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Life > 4 - Non-Traditional Life Policies > Flashcards

4 - Non-Traditional Life Policies Flashcards

1
Q

Universal Life is sometimes also known as..

A

-Flexible Premium Adjustable Life

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2
Q

UL Interest Rates

A
  • “current interest rate”

- applied to the cash account

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3
Q

“Current Interest Rate” is a combination of…

A
  • “guaranteed interest rate”

- “excess interest rate”

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4
Q

UL “target premium” takes into account the desired…

A
  • amount of death benefit
  • premium paying period
  • amount of cash value accumulation
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5
Q

The solution to an “under-funded” Universal Live policy is to…?

A
  • increase the premiums

- and/or reduce the death benefit

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6
Q

UL policy is referred to as an “unbundled” policy because it separates…

A
  • monthly mortality (cost of insurance)
  • investment (interest) earnings
  • expenses charged to the policy
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7
Q

What is included in the annual statement provided to UL policy-owner?

A
  1. Current death benefit
  2. Current cash value
  3. Total premium paid since last report
  4. Total of expenses deducted since last report
  5. Outstanding loans
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8
Q

The two death benefit options with UL policies are referred to as…

A
  • Option A

- Option B

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9
Q

UL Death Benefit Option A

A
  • benefit remains level

- always a combo of decreasing amount at risk and an increasing cash account

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10
Q

UL Death Benefit Option B

A
  • level death benefit

- increasing cash account

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11
Q

Between UL DB Option A and B, which require higher premiums?

A
  • Option B
  • have to offset higher mortality costs
  • usually higher death benefit
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12
Q

The required difference between a UL’s risk component (death benefit) and the increasing cash value is know as…

A

-“Corridor of Insurance”

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13
Q

If the difference between a UL’s death benefit and the increasing cash value doesn’t meet the required difference set by the “Corridor of Insurance,” the policy is at risk of being considered an investment contract called…

A

-Modified Endowment Contract

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14
Q

UL Partial Surrenders

A
  • can partial surrender of cash value built up
  • death benefit is reduced by amount of withdrawal
  • if withdrawal is greater than amount paid in premiums can be subject to taxation
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15
Q

UL Policy Loans

A

-can make a loan against the policy’s cash value

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16
Q

UL Expense Charges

A
  • front-end load policy

- rear-end load policy

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17
Q

UL Front-end load policy:

A
  • deducts policy expense charges as premiums are paid

- less interest is being earned

18
Q

UL Rear-end load policy:

A
  • apply the expense charges upon surrender of the policy (surrender charges)
  • earns more interest
19
Q

Interest Sensitive Whole Life Insurance is also know as…

A
  • Current Assumption Whole Life Insurance

- is a version of the traditional Whole Life policy

20
Q

Features of ISWL

A
  • guaranteed death benefit
  • min. guaranteed cash value
  • possible additional cash growth through the use of higher interest rates
21
Q

ISWL is sometimes referred to as a…

A
  • “vanishing premium” policy

- additional premiums can earn more cash value which could eliminate the premiums at a younger age

22
Q

Generally, the most expensive type of Life Insurance is ______ because policy owners can allocate a portion of the premiums to a separate account comprised of various investment funds within the insurance company’s portfolio

A

-Variable Life

23
Q

In VL, the better the total return is on the investment portfolio, the higher the __________ or ______ of the policy.

A
  • death benefit

- cash surrender value

24
Q

What is the difference between VUL and UL?

A

-interest credited to the cash value account depends on the investment in the separate accounts, and the insurer does not guarantee the cash accounts in the VUL

25
Q

Separate Account

A

-a portfolio of common stock and other securities based on investments in mutual funds

26
Q

General Account

A

-safe, conservative investments such as high-grade bonds, real estate and certificates of deposit (CDs)

27
Q

What is the death benefit of an Option A Universal Life (UL) written for $100,000 that has $25,000 in cash value build-up?

A

-$100,000

28
Q

If an Option A Universal Life (UL) enters into the “corridor,” the following will happen:

A

-the death benefit will be increased

29
Q

The Universal Life (UL) policy is basically a form of _______________.

A

-Monthly Renewable Term

30
Q

The Universal Life (UL) can be considered a form of __________ because the insurance company deducts the mortality charges on a monthly basis. As long as there is sufficient money in the cash account to pay the mortality charges, the policy will continue.

A

-Monthly Renewable Term

31
Q

If the excess interest rate increases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following?

A

-The cash component could increase too much, and the policy could become an investment contract (MEC)

32
Q

Which of the following types of life insurance requires that the producer be FINRA licensed before selling the policy?

A

-Variable Universal Life

33
Q

A major feature of Universal Life (UL) insurance is:

A

-the premiums may be increased/decreased periodically by the policy-owner

34
Q

What is the death benefit of an Option B Universal Life (UL) written for $100,000 that has $25,000 in cash value build-up?

A

-$125,000

35
Q

If the excess interest rate decreases over the lifetime of the Universal Life (UL) insurance policy, the effect would probably be which of the following?

A

The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges.

36
Q

Which life insurance policy offers flexible premiums, flexible optional death benefits and two (2) insurer controlled interest accounts?

A

-Universal Life (UL)

37
Q

Premiums paying for a Variable Universal Life (VUL) insurance policy are placed by the insurance company into a _________ that is subject to the fortunes of the investment portfolio.

A

-separate account

38
Q

The term used to indicate that the UL policy separates the mortality costs from the expense cost of the policy is referred to as __________.

A

-unbundled

39
Q

FINRA

A

-Financial Industry Regulatory Authority

40
Q

FINRA was formerly the…

A
  • NASD

- National Association of Securities Dealers

41
Q

NASD

A

-National Association of Securities Dealers

Life (10 decks)

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