Chapter 3 - Life Insurance Policies

what entities regulate variable life policies

The SEC, The insurance department, and the federal government regulate. The guaranty association is not a regulating body

what is a target premium in a universal life policy

the target premium is a recommended 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

define accumulate

to build up

true or false. In a variable product, the minimum death benefit is guaranteed

true. The minimum death benefit is guaranteed

true or false, annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

true. annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

at 30, an applicant wants to get insurance but knows his insurance needs will change as they occur. What policy will adjust as changes occur

adjustable life. These policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. Any increase in face amount requires proof of insurability

define level premium

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

what does term life insurance offer the best coverage for the lowest premium

because it does not have a cash value

what are nonforfeiture values

benefits in a life insurance policy that the policy owner cannot lose even if the policy is surrendered or lapses

key descriptions of an adjustable life policy

can be term or whole. Premiums can be adjusted. The face amount is flexible. Cash value is fixed. You can borrow cash from the policy

define variable life insurance products

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

define fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

what are securities

financial instruments that may trade for value

what type of insurance is group insurance

group insurance is written as annually renewable term insurance

what happens if you skip a premium payment in a universal life policy

if an insured skip a premium on a universal life policy, the missing premium may be deducted from the policy's cash value. The policy will not lapse

at what point will the insured be able to receive the full face amount from a whole life policy

if the insured lives to the age of 100

characteristics of group insurance

in group insurance, the master contract is for the employer, and certificates of insurance are for individual insureds

define policy maturity

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

a group of skydivers coalesces to get life insurance. Why would they be rejected

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

who bears the risk of investment in a variable contract

in variable contracts, the policy owner bears the investment risk

what are the differences between joint life and survivorship life

joint life equals first to die. Survivorship life equals second to die

what is juvenile life insurance

juvenile life insures the life of a minor. It does not need to be purchased by a minor

in the context of life insurance, what does level mean

level refers to the death benefit that does not change throughout the life of the policy. An example is a level term insurance policy or a level premium policy

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

can the owner change the types of investments in an adjustable life policy

no. the type of investment is not an item that can be changed

key description of a variable life policy

permanent insurance only. Premiums are fixed if whole life, flexible if universal life. Face amount can be increased or decreased. Cash value is not guaranteed but you can borrow from the cash value

key descriptions of a universal life policy

permanent insurance with renewable term protection. Premiums are flexible and can be minimum or target. The face amount is flexible. Cash value is guaranteed at a minimum level and can borrow from the policy

you are ending a 10 year term policy that is convertible. What are your options

policies that are guaranteed renewable and convertible may be renewed at a higher premium, without evidence of insurability, for another term, or may be converted to permanent insurance

what is a lapse

policy termination due to nonpayment of premium

how are premium rates determined in a joint life policy

premium rates on a joint life policy are determined by averaging the ages of both insureds

what type of life insurance generated an immediate cash value

single premium.

what form of life insurance provides the greatest amount of coverage for the lowest premium

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

what is the face amount

the amount of benefit stated in the life insurance policy

define attained age

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

in an adjustable life policy what can the owner change

the premium, the amount of insurance, the length of coverage

true or false. Neither the premium nor the death benefit is affected by the insureds ages in annually renewable term insurance

this is false

true or false regarding the convertibility option under a term life insurance policy: evidence of insurability is not required

true. evidence of insurability is not required

true or false regarding the convertibility option under a term life insurance policy: most term policies contain a convertibility option

true. most term policies contain a convertibility option

true or false regarding the convertibility option under a term life insurance policy: upon conversion, the premium for the permanent policy will be based upon attained age.

true. upon conversion, the premium for the permanent policy will be based upon attained age.

what is the key distinction between variable whole life and variable universal life products

variable whole life has a guaranteed death benefit.

when would a 20-pay whole life policy endow

when the insured reaches the age of 100. a limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to the age of 100. the premium is however completely paid off in 20 years

what are the primary characteristics of a whole life insurance policy

whole life insurance provides lifetime, or permanent, protection and accumulates cash value

define deferred

withheld or postponed until a specific time or event in the future

will whole life policies provide permanent protection

yes. Whole life policies are referred to as permanent protection, sinch as long as the premium is paid coverage will continue for the life of the insured

what does level refer to in level term insurance

the face amount. Level-term policies maintain level death benefit or face amount through the term of the policy.

100k joint life policy. One of the spouses dies prematurely. How much will the policy pay out

100k. In a joint life policy, the death benefit is put upon the first death only

in order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years

5 years. If the master contract is terminated. Every individual who has been in the plan for 5 years can convert to individual insurance of the same coverage

you have a variable policy with a face amount of 50k. Stocks have done poorly so cash value fell to 10k. You die what is paid out

50k is the death benefit. 10k would be the cash you could borrow.

what is the type of premium in a straight life policy

a level annual premium for the life of the insured.

define cash value

a policy savings element or living benefit

what are the licensing requirements for someone who sells variable universal life insurance

an individual must be licensed for both securities and life insurance in order to sell variable universal life

define endow

endow is to have the cash value of a whole life policy reach the contractual face amount

true or false regarding the convertibility option under a term life insurance policy: upon conversion, the death benefit of the permanent policy will be reduced by 50%

false, there is no 50% reduction of the death benefit in a conversion

true or false, in variable products the premiums are invested in the insurer's general account

false. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund.