Term Life Policies

Universal Life Insurance (Option A and Option B)

Option A: Level death benefit (less expensive) Option B: Increasing death benefit gradually over time (more expensive)

Joint Life Policy

-2 people covered on one policy -Average age of the 2 people covered -Death benefit paid out when the first person passes away

Group Conversion

-Must have at least 5 years under group plan -Can convert to Whole Life (must be some type of cash value policy, cannot be individual) -Must do conversion within 31 days to avoid having to do a physical -Premium will increase because you are going from group to individual and going from term to whole life

3 Biggest Factors in Cost of Insurance

1. Age 2. Gender 3. Smoker/Non-Smoker

What must an agent receive to sell variable life insurance?

1. FINRA registration 2. A securities license 3. A life insurance license

Universal life policies have 2 types of interest rates. What are they?

1. Guaranteed 2. Current

What are you able to adjust with adjustable life insurance?

1. The premium or premium payment period 2. The face amount 3. The coverage period

What do Modified Life and Straight Life policies have in common?

Accumulation of cash value

A man decided to purchase a $100,000 annually renewable term life policy until his kids graduate college. He discovered that his policy requires what each renewal?

An increase in premium payment

What happens to the cash value when a whole life insurance policy matures

Cash value is paid to the policyowner

Family Policy

Covers the whole family in a single contract

What component must decrease in the decreasing term on term insurance

Death Benefit Face Amount

What type of life insurance is best suited to cover a mortgage?

Decreasing term

Annually (aka yearly) Renewable Term

Every year at the end of a term, you have to renew your policy. The older you get, the higher your premium goes up.

What does level refer to?

Face amount

Securities

Financial instruments that may trade for value. For example, stocks bonds, and options

What type of premium do both universal life and variable universal life policies have?

Flexible

Adjustable policy

Good for people with commission based jobs -Can be term or permanent

What type of policy is typically issued without proof of insurability from the insured?

Group policy

Policy Maturity

In life policies, the time when the face value (amount of benefit stated in the life insurance policy) is paid out

Flexible Premium Adjustable Life (Universal Life)

Insured can skip a payment as long as the cash value exceeds the premium

In term policies, what happens to the premium throughout the term of the policy?

It remains level

A policy will pay the death benefit if the insured dies during the 20-year premium paying period and nothing if the death occurs after the 20-year period. What type of policy is this?

Level term

A whole life policy that requires the policy holder only pays the premiums for a set number of years is known as what kind of policy?

Limited Pay Whole Life

What type of insurance could be life paid up to age 65?

Limited pay whole life

What universal life option has a gradually increasing cash value and a level death benefit?

Option A

Which type of policy would have an IRS required corridor or gap between the cash value and death benefit?

Option A (Level Death Benefit option)

What are the death benefit options in a universal life policy

Option A- Level death benefit Option B- Increasing death benefit

Lapse

Policy termination due to non-payment of premium

What is the major difference between the 3 major types of whole life policies: Single Premium, Straight Life, and Limited Payment?

Premium payment mode

What license must someone have to sell variable life policies?

Securities

A domestic insurer issuing variable contracts must establish one or more what?

Separate accounts

What type of whole life policy generates immediate cash value?

Single premium whole life

Death Benefit

Stays the same or is level

What type of insurance policy offers pure death protection?

Term

Face amount

The amount of benefit stated in the life insurance policy

Increasing Term

The death benefit increases and the premium stays the same for a few years

Under option B in a universal life policy, what happens to the death benefit?

The death benefit increases each year by the amount of the cash increases

Attained Age

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

Family Income Policy

The principle wage earner is the only family member insured

Endow

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

What is the purpose of establishing a target premium for universal life policies?

To prevent the policy from lapsing or to keep the policy in force

How many loan features are there for term insurance?

Two -Renewable: You can renew for another period of time -Convertible: Can be converted to another cash accruing policy later on as clients make more money

In group life insurance policies, when is the benefit paid?

Upon the first death

What type of life insurance has an investment component?

Variable

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Are group life insurance policies annually renewable terms?

Yes

Does Variable Universal Life Insurance have many features of Whole Life Insurance?

Yes

Straight Life (Whole Life Insurance)

You make the same payment every year until the policy reaches maturity

Limited Pay (whole life insurance)

You pay a set number of years to a specified age

What are the living benefits of whole life insurance?

Loan values

Who owns a group life insurance policy

The employer (AKA the sponsor of the group)

Who bares the investment risk on variable life insurance?

The policyowner

Level term

The premium and the death benefit stay level. You get to choose the length of the term.

Level Premium

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

Graded premium whole life

The premiums are lower in the early years of the policy and increase over time to the point where the become level for the remainder of the policy

Graded-Premium Whole Life policy premiums are typically lower to start with and then increase for 5-10 years gradually. What happens after that period of increase?

