Life insurance policies: test your knowledge

List the differences between whole life and variable life:

(VL) has separate account maintained for savings agent needs a security license. VL has a better potential for gain since the cash values may be in equities, the policyholder assumes the investment risk. In (WL) the cash value grows according to a table, the savings are guaranteed a minimum return in the general amount of insurance company, the insurance company bears the risk.

The purest form of term insurance is

Annually renewable term

What is the payout period called?

Annuity period, or annuitization period, or liquidation period

List and describe three ways to fund an annuity?

1). Single premium: Lump sum 2). Periodic payments.: level premium; or 3). Periodic payments: flexible premiums.

What must a life insurance agent have to sell variable life or variable universal life?

A security's license, and a Florida life insurance license

What is an annuity?

A systematic liquidation of an estate(provides income per month)

What is an Indexed Annuity?

A type of fixed annuity with a minimum guaranteed interest rate, with a potentially higher rate, based on the equity indexed market, such as S&P 500. Payouts (annuitization) can be either fixed or variable

What is the pay-in period called?

Accumulation period

When does whole life insurance mature?

At insured's age 100

What does option to convert mean?

Being able to convert to whole life, without proof of insurability

What does option to renew mean?

Being able to renew for another term for the same base amount, without proof of insurability

What type of license must an agent have to sell variable annuities?

Both life insurance, license, and securities license(FINRA registration

Name and describe the features of the three main types of term insurance in reference to face amount

Level, decreasing, increasing

Compared to term insurance, what extra features does whole life insurance provide?

Cash value and living benefits

What three things can be adjusted on a universal life policy without needing a new policy?

Face amount, payment, amount, and frequency of payment; the policy owner may even skip payments, as long as there is enough cash value to cover policy expenses

What determines the amount of a policies cash value?

Face amount, premium, how long the policy has been in force

Describe how fixed in variable annuities are different

Fixed annuities are like a savings account, which guarantees a specified percent, credited and guaranteed minimum payment amount per month at maturity. The funds are invested in the insurance companies general amount. Variable annuities are invested in market funds, and grow as the funds performs in the market.

What is the primary difference between whole life and universal life?

Flexibility

List and describe two ways annuities can be paid out.

Immediate: pay out within a year Deferred: payout after at least one year

Who sells annuities?

Insurance companies

What is the difference between life insurance and an annuity?

Insurance creates an estate; annuity, liquidates, an estate. Life insurance is concerned with when someone dies; annuities are concerned with how long one lives.

Describe the difference between a joint life policy and a survivorship policy

Joint life covers two or more people, stops, when the first insured dies; survivorship life(joint and last survivor) covers two or more people, pays only when the last insured dies(usually second to die policy, covering to people)

Do universal life policies, offer policy loans?

Loans and partial withdrawals are permitted because of universal life policies generate cash value

How soon can an immediate annuity start to payout?

One month from the date of purchase

What is another name for whole life insurance?

Permanent

Describe the outstanding features of each of these policies: Ordinary whole life - 20 pay whole life - Life paid up at 65 - Single, premium whole life -

Straight whole life-permanent level protection, and level premium until death or age 100 20 pay whole life -premium only paid for 20 years, but coverage continues until death or age 100 Life paid to 65 -premium paid only to 65, but coverage continues until death or age 100 Single, premium whole life -one time, lump sum premium payment; coverage until death or age, 100

What is another name for term insurance?

Temporary

Describe the death benefit of universal life-option 1 and universal life-option 2 policies.

UL option one is also called the level death benefit option. The death benefit equals increasing cash values plus decreasing term. As cash values approaches the face amount before policy measures, the additional amount of insurance called the corrider is inserted in order for the policy not to become a MEC. UL Option two is called the increasing death benefit option. The death benefit equals level term increase in cash.

How does a variable life insurance policy (VUL) work?

VUL works like UL except cash values grow like VL in separate accounts in equities

Which type of annuity builds accumulation units during the pay-in period?

Variable annuities