Life Insurance
Juvenile Life
"jumping juvenile" premium remains level, face amount increases at predetermined age, often 21
Agents selling variable life insurance products must:
1. Be registered with FINRA 2. Be licensed by the state to sell life insurance 3. Have received a securities license
What are two features that distinguish group insurance from individual insurance?
1. Evidence of insurability is usually not required (unless an applicant is enrolling for coverage outside the normal enrollment period) 2. Participants (insureds) under the plan do not receive a policy because they do not own or control the policy
Industrial Life is also called:
1. Home Service Insurance
What are the two components in a Universal Life Policy?
1. Insurance component 2. Cash Account
What are the certain areas that straight life is different than Industrial life on an individual basis?
1. Larger face amounts 2. Premiums can be paid annually, semiannually, quarterly, or monthly 3. Premiums are paid by the insured directly to the insurance company 4. A physical examination may be required to prove the applicant's insurability.
What are the three types of term coverage available?
1. Level 2. Increasing 3. Decreasing
Straight Life is also called:
1. Ordinary Life 2. Continuous Premium Whole Life
Permanent Life Insurance
A general term used to refer to various forms of whole life insurance policies that remain in effect to age 100 so long as the premium is paid.
Limited Pay Whole Life
A variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid-up well before age 100.
Universal Life Insurance
Also known as Flexible Premium Adjustable Life
What does Variable Universal Life Insurance provide for policyowners?
Flexible premiums and an adjustable benefit
In Variable life insurance contracts the policyowner bears?
Investment risk. (assets in separate account)
Variable Life Insurance
Is a level fixed premium investment based product
Does term insurance have cash value?
No
Cash value is also called?
Nonforfeiture Value
An adjustable life policy can assume the form of which two types of insurance?
Term insurance and/or Permanent insurance
Can the death benefit of a variable life policy decrease below face amount?
The death benefit can not generally decrease over the initial face amount of the policy.
Option B Death Benefit
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. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Adverse Selection
The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.
When would Increasing Term be ideal?
To handle inflation and the increasing cost of living. It is often added to another policy as a rider, such as with return of premium policies
Estate
a person's net worth
Flexible Premium Policies
allow the policyowner to pay more or less than the planned premium
Deferred
withheld or postponed until a specified time or event in the future
Survivorship Life
(also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that 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 in a sense is extended, resulting in a lower premium than that which is typically charged for joint life, which pays upon the first death. This type of policy is often used to offset the liability of the estate tax upon the death of the last insured.
Pure Death Protection
1) If the insured dies during this term, the policy pays the death benefit to the beneficiary; 2) If the policy is canceled or expires prior to the insured's death, nothing is payable at the end of the term; 3) There is no cash value or other living benefits.
Types of Flexible Premium Policies:
1. Adjustable Life 2. Universal Life 3. Indexed Universal Life
As the insured's needs change, the policyowner can make adjustments in the policy- typically the policyowner has the following options:
1. Increase or decrease the premium or the premium paying period 2. Increase or decrease the face amount 3. Change the period of protection
Key Characteristics for Whole Life Insurance include:
1. Level Premium: the premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy. 2. Death Benefit: the death benefit is guaranteed and also remains level for life. 3. Cash Value: the cash value, created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100 (the policy maturity date),m and is paid out to the policyowner. 4. Living Benefits: the policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. The cash value does not usually accumulate until the third policy year and it grows tax deferred.
In group insurance, master contracts and certificates of insurance goes to whom?
1. Master contracts- for employer 2. Certificate of Evidence- Individual insurers
What types of premiums can a policyowner choose from when adjusting a Universal Life policy?
1. Minimum Premium: The amount needed to keep the policy in force for the current year. 2. Target Premium: 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 throughout its lifetime.
What are the two types of Death benefit options Universal Life Insurance offer?
1. Option A: Level Death Benefit Option 2. Option B: Increasing Death Benefit Option
Types of Traditional Whole Life Policies:
1. Permanent Life 2. Whole Life
When converting a whole life to a term policy, the insurer may adjust the death benefit, which means?
1. The policyowner may also pay additional premiums above and beyond what is required under the permanent form in order to accumulate greater cash value or to shorten the premium paying period.
What are distinguishing features of Industrial Life policies?
1. Written in small amounts (usually with a face amount of $2,000-$10,000) 2. Premiums are payable on a weekly or monthly basis. 3. Premiums are collected by a representative of the insurance company at the home of the insured 4. Policies are written as non-medical (no medical exam is required; however medical history information is still collected)
Straight life Insurance
A basic policy that charges a level premium for the lifetime of an insured and provides a level, guaranteed death benefit
Indexed Universal Life
A universal life policy with an equity index as its investment feature. The policy's cash value is dependent upon the performance of the equity index
How is group insurance usually written?
As an annually renewable term.
When do Whole Life policies endow?
At the insured's age 100- which means the cash value created by accumulation of premium is scheduled to equal the face amount of the policy at age 100.
Are cash value and death benefit guaranteed in Variable Universal Life Insurance?