They become level

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

They can convert their coverage to permanent life insurance without evidence of insurability

What type of life insurance have flexible premiums?

Universal

Which life insurance policy is interest sensitive?

Universal Life

Between adjustable life and universal life policies, which provides more flexibility to the policyholder?

Universal life

In what type of insurance policies can the policy holder skip premium payments without the policy elapsing?

Universal life insurance policies

Master Policy

What the employer (group sponsor) of a group life policy receives when the insureds receive certificates of insurance

When does an adjustable life policy accumulate cash value?

When the premiums paid are most than the cost of the policy

Variable Life Insurance

-Best when stock market is high -Must have securities + life license -Sells mutual funds through the account -Owner of policy chooses mutual funds -Gives stock market exposure (variable) so cash value goes up and down -Riskier product

Variable Universal Life Insurance

-Combination of Variable and Universal -Dually regulated by State Insurance Dept. so just like variable it's regulated by SEC/FINRA so you must have more than just your life insurance license to sell it

Types of Group Life Policies

-Employer/Employee Group -Debtor/Creditor Group -Labor Union -Association

Group Life Policy

-Inexpensive death benefit -Employer/Employee group is often what this type of insurance is for -Must be full time employee

Benefits of Term Insuance

-Maximum protection -Lowest cost -Increasing term for riders -Decreasing term for debt

Survivorship Life Policy

-Often used in estate planning process when the beneficiary is the child for example -Death benefit not paid out until the 2nd person dies

Single Premium Whole Life

-Permanent -Grows cash value over time -You are able to pay in lumpsum or annually

Whole life insurance

-Permanent -Goes up to age 100 -Cash value accrues -Cash value = death benefit and it is paid out to you if you are alive at the end of the term or goes to your beneficiary if you pass away -Guaranteed death benefit -Cash value with a guaranteed interest rate

What do underwriters consider before issuing a group life policy?

-Purpose -Size -Financial Strength -Turnover

Universal Life Insurance

-Stated interest rate to grow cash value -Stated for 1 year at a time then insurance company looks at what universal policy is paying you and re-evaluates the cash value based on interest rates, expenses, current loans and withdraws. -Minimum interest rate of 1-2% incase interest rates drop lower than that -Annual rate is reviewed and changed according to the rates at the time that it comes up for renewal each year -Excess money goes into cash value

What elements of adjustable life policy can be changed by the policyowner?

-The amount and payment period of the premium -The face amount -The period for protection

What type of premium payment is charged on straight life policy?

A level premium for the life of the insured

The death protection component of universal life insurance is expressed as what type of coverage?

Annually renewable term

Nonforfeiture Values

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

Endowment policy

Best for a customer who does not mind paying a higher premium for a life insurance product that would allow for faster growth of the cash value

What feature of Indexed Whole Life Policy is NOT fixed?

Cash Value Growth

Invariable universal life insurance, what are the 2 variables?

Cash value and death benefit

Variable Life Insurance

Cash value in SEPERATE accounts *Whenever you have a question about SEPERATE accounts, the answer will be variable

If an employee wants to join a group policy outside of the enrollment period, what would they have to provide?

Evidence of insurability

When the amount of insurance increases in an adjustable life policy, what will the insurer require from the insured?

Evidence of insurability

What is the main advantage of switching from group life insurance to individual coverage?

Evidence of insurability is not required

Adverse Selection

Insuring to risks that are more prone to losses than the average risk

What type of insurance policy is life-paid up at age 65?

Limited pay whole life

Decreasing term

Premium stays the same but the death benefit goes down. This is mostly caused by financial debt. Matched by what you owe on the loan.

Regarding taxation, how does the cash value in a universal life policy accumulate?

Tax deferred

Term Insurance

Term Insurance: -AKA temporary insurance -First and most simple type of life insurance. -Always going to be the cheapest and never has a cash value, so the premium is lower. -No loans allowed because you have no cash value. -Matures at death (is paid out to beneficiary when you pass)

What type of policy is described as the "Greatest"?

Term Policy (term policies provide for the greatest amount of coverage for the lowest premium

Term vs. Whole Life (aka Permanent)

Term: -Temporary -Specific period of time -No cash value -Cheaper in early years Whole life: -Goes out to age 100 -Cash value you can access for a loan against cash value

In annually renewable term insurance policies, what is the annual premium rate determined based off of?

The insureds attained age

Who bares the investment risk in a whole life insurance policy?

The insurer because they guarantee you an interest rate

Premium

The money paid to the insurance company for the policy

What determines the cash value of a variable life insurance account?

The performance of the policy portfolio

Proposed Insured

The person applying for insurance