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.