ExamFX

Graded-Premium Whole Life Policies...

A policy somewhat similar to modified life in that premiums start out relatively low and then level off at a point in the future.

Decreasing Term Policy

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

Limited-Pay Whole Life

A policy that's designed so that the premiums for coverage will be completely paid-up well before age 100.

20-Pay Life

A policy where coverage is completely paid for in 20 years.

LP-65

A policy where coverage is completely paid up for by the insured's age 65.

Term Life

A temporary protection that only provides coverage for a specific period of time.

Proof of Insurability

Adjustable-policies usually require _______________ ____ ______________________.

Temporary & Permanent

All life insurance policies fall into two categories

A renewable provision...

Allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability.

Interest-sensitive whole life insurance

Also referred to as "current assumption life," and is a policy where the insurer changes its premium assumpitons based on mortaility, investment factiors and expenses.

Ordinary (Straight) Life Insurance

Also referred to as continuous premium whole life) It is the most basic whole life policy whereas the policyowner pays the premium from the time the policy is issued until the insured's death or age 100 (whichever comes first).

A.R.T.

Annually Renewable Term

Indexed Whole Life Policies...

Are also known as Equity Index Whole Life.

Cash Values...

Are credited to the policy on a regular basis and have a guaranteed interest rate.

Single-premium whole life policies...

Are often purchased with the death benefit of a previous policy or with a severance package if a job change occurs.

Increasing Term Policies...

Are often used by insurance companies to fund certain riders that provide a refund of premiums, or a gradual increase in total coverage, such as the cost of living or return premium riders.

10-pay policies....

Are popular children's policies. The difference in premium between a straight-life and _________ ________________ on a young child is generally very small, and customers are seeing the value of paying slightly more for a shorter period of time.

Most term insurance policies....

Are renewable, convertible, or both (R&C)

R.O.P. Policies...

Are structured to consider the low risk factor of a term policy but at a significant increase in premium cost, sometimes as much as 25% to 50% more.

Decreasing Term Policies...

Are usually convertible; however, it is usually not renewable since the death benefit is $0 at the end of the policy term.

Modified Life Policies...

Charge a lower premium (similar to term rates) in the first few policy years, usually the first 3 to 5 years, and then a higher level premium for the remainder of the insured's life. The higher subsequent premium is typically higher than a straight life premium would be for the same age and amount of coverage.

Mortgage or Other Debts

Decreasing term coverage is commonly purchased to insure the payment of a ______________ ____ _________ ___________ if the insured dies prematurely.

Fluctuate

Depending upon the type of term insurance purchased the death benefit may _______________________.

Single Premium Whole Life Policies.....

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

Single-premium policies...

Differ from other traditional whole life policies is that they are subject to a surrender charge if the policy is surrendered within a certain time period.

An Increasing Term Policy...

Features level premiums and a death benefit that increases each year of the duration of the policy term, whereas the amount of the increase in the death benefit is usually expressed as a specific amount or a percentage of the original amount.

Indeterminate Premium Whole Life

Have a premium rate that may vary from year to year. These policies specify two premium rates; a guaranteed level premium stated in the contract (maximum premium), and a nonguaranteed lower premium rate that the policyowner actually pays for a set period of time, usually 2-3 years, after which the new rate could be raised, kept the same, or lowered based upon the company's expected mortality, expense and investments but can never be higher than the guaranteed maximum rate.

Limited-Payment Policies...

Have shorter premium-paying period than straight life insurance, so the annual premium will be higher. Cash value builds up faster for this type of policy.

No payout

If a term life policy is canceled or expires prior to the insured's death, there is...

Remain level

If the insurer assumes the risk, indexed whole life policy premiums _______________ ___________.

Increases

In an annually renewable term insurance policy the premium ___________________ each year according to the attained age, as the probability of death increases.

Adjustable life policies

In this kind of policy the insured chooses the amount of coverage they need, and how much premium they can afford. The policy can be adjusted as the insured's needs change.

Increase

Indexed whole life policies are classified depending on whether the policyowner or the insurer assumes the inflation risk. If the policyowner assumes the risk, the policy premiums _________________ with the increases in the face amount.

Indexed Whole Life

Insurance is that the cash value is dependent upon the performance of the equity index, such as S&P 500 although there is no guaranteed minimum interest rate. The policy's face amount increases annually to keep pace with inflation (as the Consumer Price Index increases) without requiring evidence of inseparability.

The premium for renewals...

Is based on the insured's current (attained) age.

An R.O.P. Term Policy...

Is paid if the death occurs within a specified period of time or if the insured outlives the policy term.

Key characteristics of whole life insurance include:

Level premium, guaranteed level death benefit, cash value created by the accumulation of premium that equals the face amount of the policy when the insured reaches the policy mature date (age 100), and living benefits (allowing the policyowner to borrow against the cash value while the policy is in effect).

Traditional Term Policies...

Offer a low-cost, simple-death benefit for a specified term but have no investment component or cash value. when the term is over, the policy expires and the insured is without coverage.

R.O.P. Insurance Policies...

Offers the pure protection of a term policy, but if the insured remains healthy and is still alive once the term limit expires, the insurance company guarantees a return of premium. However, since the amount returned equals the amount paid in, the returned premiums are not taxable.

Higher

Premiums for whole life policies are usually ______________ than for term insurance.

Term life policies

Provide the greatest amount of coverage for the lowest premium compared to other policy types.

Interest-Sensitive Whole Life Policies...

Provide the same benefits as other traditional whole life policies with the added benefit of current interest rates, which may allow for either greater cash value accumulation or a shorter premium-paying period.

