Life insurance
What are the 3 factors that determine the premium for a particular policy?
1) Morality 2) Interest 3) Expense
Which riders increase the amount of the death benefit?
Accident death rider - pays double or triple the amount of face value Cost of Living rider - automatically increases the amount of insurance based on an inflation index Return of Premium - pays back all the premiums in addition to the death benefit
Flexible policy with three variables for insured
Adjustable life
Securities
All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded.
What is the difference between absolute and collateral assignment?
An absolute assignment permanently transfers all rights of ownership to another person or entity. A collateral assignment is a transfer of partial rights to another person.
Term insurance with a premium that increases each year
Annual renewable
What is annually renewable term insurance?
Annually renewable term (ART) is the purest form of term insurance in which the death benefit remains level; the policy may be guaranteed renewable each year without proof of insurability, but the premium increases annually according to the attained age.
What happens to an unpaid policy loan at insureds death?
Any outstanding loans, and accrued interest, will be deducted from the policy death benefit upon the insured's death.
What are the 3 nonforfeiture options in life insurance policies?
Cash surrender value, reduced paid-up insurance or extended term option
Change term policy to permanent protection
Convertible term
Temporary protection often used for insuring mortgages
Decreasing term
Face amount equals cash value earlier than age 100
Endowment
Policy has increasing premiums for 5-7 years and the remains constant for the remainder of the policy
Graded premium
Which nonforfeiture option is automatically selected if the policy owner has not made a selection?
If the policy owner has neglected to select one of these nonforfeiture options, the insurer will automatically implement the extended term option in the event of termination of the original policy.
Permanent protection but premium and cash value can change
Interest sensitive
What are the characteristics of term life insurance?
It provides temporary, pure death protection, with no cash value.
Insured lives of more than 2 people; pays death benefit when first dies
Joint life
Temporary protection with level face amount
Level term
Policy that pays death benefit only if death is by certain causes
Limited benefit
Permanent protection paid-up sooner than age 100
Limited-pay life
What settlement options are available in life insurance policies?
Lump-sum/cash, fixed period, fixed amount, life income, interest only
Policy has one increase in annual premium
Modified life
What are the death benefit options in universal life policies?
Option A - level death benefit, and Option B - increasing death benefit
Which dividend option increases the death benefit?
Paid-up additions increase the death benefit of the original policy by whatever amount the dividend will buy.
What are the characteristics of whole life insurance?
Permanent protection to the insured's age 100, with living benefits such as cash value, policy loans, and nonforfeiture options.
What is the purpose of the automatic premium loan provision?
Prevents the unintentional lapse of a policy due to nonpayment of the premium
Purchase another term policy without evidence of insurability
Renewable term
Insures lives of at least 2 people; pays death benefit when last dies
Survivorship
What is the free-look period, and when does it begin?
The Free-look period allows the policy owner 10 days from receipt to look over the policy, and if dissatisfied for any reason, return it for a full refund of premium. It starts when the policy owner receives the policy, not when the insurer issues the policy.
What constitutes the entire contract?
The policy and a copy of the application, along with any riders or amendments, form the entire contract.
What is the difference between a revocable and irrevocable beneficiary?
The policyowner may change a revocable beneficiary at any time. An irrevocable designation, however, may not be changed without the written consent of the beneficiary.
Which features of an adjustable life policy can be changed by the policy owner?
The premium or the premium-paying period, the face amount, and the period of protection.
How does continuous premium straight life differ from 20-year limited pay life?
The premiums for straight life will be spread over the insured's lifetime, thus enabling the insurance company to charge a lower annual premium. When the premium-paying period is condensed to 20 years, a higher annual premium is required.
What is the purpose of the grace period?
To prevent unintentional policy lapse for nonpayment of premiums.
Also known as flexible premium life
Universal life
Which authorities regulate variable life policies?
Variable life insurance products are dually regulated by the State and Federal Government: the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the State Department of Insurance.
Protection which matures at age 100
Whole life
endowment insurance
a type of insurance that pays the face value of the policy to beneficiaries if the insured dies before the endowment period ends
Nonforfeiture Values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Policy maturity
in life policies, the time when the face value is paid out
