Ch. 9 - Life insurance products, marketing, and distribution Flashcards
The major components determining premiums are:
Mortality, expenses, investments, profit
What is a feature of the Level Term product?
Level term products maintain a constant death benefit during the in-force period. However, the premiums can remain the same or increase if the product has multiple premium payment periods that change after every one, five, or ten-year period
The face amount on what term policy type is reduced over the duration of the policy based on a specified schedule, with the premiums remaining level?
Decreasing term
What term product has a face amount that increases over the coverage period, often at a set percentage rate to reflect some form of inflation?
Increasing term
What are two key features that help make term life insurance more valuable?
Renewability and convertibility
What Canadian product is classified as a term insurance product, but is permanent, level premium, non-par, whole life insurance?
Term to 100
What is an advantage of purchasing a whole life policy with a shorter or limited premium payment duration?
The policyholder has access to a large amount of cash value more quickly
Which whole life typically has the highest premium amount?
Single premium whole life which requires just one premium to fully pay up the policy for the lifetime of the insured
What situations are single premium whole life used?
- One policy is replaced for another policy and the cash value from the prior fully pays for the new policy
- Planning for seniors is done to provide additional tax advantages as well as additional death benefits
- Grandparents can wish to gift a policy on the life of a grandchild
What whole life policy type has coverage that lasts for the whole of the insured’s life, but premiums are needed only for a certain stated number of years, or to the anniversary when the insured is age 65?
Limited pay whole life
What whole life products vary their face amount and/or premium payment structure over the life of the policy?
Modified whole life
Universal life policies typically have two, but sometimes three death benefit options, those being:
- level face amount
- level face amount plus the amount of cash value at the time of death
- level face amount plus premiums paid
What is a disadvantage of the Universal life product?
A disadvantage of this product is that to keep premiums low, policyholders tend to rely on high interest earnings from company investments to maintain cash values high enough to keep the policy in force
Universal life insurance is characterized by:
1. guaranteed issue for applicants
2. death benefit flexibility
3. rigid premium payment schedule
4. flexible mortality rates
- death benefit flexibility
Accelerated life insurance benefit payments can be paid if which of the following occurs?
A. terminal illness
B. a need for long-term care
C. critical illness
A, B, & C are correct
A policy benefit rider that generally does not require additional premium is the:
1. accelerated death benefit
2. waiver of premium benefit
3. guaranteed insurability option
4. accidental death benefit
- accelerated death benefit
Major factors in determining life insurance premiums include which of the following?
A. mortality costs
B. accelerated benefits
C. return on investment
A & C are correct
What are the two main categories of life insurance products?
Term life insurance and permanent life insurance.
What is term life insurance?
A policy that provides coverage for a specified period (e.g., 10, 20, or 30 years) and pays a benefit only if the insured dies during that term.
What is a key characteristic of permanent life insurance?
It provides lifelong coverage and typically includes a cash value component that grows over time.
What are the primary types of permanent life insurance?
Whole life, universal life, variable life, and variable universal life.
What is whole life insurance?
A permanent policy with fixed premiums, guaranteed death benefits, and guaranteed cash value growth.
What is universal life insurance?
A flexible premium permanent life insurance policy that separates the cost of insurance and savings component.
What is variable life insurance?
A permanent life policy that allows policyholders to invest the cash value in sub-accounts, with returns varying by market performance.
