that is any type of policy that has cash value, is the ability for the policy owner to access that cash value while the insurer is alive, that is

while the policy is in force

As part of ownership rights in a policy owners can borrow an amount of cash in a policy up to a certain percentage of the cash surrender value. If there is a prior Loan on the policy it will

will reduce the cash surrender value interest is also charged on the policy loan