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
