Life Insurance Policies

Agents selling variable life insurance must:

- Be registered with FINRA - Have a securities license - Be licensed by the state to sell life insurance

What are the common versions of limited pay whole life?

-20-pay life: completely paid in 20 years -life paid-up at 65: coverage completely paid for by age 65

Universal life

-A combination of a flexible premium and adjustable life insurance. -will not lapse if there is enough cash value to cover premium -interest sensitive policy -policyowner may be able to get current interest rate, premium would be higher.

Interest Sensitive Whole Life

-Coverage provides flexible premiums based on a changing interest rate. -provides a guaranteed death benefit to age 100

What are some requirements for group underwriting

-Each person completes a short application that clearly identifies the insured and beneficiary -if large enough group, no medical questions

whole life insurance

-Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be. -premium higher than term

graded premium whole life

-Lower premiums for designated timeframe (typically 5-10 years) -payments rise annually thereafter until leveling off

adjustable life

-Permanent + Term -Combines permanent and term life policies allowing changes to face amount, period payments, and term during policy lifetime. -policyowner has option to change from term to whole life or vise versa

equity indexed whole life

-cash value is dependent upon the performance of the equity index -face amount increases annually to keep pace with inflation without evidence of insurability -If policyowner assumes risk, premium and cash value increases -if insurer assumes risk, premium remains level

modified life whole life

-charges lower premium in first few years, then a higher level premium for the remainder of insured's life -for people with low income now but are going to have a larger income later in life

limited payment whole life

-designed for premium to be paid well before 100 -cash value builds up faster -higher premium, short pay period

What are some regulations of Variable life insurance?

-dually regulated by the State and Federal Government -regulated by securities and exchange commission (SEC) and Financial Industry Regulatory Authority (FINRA) -Also regulated by the Insurance Department as an insurance product

pure death protection

-if insured dies, beneficiary is paid -if policy is cancelled or expires prior to death, nothing is payable at the end of the term -no cash value or other living benefits

term life insurance

-life insurance protection for a specified period of time -pure life insurance -greatest amount of coverage for the lowest premium

Group Life Insurance

-life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance -annually renewable insurance

Level term insurance

-most common type of temp protection -level refers to the death benefit that does not change throughout the life of the policy

Continuous Premium Whole Life

-most common type of whole life insurance -lowest annual premium -policyowner pays premium until death or age 100

Death benefit options for whole life(2) Explain each.

1) Option A (level) -remains level while the cash value increases -lowers the pure insurance with the insurer in the later years 2) Option B (increasing) -gradually increases each year by the amount that the cash value increases -always be equal to the face amount plus the current cash value -much more expensive than option A. -cash value lower in the older years, all else is equal

What are the 4 key characteristics of whole life insurance? Explain each.

1)Level Premium -premium is based on age, so it remains the same throughout the life of the policy 2)Death Benefit -guaranteed and remains level for life 3)Cash Value -credited to the policy on a reg basis and have a guaranteed interest rate. 4)Living benefits -policyowner can borrow the cash value while policy is in effect, or when the policy is surrendered -cash value usually doesn't accumulate until 3rd year

What are the characteristics of group plans?(4) Explain each.

1)Purpose or Nature of the Group -must be created for a purpose other than to obtain group insurance 2)Size of Group -More people, more accurate the projections of future loss experience will be -Based on the Law of Large Numbers 3)Turnover of the Group -steady turnover: younger,lower-risk people enter while older, higher-risk people leave. 4)Financial Strength of the Group -determine whether or not the group has the financial resources to pay the premiums and if they will renew

What are the 2 parts to a universal policy?

1)insurance component 2)cash account

2 premium choices in universal life. Explain each.

1)minimum premium -amount needed to keep policy in force -paying minimum will results in policy being an annual renewable term product. 2)Target premium -recommended amount that should be paid on a policy to cover the insurance protection and to keep the policy in force for its lifetime.

Annually Renewable Term (ART)

A form of renewable term insurance that provides coverage for one year and allows the policy owner to renew coverage each year without evidence of insurability. Also called yearly renewable term (YRT).

single premium whole life (spwl)

A life insurance policy designed to provide a level death benefit to the insured's age 100 for a one-time, lump sum payment.

Variable Life Insurance

a fixed-premium policy in which the death benefit and cash values vary according to the investment experience of a separate account maintained by the insurer

Cash Value

a policy's savings element or living benefit

flexible premium policies

allow policy owner to pay more or less than the planned premium

What is the cost of coverage based off of in a group plan?

average age and ratio of men and women

nonforfeiture values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Variable Life Insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

securities

financial instruments that may trade for value (for example, stocks, bonds, options)

policy maturity

in life policies, the time when the face value is paid out

permanent life insurance

life insurance that provides a death benefit plus a savings plan and lasts for the policyholder's lifetime

lapse

policy termination due to nonpayment of premium by the end of grace period

level premium term

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

face amount

the amount of benefit stated in the life insurance policy

Attained Age

the insured's age at the time the policy is issued or renewed

level premium

the premium that does not change throughout the life of a policy

endow

to have the cash value of a whole life policy reach the contractual face amount

deferred

withheld or postponed until a specified time or event in the future