Level Premium Term

Provides a level death benefit and a level premium during the entire policy term. If the policy renews at the end of the term period, the premium will be based on the insured's attained age at the time of renewal.

Whole Life Insurance

Provides lifetime protection, and includes a savings element (or cash value).

A Convertible Provision...

Provides the policy owner with the right to convert the policy to a permanent insurance policy without evidence of insurability. The premium will be based on the insured's attained age at the time of conversion.

Level

Regardless of they type of term insurance purchased, the premium remains _____________ throughout the term of the policy.

R.O.P.

Return of Premium

S.P.W.L.

Single Premium Whole Life Policy

Three forms of whole life insurance...

Straight whole life, limited-pay whole life, and single premium whole life. (Other combinations may also be available as well).

Pure life insurance

Term life insurance is also known as

Temporary

Term life insurance protection is

three basic categories

Term life is broken down into...

Young people learning about coverage for a relatively cheap cost

Term life policies are great for

Beneficiary

Term life policies provide "pure death protection", meaning that if the insured dies under term coverage, the policy pays the death benefit to the...

Same

The actual premiums paid over the life of the contract for a modified or graded premium policy are actually the _____________ as paying for a straight life policy to age 100.

In a Decreasing Term Policy....

The amount of coverage decreases as the outstanding loan balance decreases each year.

Nonforfeiture Value

The cash value of an insurance policy

Annually Renewable Term Policy

The least expensive first-year premium payment is found in

Whole Life

The most common type of permanent insurance.

Level term insurance

The most common type of temporary protection purchased by clients.

Specifies a set number of years during which the policyowner must pay premium.

The only difference between straight life and limited-pay life policies is that a limited-pay policy...

In adjustable life insurance policies...

The policyowner can increase or decrease premium, change the premium-paying period, increase or decrease the face amount of coverage, and/or change the period of protection.

Modified Life Insurance Policies...

Were developed to make the purchase of whole life insurance more attractive for individuals who, for example, are just starting out and have limited financial resources, but will be able to afford the higher premiums in the future as their income grows.

Equal

When a whole-life policy matures, cash value will be __________ to the face amount.

When the insured reaches age 100

When would a 20-pay whole life policy endow?

Life paid-up at age 65

Which of the following is an example of a limited-pay life policy?

LP65 policies

_________ ______________ are becoming more common as people decide they want life insurance coverage during retirement, but don't want to have to worry about paying premiums with limited retirement income.

False

The policyowner and the insured have to be the same person...

The death benefit that does not change through the life of the policy.

"Level" in level term insurance refers to...

Increasing

A ________________ term policy is ideal for handling inflation and the increasing cost of living, or to add to another policy as a rider, such as with return of premium policies.

Loan

A feature of a whole life policy enabling the insured to borrow money against their policy and can be used to cash-out if the policyowner decides to surrender the policy before it matures.

Surrender charge

A fee charged to a single-premium whole life policy for surrendering the policy before the allotted surrender period. These fees are diminishing mean the penalty is higher when the policy is surrendered earlier.

Permanent Life Insurance

A general term used to refer to various forms of life insurance policies that build cash value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid.

Interest-Sensitive Whole Life

Also referred to as Current Assumption Life, is a whole life policy that provides a guaranteed death benefit to age 100. The insurer sets the initial premium based on current assumptions about risk, interest, and expense. If the actual values change, the company will lower or raise the premium at designated intervals. In addition, interest-sensitive whole life policies credit the cash value with the current interest rate that is usually comparable to money market rates, and can be higher than the guaranteed levels. The policy also provides for a minimum guaranteed rate of interest.

Return of Premium Life Insurance..

An increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premium paid.

Whole Life Policies

Endow at the insured's age 100, which means the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100. The policy premium is calculated assuming that the policyowner will be paying the premium until that age.

Interest-sensitive policies...

Feature a varied premium and a cash value that can be greater than what's guaranteed in the policy (due to high interest rate).

100

For term life policies, it's the age that limits coverage duration or prevents renewal.

Higher Premiums

Limited-pay policies usually have _____________ _______________ than straight life policies because the premium payment period is condensed, which causes them to accumulate cash value more quickly and continue to build cash value after the premium payment period ends.

A large amount of coverage for a relatively small premium

Most people buy term coverage to provide...

Third

Nonforfeiture value does not usually accumulate until the ___________ policy year and it grows tax deferred.

Lowest

Of the common whole life policies, straight life will have the ______________ annual premium.

Limited-Pay...

Polices are well suited for those insureds who do not want to be paying premiums beyond a certain point in time.

Annually Renewable Term

The purest form of term insurance where the death benefit remains level and the policy may be guaranteed to be renewable each year without proof of insurability

7 to 10 years

The surrender period for a single-premium whole life policy is...

Level, Increasing, & Decreasing

The three basic categories of term life policies are...

Tax-Differed

This condition implies that the insured doesn't pay taxes on the cash accumulation until they access it through policy loan or the payout of death benefit to a beneficiary.

Graded-Premium Policies...

Typically start with a premium that is approx. 50% or lower than the premium of a straight life policy. The premium then gradually increases each year for a period of usually 5 or 10 years, and then remains level thereafter.

The insured's age at the time of transaction.

Upon selling, renewing, or converting the term policy, the premium is figured at an "attained age" which is...

Modified Life & Graded-Premium Life Polices...

Useful as a compromise between straight life and convertible term insurance since the premium is less than straight life in the early years, but some cash value is being accumulated.

Time Sensitive

decreasing term is primarily used when the amount of needed protection is ________ ______________.