Chapter 3 Test Flashcards
The Waiver of Premium Rider
The Waiver of Premium Rider would waive premiums for a disabled insured. If the insured also wanted to replace income due to disability, then he or she would purchase the Waiver of Premium/Disability Income Rider.
Joint Survivorship
This policy continues on until the second insured (survivor) dies.
Guaranteed Insurability
Provides the insured with the right to buy coverage at specified times in the future.
A viatical settlement
An agreement between a viatical settlement provider and a life insurance policyowner. A viatical settlement broker may be involved in the transaction, but is not a party to the contract.
Simplified issue
Requires no medical exam and only asks very basic health related questions on the application. Usually this type of insurance is only available in low face amounts, to reduce the risk of adverse selection.
The most expensive term life insurance (all else being equal)
Renewable and Convertible (the most expensive features on a term policy if paired together.
Waiver of Premium Rider
Waives future premiums for the duration of the disability and still allow the cash value and dividends to continue as though the premiums were being paid.
Viatical settlement
The purchase of a policy from a terminally ill insured by a third party who becomes the new owner.
The insured is terminally ill and money is paid to the policyowner in exchange for making an absolute assignment of the policy to the purchaser.
Variable Life Insurance requires two licenses
a valid life license and a securities license. To be registered with FINRA is to be securities licensed. The policyowner is bearing all investment risk in the stock market and all products that have investment risk are considered securities.
Which is not a true characteristic of Whole Life Insurance?
A. Premiums are payable to age 100 in older policies, and to age 121 in newer policies
B. The insurer bears all risk
C. Premiums are flexible
D. Death benefit typically remains level
Flexible Premiums
Living Needs Rider
The benefit comes from the acceleration of the death benefit, so no additional coverage or cost is involved. The rider merely explains the terms and conditions associated with exercising the rights in the rider.
If a father were to add a Child Rider to a policy to cover his children, when would coverage become effective for a newborn?
At 14 or 15 days of age
Children born after the rider is issued are covered automatically after 14 or 15 days, depending on the insurer, at no additional premium.
Cash Value of Variable Life
Grows based on the performance of the separate accounts chosen by the policyowner. Cash value does not increase based on interest being credited to the cash value.
In a viatical settlement, a third party purchases a policy from a terminally ill insured for approximately _____ to _____% of the policy’s face amount.
The viatical settlement provider purchases the policy at 60 to 80% of the face amount, expecting to profit as the new policyowner at the time of claim.
What are living benefits?
Any values that can be accessed while living are referred to as living benefits.
Permanent policies generally provide access to cash values, either by loan or surrender. Any values that can be accessed while living are referred to as living benefits.
How does accessing your living benefits (taking out a loan) affect your whole life policy?
Policy loans carry a fixed or variable loan interest rate. If the policy is surrendered or a death claim is paid, the proceeds are reduced by the outstanding policy loan and policy loan interest.
Waiver of Cost of Insurance
In Universal Life it is a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.
Variable Universal Life should only be sold to those clients who are
Investment savvy
VUL is appropriate for those who are seasoned investors who understand investment risk and are willing and can afford to take it.
Joint Survivorship Life
Ideally suited for estate planning purposes.
If owned by an irrevocable trust, a Joint Survivorship policy can keep the value of the policy out of the estate and create much needed cash to pay for estate taxes, which come due 9 months after the second spouse dies.
What are not guarantees of a Variable Life Policy?
A. Cash Value
B. Dividends
C. Investment Returns
What is guaranteed in a Variable Life Policy?
Death Benefit
Which of the following pays a current interest rate and also guarantees a minimum interest rate that will be credited to the cash values of the life insurance policy?
A. Variable Whole Life
B. Variable Universal Life
C. Ordinary Whole Life
D. Universal Life
D. Universal Life
Universal Life insurance has a current interest rate which is generally higher than the guaranteed minimum interest rate. It depends on the interest rates the insurer can earn on the assets in its general account.
