Chapter 3 - Life Insurance Policies
15 days
a group life insurance customer is converting their policy to an individual policy, within how many days of the first premium must the insurer notify the insured of their eligibility?
consideration clause includes
amount of premium payment
does not require a securities license to sell
indexed universal life
Annually Renewable Term (ART)
level term insurance
second to die (last survivor)
survivorship life
which of the following types of policies allows for a flexible premium AND a variable investment component?
variable universal life
an insured purchased a variable life insurance policy with a face amount of 50,000. Over the life of the policy, stock performance declined and cash value fell to 10,000. If the insured dies, how much will be paid out?
50,000. The cash value of variable life is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefit amount.
Term to 65
A term insurance policy with level premium and level death benefits that provides coverage until the insured's 65th birthday
Decreasing Term
A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.
what characteristic makes whole life permanent protection?
Coverage until death or age 100
Option A Universal Life
death benefit remains level while the cash value gradually increases
Variable Whole Life
Has a level fixed premium
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.
which type of life insurance policy generates immediate cash value?
Single Premium
Option B Universal Life
The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
Level Death Benefit
The death benefit is guaranteed and remains level for the entire lifetime of the policy.
The death benefit can be increased by providing evidence of insurability.
The policyowner of an adjustable life policy wants to increase the death benefit, how can they do this?
all of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account
all of the following statements are correct regarding credit life insurance
benefits are paid to the borrower's beneficiary
straight life policies
charge a level annual premium throughout the insured's lifetime, and provide a level, guaranteed death benefit
Fixed Life Insurance
contracts that offer guaranteed minimum or fixed benefits
which of the following is true about credit life insurance?
creditor is the policyowner
variable universal life
may or may not have a minimum death benefit
Continuous Premium Whole Life
most common type of whole life insurance; stretch premium payments over the whole life of the insured up to age 100
level term
no 'cash value'
a universal life policy has two types of interest rates that are called
guaranteed and current
Credit Life Insurance
A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.
Increasing Death Benefit
An optional Universal Life contract choice that bases the proceeds paid on the combination of original face amount plus the policy account total of the contract on the date of death of the insured.
20-pay life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
credit life
decreasing term
Mortgage protection term life
decreasing term insurance in which the face amount directly correlates with the amount of outstanding loan
Universal Life Insurance
permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates
decreasing term policy
premiums remain level with a __________________________, only the face amount decreases.
Level Premium Term
provides a level death benefit and a level premium during the policy term
A domestic insurer issuing variable contracts must establish one or more
separate accounts
Survivorship Life
A life insurance contract which pays policy proceeds only upon the death of the last of two or more insureds covered by a combination plan.
Variable Life
A life insurance policy where the insured determines how to invest the dollars that accumulate in cash value
Universal Life - Option A
What policy would have an IRS required corridor or gap between the cash value and the death benefit?
When would a 20-pay whole life policy endow?
When the insured reaches age 100
first to die
joint life
Single Premium Whole Life
Paid up for life with one large premium payment
Joint Life
A single policy that is designed to insure two or more lives.
straight life insurance
Life insurance that requires the payment of premiums until the face value is reached or the insured is deceased; also called ordinary life or whole life
Adjustable Life
Life insurance which permits changes in the face amount, premium amount, period of protection, and the duration of the premium payment period.
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
which of the following statements is correct regarding a whole life policy?
Policyowner is entitled to policy loans.
Term Insurance
Provides the greatest amount of coverage for the lowest premium
One-Year Term Option
Purchase one-year term protection
who has the investment risk in variable life?
the policyowner
which type of insurance policy allows the policy owner to pay more or less than the planned premium?
universal life
Level Term Insurance
Term insurance where the face value of policy remains the same from the date the policy is issued until the date the policy expires.
all of the following entities regulate variable life policies EXCEPT
The Guaranty Association
a universal life insurance policy is best described as an
annually renewable term policy with a cash value account
an employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
attained age
individual whole life
group life insurance can be converted to an ____________________________, not a term policy.
variable whole life
guarantees a minimum death benefit
survivorship life policy
has a lower premium due to longer age average
term insurance
has no cash value
what are the two components of a universal policy?
insurance and cash account
group life insurance
life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance
Consideration
something of value exchanged for something else of value
Indexed Universal Life Insurance
A variation of universal life insurance with certain key characteristics; there is a minimum interest rate guarantee; additional interest is credited to the policy based on the investment gains of a specific stock market index; and a formula determines the amount of enhanced (additional) interest credited to the policy.
when an employee terminates coverage under a group insurance policy, coverage continues in force
for 31 days
Annually Renewable Term
Universal life insurance is always
To keep the policy in force
What is the purpose of establishing the target premium for a universal life policy?
Annually Renewable Term (ART)
least expensive first year premium
variable whole life is based on what type of premium?
level fixed
3 basic types of term coverage
level, increasing, decreasing
Annually Renewable Term (ART)
the purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.
which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage
those who have been insured under the plan for at least 5 years
who has the investment risk in whole life?
the insurer
which of the following is a key distinction between variable whole life and variable universal life
variable whole life has a guaranteed death benefit
which of the following is a key distinction between variable whole life and variable universal life products?
variable whole life has a guaranteed death benefit.
Convertible Provision
Provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability
Consideration Clause
A part of the insurance contract that states that both parties must give something of value for the transfer of risk, and specifies the conditions of the exchange.
Flexible Premium
A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.
Reduced Paid-Up Option
the policyowner pays no more premiums but the face amount is decreased.
Group Life
the cost of coverage for a __________________ policy is based on the ratio of men to women
limited-payment life insurance
the insured has lifetime protection, and premiums are level, but they are paid only for a certain period
Variable Universal Life
- Death Benefit is Variable & Adjustable - Two death benefit options - Premium is Flexible - Mortality Rates are current & guaranteed maximum - Cash Value is variable, and no Guarantee - Yes, investment options - Yes, partial surrenders
life income
straight life is the same as
When Group coverage is converted to an individual policy
the insurer will determine the type of coverage, usually permanent insurance
