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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
Separate Account
-a portfolio of common stock and other securities based on investments in mutual funds
26
General Account
-safe, conservative investments such as high-grade bonds, real estate and certificates of deposit (CDs)
27
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?
-$100,000
28
If an Option A Universal Life (UL) enters into the “corridor,” the following will happen:
-the death benefit will be increased
29
The Universal Life (UL) policy is basically a form of _______________.
-Monthly Renewable Term
30
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.
-Monthly Renewable Term
31
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?
-The cash component could increase too much, and the policy could become an investment contract (MEC)
32
Which of the following types of life insurance requires that the producer be FINRA licensed before selling the policy?
-Variable Universal Life
33
A major feature of Universal Life (UL) insurance is:
-the premiums may be increased/decreased periodically by the policy-owner
34
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?
-$125,000
35
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?
The contract may not have sufficient cash and the policy would not be able to pay the mortality costs and expense charges.
36
Which life insurance policy offers flexible premiums, flexible optional death benefits and two (2) insurer controlled interest accounts?
-Universal Life (UL)
37
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.
-separate account
38
The term used to indicate that the UL policy separates the mortality costs from the expense cost of the policy is referred to as __________.
-unbundled
39
FINRA
-Financial Industry Regulatory Authority
40
FINRA was formerly the...
- NASD | - National Association of Securities Dealers
41
NASD
-National Association of Securities Dealers

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