Cash value is not guaranteed and the death benefit is not fixed. The cash value and or death benefit may increase or decrease over the life of the policy depending on the investment performance of the underlying sub-account.
Is cash value in Variable Life insurance guaranteed?
Cash value is not guaranteed in Variable life insurance policies and also fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.
When is Decreasing Term purchased?
Commonly purchased to insure the payment of a mortgage or other debts if the insured dies prematurely.
When is the death benefit paid in Joint Life Insurance?
Death benefit is paid upon the first death only
Under the equity index universal policy what is the policies cash value dependent upon?
Dependent upon the performance of the equity index.
Single Premium Whole Life (SPWL)
Designed to provide a level death benefit to the insured age 100 for a one time lump sum payment. This policy is completely paid-up after one premium and it generates immediate cash; usually requires a minimum premium
Decreasing Term
Feature a level premium and a death benefit that decreases each year over the duration of the policy term.
What does FINRA stand for?
Financial Industry Regulatory Authority
Straight Life Insurance is also written on what basis?
Individual basis, but differs from industrial life in certain areas.
When is Joint Life Insurance used?
Joint Life Insurance is used primarily when there is a need for two or more persons to be protected; however the need for insurance is no longer present after the first insured dies.
What does Joint Life Insurance do for business partners?
Joint life is also used to insure the lives of business partners in the funding of a buy sell agreement and other business life needs.
What does level mean in level term insurance?
Level refers to death benefit, which does not change.
What must an insurer be licensed in to be able to sell Variable Universal Life Insurance?
Licensed in both Securities and Life Insurance
Level Term Insurance
Most common type of temporary protection purchased. The word level refers to the death benefit that does not change throughout the life policy.
Does the insured and the policyowner have to be the same person?
No
When is Increasing Term used?
Often used by insurance companies to fund certain riders that provide a refund of premiums or a gradual increase in total coverage, such as the cost of living or return of premium riders.
Will a universal life policy lapse if a payment is not made?
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 cover the monthly deductions for cost of insurance.
What is the premium based on in Joint Life Insurance?
Premium is based on a joint average age that is between the ages of the insureds
Term Insurance provides:
Pure Death Protection
Term Insurance
Pure insurance
What does SEC stand for?
Securities and Exchange Commission
What insurance provides the greatest amount of coverage for the lowest premium?
Term Insurance
Universal Life Insurance
That implies that the policyowner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again.
Option A Death Benefit
The death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years.
What is the main reason for purchasing industrial insurance?
To help cover the insured's funeral expenses.
Are Variable Universal Life policies dually regulated by the State and Federal Government?
True
Cash values and death benefits are not guaranteed when?
Under Universal life policies
Are premiums for Whole Life policies usually higher or lower than for term insurance?
Usually Higher
When is Group Insurance normally written?
Usually written for employee-employer groups, but other types of groups are also eligible for coverage.
Does Variable life insurance have fixed premiums?
Variable life policies have fixed premiums and a guaranteed minimum death benefit
Limited Pay Whole Life policies are suited for whom?
Well suited for insureds who do not want to be paying premiums beyond a certain point in time.
When is Decreasing Term primarily used?
When the amount of needed protection is time sensitive, or decreases over time.
When does cash value develop on an adjustable life policy?
When the premiums paid are more than the cost of the policy.
What is the most common type of Permanent Life Insurance?
Whole Life
Can premiums be adjusted on a Universal Life policy?
Yes
Does cash value build up faster for Limited Pay policies?
Yes
Does the policyowner of an adjustable life policy have the option to convert their policy to a whole life or vice versa?
Yes
Is the insurance component of a Universal Life policy always annually renewable term insurance?
Yes
Does joint whole life function the same as an individual whole life policy?
Yes, but with two major exceptions. 1. The premium is based on a joint average age that is between the ages of the insureds 2. The death benefit is paid upon the first death only
Joint Life Insurance
a policy written on the lives of two or more people and is payable at the time of death of the first person to die
Cash Value
a policy's savings element or living benefit
Nonforfeiture Values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Variable Universal Life
combination of universal life and variable life; provides policy owner with flexible premiums and adjustable death benefit, policyowner decides where cash value will be invested (not guaranteed)
Liquidation of an estate
converting a person's net worth into a cash flow
Adjustable Life
developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage)
Cash Value
equity amount accumulated in permanent life insurance
Increasing Term
features level premiums and a death benefit that increases each year over the duration of the policy term.
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
Group Life Insurance
issuing to the sponsoring organization, and covers the lives of more than one individual member of that group.
Term Insurance
life insurance protection for a specified period of time; sometimes called temporary life insurance
Illustrations
presentation or depiction of nonguaranteed elements of a life insurance policy
Level Premium Term
provides a level death benefit and a level premium during the policy term
Whole Life Insurance
provides lifetime protection, and includes a savings element (or cash value)
Face Amount
the amount of benefit stated in the life insurance policy
Death Benefit
the amount paid upon the death of the insured in a life insurance policy
Endow
the cash value of a whole life policy has reached the contractual face amount
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
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.
Industrial Life Insurance
written on an individual basis that provides insurance to industrial workers or people who are unable to afford insurance for bigger amounts.
