PA Life and Health Insurance Exam - Life Insurance Policies

What age must the insured attain in order to receive the policy's face value amount?

100

Renewable Provision

Allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability. Premium for the new term policy is based on the insured's current age.

Universal Life

Also known as flexible premium adjustable life. Policyowner has flexibility to increase the amount of premium paid into the policy and to later decrease it again.

Universal Life Insurance Policy is best described as

Annually renewable term with a cash value account.

Variable Universal Life

Combination of universal life and variable life. Provides policyowner with flexible premiums and adjustable death benefit, like universal life. Also gives the policyowner the decision on where the net premiums will be invested.

Limited Payment

Designed so that the premiums for coverage will be completely paid before age 100

Single Premium

Designed to provide a level death benefit to the insured's age 100 for a one-time, lump-sum payment.

Adjustable Life

Developed to provide the policyowner with the best of both worlds. Can change premium or premium-paying period, face amount, period of protection or could convert from term to life and vice versa.

What does level refer to in level term insurance?

Face amount

Decreasing Term

Feature a level premium and a death benefit that decreases each year over the duration of the policy term. Primarily used when the amount of needed protection is time sensitive. Commonly used to insure the payment of a mortgage or other debts if the insured dies prematurely.

Increasing Term

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

Insurance Component

First component of a Universal Life policy

Permanent Life Insurance

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 as long as the premium is paid.

Return of Premium (ROP) Life Insurance

Increasing term policy that pay an additional death benefit to the beneficiary equal to the amount of the premiums paid. Have a low risk factor but premiums cost significantly more.

Survivorship Life (Second to Die)

Insures two or more lives for a premium that is based on a joint age. This pays on the last death rather than the first. Often used to offset the liability of the estate tax.

Group Life Insurance

Issued to a sponsoring organization and covers the lives of more than one individual member of the group. Usually written as annually renewable term insurance.

Variable Life

Level, fixed premium, investment based product. Fixed premiums and guaranteed minimum death benefit.

Jumping Juvenile Policy

Low face amount in early years, usually by 5 times the amount, when the insured reaches an age specified in the contract (usually 21)

Level Term Insurance

Most common type of temporary protection purchased. Refers to the fact that the death benefit does not change throughout the life of the policy

Cash Value

One characteristic of whole life insurance. Created by the accumulation of premium.

Death Benefit

One characteristic of whole life insurance. Guaranteed and also remains for life

Living benefits

One characteristic of whole life insurance. Policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.

Level Premium

One characteristic of whole life insurance. Premium for the whole life policies is based on the issue age, therefore, it remains the same throughout the life of the policy.

Minimum Premium

One type of premium of universal life: Amount needed to keep the policy in force for the current year.

Level Death Benefit Option

Option A of Universal Life

Increasing Death Benefit Option

Option B of Universal Life

Contract Interest Rate

Part of Universal Life, guaranteed by the contract. Usually 3% to 6%

Current Interest Rate

Part of Universal Life, not guaranteed in the contract but may be higher due to market conditions

Continuous Premium (Straight Life)

Policyowner pays the premium from the time the policy is issued until the insured's death or age 100

Level Premium Term

Provides a level death benefit and a level premium during the policy term

Whole Life Insurance

Provides lifetime protection, and includes a savings element (or cash value). Endow at age 100.

Convertible Provision

Provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability.

Annually Renewable Term

Purest form of insurance. Death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability.

Characteristics of Group Plans

Purpose, size, turnover, financial strength

Target Premium

Recommended amount that should be paid on a policy in order to cover the cost of insurance protection and keep the policy in force throughout its lifetime.

Cash Account

Second component of a Universal Life Policy

Joint Life (First to Die)

Single Policy that is designed to insure two or more lives. Can be term or permanent. Premium is based on a joint average age, paid upon the first death only.

Who regulates Variable Annuities?

State and Federal Governments

Term Life Insurance

Temporary protection, only provides coverage for a specific period of time. Also known as pure life insurance.

Pure Death Protection

What is provided by Term insurance. If the insured dies during this term, the policy pays the death benefit to the beneficiary.

Indexed Whole Life

also known as equity index whole life, the cash value dependent upon the performance of the equity index, such as S&P 500