3) Permanent Life Insurance
Endowments
Another type of WL insurance that provides a permanent, level death protection if the insured should die prematurely and they accumulate cash values.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
What would help prevent a universal life policy from lapsing?
Target premium
Which types of policies will provide permanent protection?
Whole Life
Permanent Life insurance
life insurance that provides a death benefit plus a savings plan and lasts for the policyholder's lifetime
Variable Life insurance
is a level fixed premium investment-based product
Level Premium
A policy premium that remains the same over the period of time premiums are paid.
LP-65
Coverage is completely paid up for by the insured age 65
4 Key characteristics of Whole Life insurance
Level Premium Death benefit Cash Value Living Benefits
Converting
The policyowner also has the option of _________ from term to whole life or vice versa.
Contract interest rate
Usually 3 to 6%
Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection?
greatest
Variable Life insurace
have fixed premiums and a guaranteed minimum death benefit
Current interest rate
not guaranteed in the contract but may be higher because of current market conditions
Limited Pay Whole Life
premiums for coverage will be completely paid up well before age 100
Whole life insurance
provides lifetime protection and includes a savings element or cash value.
Universal Life Insurance (Flexible premium adjustable life)
An interest sensitive policy that Implies the policyowner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life
In a variable whole life policies where are the policy premiums allocated?
Separate account
Term Insurance
Temporary protection because it only provides coverage for a specific period of time.
Which types insurance policies provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?
Term
Option B (Increasing Death Benefit option)
The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
What is not true regarding a Variable Universal Life Policy?
The death benefit is fixed
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable
Which of the following determines the cash value of a variable life policy?
Performance of the policy portfolio
Term insurance
Provides the greatest amount of coverage for the lowest premium (has no cash value)
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
Living Benefits
benefits that allow the policyholder to receive a portion of death benefits prior to death
Fixed life insurance/annuities
contracts that offer guaranteed minimum or fixed benefits that are stated in the contract.
Cash Value
created by the accumulation of premium, is schedule to equal the face amount of the policy out to the policyowner.
Two components of a Universal Life Policy:
Insurance Component and a Cash account.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
Joint Life
Option A (Level Death Benefit option)
The death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years.
Adjustable Life
can assume the form of either term insurance or permanent insurance. The insured typically determines how much coverage is needed and the affordable amount of premium
What if an insured skips a premium payment on a universal life policy?
The missing premium may be deducted from the policys cash value.
Death Benefit
guaranteed and also remains level for life
20-Pay life
Version of limited pay whereaby coverage is completely paid for in 20 years.
Whole life Insurance
What provides lifetime protection and accumulates cash value
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 at the end of the term - there is no cash value or other living benefits
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
For20 years or until death which ever occurs first
The options a policy owner can make in his/her policy.
Increase or decrease the premium or the premium-paying period, Increase or decrease the face amount; or change the period of protection
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
Single Premium Whole Life SPWL
designed to provide a level death benefit to the insureds age 100 for one-time, lump-sum payment.
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
Two type of premiums a policyowner can pay
Minimum - amount needed to keep the policy in force for the current year; Target - 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.
Three basic forms of whole life insurance
straight whole life, limited pay whole life and single-premium whole life
Primary difference between a whole life policy and an endowment is
that an endowment matures at an earlier age because the cash value is an endowment has to build up faster since the funds are intended to be used while the insured is alive.
Flexible Premium Policies
Allow the policyowner to pay more or less than the planned premium.
Ordinary (Straight) Life
the basic whole life policy, the policyowner pays the premium from the time the policy is issued until the insureds death or age of 100
Indeterminate premium reduction policy
the premium is guaranteed for an initial period and then the insurer can charge up to a maximum premium charge that is specified in the policy.