Chapter 3 Life Insurance Policies
Type of whole life insurance where the premium is approximately 50% or lower than the premium of a straight life policy and gradually increases each year for a period of usually 5-10 years and then remains level thereafter?
Graded-Premium Whole Life
Term life insurance policies provided the ______ amount of coverage for the _____ premium as compared to any other form of protection
Greatest Lowest
What type of policy is typically issued without proof of insurability from the insured?
Group Policy
What type of policy issues certificate of insurance to the insureds?
Group Policy
The policyowner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount?
Age 100
Group life insurance policies are written as what type of insurance?
Annually Renewable Term
The death protection component of a universal life policy is expressed as what type of coverage?
Annually Renewable Term
What is the purest form of term insurance?
Annually Renewable Term (ART)
ART stands for
Annually Renewable Term Insurance
the insurance component of a universal life policy is always?
Annually renewable term insurance
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Groups purpose Size Financial Strength Turnover
Universal life policies have 2 types of interest rates. What are they?
Guaranteed Current
Type of whole life policies that allow the policyowner to pay more or less than the planned premium?
Flexible Premium Policies
Contracts that offer guaranteed minimum or fixed benefits
Fixed Life Insurance Products
Universal Life insurance generic name is?
Flexible Premium Adjustable Life
SPWL stands for
Single Premium Whole Life
What type of whole life insurance policy generates immediate cash value?
Single Premium Whole Life
Type of whole life insurance that is designed to provide a level death benefit to the insured's age 100 for a one time lump sum payment?
Single Premium Whole Life (SPWL)
Of the 3 forms of whole life insurance which one has the lowest annual premium?
Straight Life
List the 7 main Whole Life policies
Straight Life Limited Payment Single Premium Graded Premium Modified Life Interest Sensitive Equity Indexed
What are the 3 basic forms of whole life insurance?
Straight Whole Life Limited-Pay Whole Life Single Premium Whole Life
Term life insurance is ________ protection because it only provides coverage for a specific period of time
Temporary
Term insurance is most generally purchased to provide?
Temporary coverage A large amount of coverage for a relatively small premium
What type of life insurance policy offers pure death protection?
Term
What elements of an adjustable life policy can be changed by the policyowners?
The amount and payment period of the premium The face amount The period of protection
In a group life insurance policy, what can't the employer select when it comes to the policy/benefit?
The beneficiary
If a statement of policy information is not furnished to the applicant at the time of application, how soon must the form be delivered to the applicant?
15 business days
A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?
20-Year Level Term
If an employee terminates membership in the group insurance, how long do they have after terminating from the group to exercise their conversion option?
31 days
If an employer terminates the master contract for a group plan, every individual who has been on the plan for ____ will be allowed to convert to an individual permanent insurance of the same coverage
5 years
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
Type of life policy that can assume the form of either term insurance or permanent insurance?
Adjustable Life
List the 2 different types of Flexible Premium policies
Adjustable Life Universal Life
The insured's age at the time the policy is renewed or replaced
Attained Age
Agents selling variable life insurance products must:
Be registered with FINRA Be licensed by the state to sell life insurance Have received a securities license
Define Accumulate in terms of life insurance
Build Up
What is the main advantage of converting from group life insurance to individual coverage?
Evidence of insurability is not required
The amount of benefit stated in the life insurance policy
Face Amount
What does "level" refer to in level term insurance?
Face Amount
What policy component must decrease in decreasing term insurance?
Face Amount
A policy's savings element or living benefit
Cash Value
Term insurance has no _____ ______
Cash Value
If an insured skips a premium payment on a universal life policy, the missing premium will be deducted from the policy's ____ ____, the policy will not _____
Cash Value Lapse
In variable universal life insurance, to what policy component does the term "variable" refer?
Cash Value and Death Benefit
What happens to the cash value when a whole life insurance policy matures?
Cash value is paid to the policyowner
Interest Sensitive Whole Life is also referred to as?
Current Assumption Life
Describe an Annually Renewable Term life insurance
Death benefit remains level Policy guaranteed to be renewable each year without proof of insurability Premium increases annually according to attained age (probability of death increases)
An individual just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation?
Decreasing Term
What type of life insurance is best suited to cover a mortgage?
Decreasing Term
withheld or postponed until a specified time or event in the future
Deferred
To have the cash value of a whole life policy reach the contractual face amount
Endow
Type of whole life insurance policy that's face amount increases annually to keep up with inflation without requiring evidence of insurability?
