Life insurance Basics

The policy owner of an adjustable life policy wants to increase the death benefit. What must he provide to accomplish this.

The death benefit can be increased by providing evidence of insurablity.

What is the purpose of establishing a Universal Life Policy?

To keep the policy in Force

If an agent wishes to sell variable life policies, what license must be agent obtain?

Securities License

Settlement Option

A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

The death protection component of Universal Life Insurance is alway?

Annually Renewable Term

Interest-Sensitive Whole Life

Cash values are generated by investments. Interest rates will afftect the amount of the cash value.

Variable Life Insurance is based on what kind of premium?

Level Fixed

B just bought a car that he anticipates will be paid off in four years. he also wants to buy life insurance but is financially strapped until the car is paid off. what type of policy would work best for him?

Modified Life

Which type of insurance policy generates immediate cash value.

Single Premium

Which compenent increases in the increasing term insurance

death benefit

Modified Endowment Contract

Any cash value life insurance policy that develops cash value faster than a seven-pay whole life insurance contract. It loses the benefits of a standard life contract.

Universal LIfe

Policyowner has the flexibility to create the amount of premium going into the policy and later decrease it again. In fact, the policy owner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium

Adjustable Life

At age 30, an applicant wants to start an insurance program but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which policy would he choose to fit his needs

Adjustable life

Adjustable life policies allow for increases or decreases in the face amount or premium, so long as the premium is sufficient to pay for the mortality. any increasein famce amount requires proof of insurability

Straight Live policy has what type of premium?

Level annual Premium for the life of the insured.

What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy the premiums are lower than those a straight whole life policy and in subsequent years the premiums are higher than those a of a straight whole life policy?

Modified Life

If an immediate annuity is purchased with the face amount at death or the cach value at surrender, this would be considered a

Settlement Option

Cash Surrender Value

This is figured by the differenece between the premiums paid and the cash value.

In an Adjustable Life Policy all of the following can be charged by the policy owner EXCEPT?

Type of investment

OFFERS Flexible Premiums

Variable Univeral Life, like Universal Life itself, has a flexible premium that can be increased or decreased as the policy owner chooses, so long as there is enough value in the policy to fund the death benefit.

Decreasing Term

death benefit decreases as time goes on. The price on these policies are the lowest

Flexible Premium

premium that can be increased or decreased as the policy owner chooses, so long as there is enough value in the policy to fund the death benefit.

Increasing term

provides an increase in the death benefit each year. The coverage is usually structured to provide a death benefit equal to the amoung of the premium paid on a permananent life insurance policy or to provide a death benefit equal to the cash value accumulation in a permanenet policy: however is can be written as a stand-along policy for the individual that has a need for increasing amounts of insurance.

An insured has a Level TermLife Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and what?

pay a lower renewal premium by proving insurability.

Universal Life

What type of policy allows the policy owner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount.

Modified Life

charges a lower premium for the first few policy years and then a higher level premium for the remainder of the life of the policy. These policies were created to make the purchase of whole life insurance more attractive for indiivduals who have limited financial resources will be able to afford higher premiums in the near future.

Single Premium Whole Life (SPWL)

endows for the face value of the policy if the insured lives until the age of 100. The distinguishing feature of this policy is that it generates immediate cash value, due to the lump-sum payment maade by the insurer.

Target Premium

the 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 thoughout its lifetime.

Life Paid-Up to Age 65

Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns `00. It is the premium paying period that is limited, not the maturity.

Straight life Policy

Straight life policies charge a level annual premium for the lifetime of the insured and provide a level guaranteed death benefit.

What are variable life products are governed by?

The Securities and Exchanged commission.

Dividend

the return of unused premiums that are not considered income for tax purposes.

Which type of insurance policy covers the whole family in a single contract

Family Policy

A policy that is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy

Graded premium Whole Life

Jumping Juvenile Policy

If a life insurance policy increases significiantly in face amount (death benefit) when the insured reaches a specified age, what kind of policy is it?

Survivorship Life

Much the same as joint life in that if it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy is a sense in extended. This results in a lower premium than that which is typically charged for joint life.

Graded Premium Whole Life

Premiums charged for a graded premium whole life policy are lower during the preliminary period and then increase each year until leveling off after the preliminary period. The premium rates are actually equivalent to a standard whole life policy.

Increasing term insurance

features level annual premiums and a death benefit that increases each year over the duration of the policy term.

An insured decides to surrender his 100,000 whole life policy. the premiums paid into the policy added up to 15,000. At policy surrender, the cash surrender value was 18000. What part of the surrender value would be income taxable?

$3000

Family Policy

provides permanent life insurance for the breadwinner and term riders for other family members. With a family income policy the principal wage earner is the only family member insured.

An insured purchased a life insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. What type of policy is this?

Interest-Sensitive Whole Life

Main purpose of Seven-Pay Test?

It determines if the insurance policy is an MEC

Seven-Pay TEST

determines whether an insurance policy is "over-funded" or if it's a Moideified Endownment Contract. In other words, the cumulative peremiums paid during the first seven years of a policy must NOT exceed the total amount of net level premiums that would be required to pay the policy up using guaranteed mortaility costs and interest.

Option A_

death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

Term Insurance that provides increasing death benefits as the insured ages

Increasing term

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family memmbers that are covered under the policy?

they can convert their coverage to permanent life insurance without Evidence of insurability. Family members may convert their term coverage to permanent insurance if requested within the time stated in the policy.

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?

lower

Adjustable Life Policy

The owner of an Adjustable Life Policy has the following priviledges: increasing or decreasing the premium, changing the premium0paying period, increasing or decreasing the face amount of coverage, or changing the period of production.

Annually Renewable Term

A universal policy has two components: an insurance component and a cash account. The insurance component (death protection) of a universal life policy is always annual renewable term insurance.

If an insurance policy develops cash value faster than a seven-pay whole life contract it is what?

Modified Endownment Contract

Jumping Juvenile Policy

Provides a low face amount in the early years and then increases, usually by 5 times the amount when the insured reaches an age specified in the policy. (normally 21)

An individual just borrowed 10,000 from his bank on a 5 year loan requiring monthly installments. What type of insurance policy would be best suited for him.

Decreasing term because the face amount decreases as the amount of the debt is reduced.

Are Life insurance benefits Tax deductible

Life Insurance Premiums are generally not taxed as income

Which Universal Life option has a gradually increasing value and a level death benefit

Option A- the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.