Chapter 3- Life Insurance Policies

Be registered with FINRA Be licensed by the state Have received a securities license

Agents selling variable life insurance products must:

Increasing Death Benefit Option

Annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases

Equity Indexed Whole Life

Cash value is dependent upon the performance of the equity index, such as S&P 500 Guaranteed minimum interest rate

Providing evidence of insurability

Death benefit can be increased by

Annually renewable term

Least expensive first year premium

Modified Life

Lower premium (first 3-5 years) Higher premium after that For people just starting out Level at beginning then increases

Level Term Insurance

Most common type of temporary protection

Annually Renewable Term

The purest form of term insurance Death benefit remains level Policy may be guaranteed to be renewable each year without proof of insurability Premium increases annually according to the attained age and as probability of death increases

15, 5

A producer taking an application for a universal life insurance policy must provide a statement of policy information for the applicant in a form approved by the Commissioner, must be delivered within ___ working days after application is submitted and sooner than ___ days before the policy is delivered

Target Premium

A recommended amount that should be paid on a policy in order to cover the cost of insurance

Option B

Annual increase in cash value so that the death benefit increases each year by the amount the cash value increases ------------------------Collect Both cash and death benefit upon death of the insured

Current Assumption Life

Another name for interest sensitive whole life insurance

Variable Contracts

Any domestic insurer issuing ________ must establish one or more separate accounts (stocks/bonds)

Adjustable Life

Best of both term and permanent coverage Can increase/decrease the premium Change period Option of whole life or not Fixed rate of return Can borrow cash value

Universal Life (Flexible Premium Adjustable Life)

Can adjust premium Permanent Can borrow cash value Can skip a payment as long as there is sufficient cash value Interest sensitive (3-6%) Insurance component (renewable) and a cash account Level/Increasing Death Benefit Option

Level Death Benefit Option

Death benefit remains level while the cash value increases, lowering the pure insurance

Death Benefit

Guaranteed and also remains for life

Interest Sensitive Whole Life (Current Assumption)

Guaranteed death benefit at age 100 Minimum guaranteed rate of interest

31 days

How long does an employee have to find a new insurance policy after leaving a group policy while still being covered

Require evidence of insurability

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

Variable Life

Permanent Insurance Premium fixed (if whole), flexible (if universal) Can increase or decrease premium Cash value not guaranteed, separate account Can borrow cash value

Level Premium Term

Provides a level death benefit and a level premium

Whole Life Insurance

Provides lifetime protection Includes a savings element (cash value) Higher premium/ stops at age 100

Level

Refers to the death benefit that does not change throughout the life of the policy

State and Federal Government

Variable life insurance products are dually regulated by the __________

Group's medical history

What is not considered in a group insurance plan?

Group Life Insurance

Written as annually renewable term insurance Issued to a sponsoring organization Insured do not own or control the policy Employer-employee Can convert to individual insurance Based on ratio of men and women Evidence of insurability is not required

5 years of being on the plan

You can convert from group to individual insurance after

Cash Value

Created by the accumulation of the premium Is scheduled to equal the face amount of the policy when the insured reaches age 100 and is paid out to the policyowner

Single Premium Whole Life

Designed to provide a level death benefit to the insured's age 100 for a one-time, lump-sum payment Policy is completely paid up after one premium and generates immediate cash

Limited Pay Whole Life

Premiums paid up before 100 LP-65 (Paid by age 65) Cash value builds up faster due to higher premium

Graded Premium Whole Life

Premiums start low and level off in future Starts with premium 50% or lower than straight life Premium increases for 5-10 years then becomes level

Term (Pure) Insurance

Temporary protection because it only provides coverage for a specific period of time Greatest amount of coverage for the lowest premium Pure death protection, no cash value

Minimum Premium

The amount needed to keep the policy in force

Straight Whole Life (continuous premium)

The basic whole life policy Lowest annual premium Pay till death or age 100 Level Premium

Option A

The death benefit remains level while cash increases lowering pure insurance-----------------Corridor or gap between cash value and death benefit

Living Benefits

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 The cash value (nonforfeiture) does not accumulate until the third policy year and it grows tax deferred

Level Premium

The premium for whole life policies is based on the issue age; therefore it remains the same throughout the life of the policy

Permanent

When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually

In Variable Contracts

___________ the policyowner bears the investment risk