Equity Indexed Whole life (Indexed Whole Life)
Type of whole life insurance that's cash value is dependent upon the performance of the equity index, such as S&P 500, and has a guaranteed minimum interest rate?
Equity Indexed Whole life (Indexed Whole Life)
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?
Evidence of insurability
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of insurability
A universal life policy has 2 components, an
Insurance Component Cash Account
Type of whole life policy that credits the cash value with the current interest rate and provides for a minimum guaranteed rate of interest
Interest Sensitive Whole Life
Type of whole life policy whose premiums change depending upon the insurer's underlying death, investment and expense assumptions.
Interest Sensitive Whole Life
policy termination due to nonpayment of premium
Lapse
Universal life offers what 2 death benefit options to the policyowner?
Level Death Benefit Increasing Death Benefit
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
Describe the difference between the 2 death benefit options when it comes to a universal life policy
Level Death Benefit- death benefit remains level while cash value gradually increases thereby lowering the pure insurance with the insurer in the later years Increasing Death Benefit- death benefit increases annually by the annual increase in cash value
the premium that does not change throughout the life of a policy
Level Premium
List some key characteristics of whole life insurance policies
Level Premium Death Benefit Cash Value Living Benefits
What term insurance provides a level death benefit and a level premium during the policy term?
Level Premium Term
List the 3 main Term Life policies
Level Term (most common type) Annually Renewable Term (purest form of term insurance) Level Premium Term
What term insurance is the most common type of temporary protection purchased?
Level Term Insurance
Whole life insurance provides _____ protection and accumulates ____ ____
Lifetime (permanent) Cash Value
What type of whole life insurance is designed so that the premiums for coverage will be completely paid up well before age 100?
Limited Payment (Limited-Pay)
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?
Limited-Pay Whole Life
What type of life insurance policy is Life Paid-up at Age 65?
Limited-Pay Whole Life
What are the living benefits of whole life insurance?
Loan values
Type of whole life policy that charges lower level premiums in the first few policy years, usually 3-5 years and then a higher level premium for the remainder of the insured's life?
Modified Life
Benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Nonforfeiture Value
What universal life option has a gradually increasing cash value and a level death benefit?
Option A (Level Death Benefit)
Straight (Whole) Life insurance is also referred to as
Ordinary Whole Life Continuous Premium Whole Life
Type of life insurance that in general is used to refer to various forms of life insurance policies that build cash value and remain in effect for the entire life of the insured as long as the premium is paid
Permanent Life Insurance
In life policies, the time when the face value is paid out
Policy Maturity
Who bears the investment risk in variable life insurance products?
Policyowner
Who is entitled to the cash values in a life insurance policy?
Policyowner
What happens to the premium in an annually renewable term life policy?
Premium increases with each renewal
How is the premium determined in a joint life insurance policy?
Premium is based on the average age of the insureds
What is the major difference between the most common types of whole life policies: Straight Life, Limited Payment and Single Premium?
Premium payment mode
Term life insurance provides what is know as ____ ____ protection
Pure Death
Term life insurance is also known as
Pure Life Insurance
Financial instruments that may trade for value (ex. stocks, bonds, options)
Securities
Who owns a group life insurance contract?
The employer (also known as the sponsor of the group)
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
In term policies, what happens to the premium throughout the term of the policy?
The premium remains level
The cash value of an adjustable life policy only develops when?
The premiums paid are more than the cost of the policy
Why are policy loans not available on term insurance?
There is no cash value to borrow against
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
Universal Life
In what type of insurance policies can the policyowner skip premium payments without the policy lapsing?
Universal Life
In a joint life policy, when is the death benefit paid?
Upon the first death
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
What type of life insurance is a level, fixed premium, investment based product?
Variable Life Insurance (also referred to as Variable Whole Life Insurance)
Contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Variable Life Insurance Products
When would a 20-pay whole life policy endow?
When the insured reaches age 100
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
Whole Life
What is the most common type of permanent insurance?
Whole Life
What type of life insurance policy provides permanent protection?
Whole Life
Are variable contracts considered securities?
Yes
Who is insured under a juvenile life policy?
minor
Define Whole Life Insurance
provides lifetime protection and includes a savings element (or cash value)
"Level" in level term insurance refers to the?
the death benefit, which does NOT change