Types of Life policies

Variable Life

Key features: Permanent insurance Premium: Fixed (if whole life); flexible (if Universal Life) Face Amount: can increase or decrease to a stated minimum Cash Value: Not guaranteed: separate account Policy Loans: Can borrow cash value

What is the prerec for group insurance

In order to qualify for small group life insurance, a group must be formed for a purpose other than attaining life insurance.

Which of the following policies would be classified as a traditional level premium contract?

Straight whole. Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?

Term policies provide for the greatest amount of coverage for the lowest premium, as compared to any other form of protection.

How many years must an individual work under a group contract in order to convert to individual insurance?

If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to covert to individual insurance of the same coverage.

Employee quits his job and coverts his group policy to an individual policy; the premium of the individual policy will be ased on his

Attained age.

Variable Whole Life insurance is based on what type of premium?

Level fixed. Vairable Whole life insurance is a level fixed premium investment-based product.

Adjustable Life

Key feature: Can be Term or Whole life; can convert from one to the other Premium: Can be increased or decreased by policy owners Face Amount : Flexible; set by policy owners with proof of insurability Cash value: Fixed rate of return: general account Policy loans: can borrow cash value

Group Life

Master Contract goes to the sponsor, usually employer Certificate of Insurance goes to member Underwritten as a group If coverage after open enrollment-proof of insurability is required Conversation to individual policy in 31 days - same face amount but higher premiums due to attained age

Which Universal Life option as a gradually increasing cash value and a level death benefit?

Option A. Under option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

A universal life insurance policy has two types of interest rates that are called

Guaranteed and current. The insurer credits the cash value in the policy with a current interest rate and backs the cash value with a contract (lower gauranteed) rate of interest.

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

A life insurance license FINRA registration A securities license

The death protection component of Universal Life insurance is always

Annually Renewable Term. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

FINRA

Financial Industry Regulatory Authority

What are the two components of a unviersal policy?

Insurance and cash account. A universal policy has two components: an insurance component and cash account. The insurance component of a universal life policy is always annual renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the current rate, whichever is higher.

Group Life Insurance

Usually written as an annually renewable term insurance. Two features that distinguish group insurance from individual insurance are: Evidence of insurability is usually not required (unless an applicant is enrolling for coverage outside the normal enrollment period); Participants (insureds) under the plan do not receive a policy because they do not own or control the policy. In group insurance, the master contract is for the employer, and certificates of insurance are for individual insureds.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy - Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Joint Life Policy

A Joint Life policy covering two lives would be the least expensive beacause the premiums are based on an average age, and it would pay a death benefit only at the the first death.

Annually renewable Term (ART)

AKA the purest form of term insurance. ART is the purest form of term insurance. The death benefit remains level (in that sense, it's a level term policy), 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 increase.

A Universal Life Insurance policy is best described as a/an;

Annually Renewable Term policy with a cash value account. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Group Life Policy to Individual premium

Employees usually have a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy. Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life. A Joint Life Policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

Universal Life

Key feature: Permanent insurance with renewable term protection component Premium: Flexible; minimum or large Face Amount: Flexible; set by policy owner with proof of insurability Cash value: Guaranteed at a minimum level: general account Policy Loans: can borrow cash value

An adjustable life policyowner can change which of the following policy features?

Typcially, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium; chaning the premium-paying period; increasing or decreasing the face amount of coverage, or changing the period of protection.

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

Require evidence of insurability. In group underwriting the evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside of the normal enrollment period.

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 - Under Option B 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. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

Which of the following is a key distinction between variable whole life and variable universal life products?

Variable whole life has a guaranteed death benefit. Variable universal life insurance may or may not have a minimum death benefit, unlike variable whoe life insuranc

What does "level" refer to in level term insurance?

Face amount. Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.

Agents selling variable life products must be registered with:

FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

Which Policy component decreases in decreasing term insurance?

Face amount. decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

The LEAST expensive first-year premium is found in which policy?

Annually Renewable Term. ART is the purest form of term insurance. The death benefit remains levels, but the premium increases each year with the insured's attained age.

Variable life

Fixed premium, minimum death benifit Cash value and the actual amount of death benefit are not guaranteed Assets in separate accounts Agents must be dually licensed in insurance and in securities

Which component increases in the increasing term insurance?

Death benefit. Increasing term features level annual premiums and a death benefit that increases each year over the duration of the policy term.

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-pay Life. In limted-pay policies, the premiums for coverage will be completely paid-up well before age 100, usually after a specified number of years

If an agent wishes to sell variable life policies, what license must the agent obtain?

Variable product are governed in part by the Securities and Exchange Commission; therefore, agents sellings variable life policies must also secure a securities license. A domestic insurer

What are the two death benefit options in Universal Life insurance?

Option A: (Level death Benefit Option), the death benefit remains levels while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years. 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. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

Which policy would be classified as a traditional level premium contract?

Straight Life. Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

The death benefit under the Universal Life Option B

Under Option B 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.

For variable products, underlying assets must be kept in

Under a variable life insurance policy, assets must be placed in a speperate fund, used primarily for the investment of stocks, bonds, and other security investment options

Which of the following is a key Distinction between variable whole life and variable universal life products?

Variable universal may or may not have a minimum death benefit, unlike variable whole life insurance which guarantees a minimum death benefit .

When would a 20-pay whole life policy endow?

When the insured reaches age 100. A limited-pay whole life policy, just list straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.