Life Insurance

Decreasing Term

-a level premium and death benefit that decreases each year over the duration of the policy term

Return of Premium (ROP)

-increasing term insurance policy

Joint Life, Survivorship Life

Joint Life=First to Die Survivorship Life= second to die (last survivor)

to sell variable life insurance policies, an agent must receive all f the following except

SEC registration

agent/producer

a legal rep of insurance company producer includes agents and brokers agents are the agents of the insurer

who is insured under a juvenile life policy

a minor

applicant

a person applying for insurance

beneficiary

a person who receives the benefits of an insurance policy

cash value

a policy's savings element or living benefit

what do modified life and straight life policies have in common

accumulation of cash value

group life insurance policies are written as what type of insurance

annually renewable term

the death protection component of a universal life policy is expressed as what type of coverage?

annually renewable term

in annually renewable term policies, what is the annual premium based upon?

attained age

how is the premium determined in a joint life insurance policy?

based on the average age of the insureds

Ordinary (Straight) Life

basic whole life policy policyowner pays the premium from the time the policy is issued until the insured's death or age 100 has the lowest annual premium

graded-premium whole life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. after the period of increase the premiums will

be level thereafter

nonforfeiture values

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

How are the premium rates on a joint life policy determined?

by averaging the ages of both insureds

in variable universal life insurance, to what policy component does the term variable refer?

cash value and death benefit

Indexed Whole Life

cash value is dependent upon the performance of the equity index has a guaranteed min interest rate face amount increased annually to keep pace with inflation

what happens to the cash value when a whole life insurance policy matures

cash value is paid to the policyowner

The type of policy that can be changed from one that does not accumulate cash value to the one that does is a

convertible term policy

Cash value

created by the accumulation of premium, scheduled to equal the face amount of the policy when the insured reaches age 100 and is paid out to the policyowner cash values are credited to the policy on a regular basis and have an interest rate

borrows $10,000 on a 5 year note from his bank. the note is due in installments. what type of life insurance policy would be best suited to this situation?

decreasing term

what type of life insurance is best suited to cover a mortgage

decreasing term

Limited-pay whole life

designed so that the premiums for coverage will be completely paid well before the age of 100 annual premium will be higher cash value builds up faster Suited for those who do not want to be paying premiums beyond a certain time (like when they retire)

if an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?

evidence of insurability

when the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured

evidence of insurability

what is the main advantage of converting from group life insurance to individual coverage?

evidence of insurability is not required

What policy component must decrease in decreasing term insurance?

face amount

insured

person covered by the insurance policy; may or may not be the policy owner

premium

the money paid to the insurance company for the insurance policy

what type of policy is typically issued without proof of insurability from the insured?

group policy

Adverse Selection

insuring of risks that are more prone to losses than the average risk

lapse

policy termination due to nonpayment of premium

what type of whole life insurance policy generates immediate cash value?

single premium whole life

regarding taxation, how does cash value of a universal life policy accumulate

tax deferred

what type of life insurance policy offers pure death protection

term

face amount

the amount of benefit stated in the life insurance policy

Under Option B (Increasing Death Benefit option) in a universal life policy, what happens to the death benefit?

the death benefit increases each year by the amount of the cash value increases

who owns a group life insurance contract

the employer (aka the sponsor of the group)

all of following entities regular variable life policies except

the guaranty association

What happens if a premium payment is skipped on a Universal Life Policy?

the missing premium may be deducted from the policy's cash value the policy will not lapse

what is the purpose of establishing the target premium for a universal life policy?

to prevent the policy from lapsing

Who is term insurance beneficial for?

young people in the beginning of their career who may not be able to afford permanent insurance

Death benefit

guaranteed and also remains for life

policy maturity

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

Temporary Protection

provides coverage for a specific period of time also known as pure life insurance

what type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?

single premium whole life

death benefit

the amount paid upon the death of the insured in a life insurance policy

policy owner

the person entitled to exercise the rights and privileges in the policy

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

What kind of policy allows withdrawals or partial surrenders?

universal life

what are the death benefit options in universal life policies

-level death benefit - increasing death benefit

Whole Life insurance

-most common type of permanent insurance -lifetime protection -include a savings element (cash value)

Level Term Insurance

-most common type of temporary protection -"level" refers to the death benefit, which does not change

Level Premium Term

-premium will remain level during the entire period -Ex. a $100,000 10-year level term policy will provide a $100,000 death benefit

Term Insurance

-provides the greatest amount of coverage for the lowest premium -has no cash value -temporary

Annually Renewable Term (ART)

-purest form of term insurance -death benefit remains level -renewable each year, premium increased annually according to the age

the policyowner of a whole life insurance policy is also the insured. what age must the insured attain in order to receive the policy's face amount?

100

whole life policies provide protection until the insured reaches what age

100

under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?

20 years or death

securities

financial instruments that may trade for value (stocks, bonds, options)

what type of policy issues certificates of insurance to the insureds

group policy

what are the characteristics of the group that underwriters will consider before issuing a group life policy

groups purpose, size, financial strength and turnover

universal life policies have two types of interest rates. what are they?

guaranteed and current

Variable Contracts

in variable contracts the policy owner bears the investment risk (assets in a separate account)

a return of premium term life policy is written as what type of term coverage

increasing

concerning juvenile life insurance, which of the following statements is incorrect?

juvenile life is classified as any life insurance purchased by a minor

what type of premium is charged on a straight life policy?

level

variable whole life insurance is based on what type of premium

level fixed

a whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?

limited pay whole life

what type of life insurance policy is life paid up at age 65

limited pay whole life

what are the living benefits of whole life insurance

loan values

a variable policy death benefit and cash value is based on a distinct pool of investments. these are held in separate accounts that act like

mutual funds

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

option A

what universal life option has a gradually increasing cash value and a level death benefit

option A-level death benefit

Living benefits

policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered

what is the major difference between the most common types of whole life policies: straight life, limited payment, and single premium

premium payment mode

Single Premium Whole Life

provide a level death benefit to the insured's age 100 for a one time payment completely paid after one premium and generates immediate cash

Know this- Whole Life Insurance

provides lifetime (permanent) protection and accumulates cash value

permanent life insurance

refers to various forms of life insurance that build cash value and remain in effect for the entire life of the insured

what elements of an adjustable life policy can be changed by the policy owners

the amount and payment period of the premium, the face amount, and the period for protection

insurer

the company that issues an insurance policy

an adjustable life policyowner can change which of the following policy features

the coverage period

an insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. what happens at the end of the 10 year term.

the insured may renew the policy for another 10 years, but at a higher premium rate

what happens to the premium in an annually renewable term life policy?

the premium increases with each renewal

level premium

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

why are policy loans not available on term insurance

there is no cash value to borrow against

endow

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

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?

universal life

does adjustable life or universal life policies offer more flexibility

universal life

in what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

universal life

which of the following life insurance policies would be considered interest sensitive

universal life

which of the following types of policies allows for a flexible premium and a variable investment component?

variable universal life insurance

when does an adjustable life policy accumulate cash value

when the premiums paid are more than the cost of the policy

is an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

whole life

deferred

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

Increasing Term

-a level premium and death benefit that increases each year over the duration of the policy term -ideal to handle inflation -often added to another policy as a rider

Pure Death Protection

-if the insured dies during this term, the policy pays the death benefit to the beneficiary -if the policy is canceled or expires prior to the insured's death, nothing is payable