Chapter 4 Flashcards
What are the two UL death benefit options?
Options A and B
A jumping juvenile policy has a death benefit that increases to ____ times it’s stated value with no premium increase.
5
What is another name for a “First to Die” policy?
Joint life
What is the renewability feature?
The ability to renew a term policy without having to provide evidence of insurability
The death benefit of term policy is payable only if death occurs during the ___________ period.
Term coverage
T/F: Regardless of cash value performance, VL policies have a guaranteed minimum death benefit.
T
The premium on a universal life policy may be ____________.
Flexible
What age is used to determine level term policy renewals?
Premiums are based on a person’s actual age, and renewal premiums will increase
Whole life premium rates are based on a rate per $_______ of coverage.
$1,000
What is original age or retroactive conversion?
A type of conversion that uses the age of the original policy purchase.
Premiums on a VL policy are _________.
Fixed
What are loan option and cash surrender?
Methods available to the policy owner to obtain or access the policy’s cash value
Which life policy has cash value gains that mirror or are tied to a stock market index, such as the S&P 500?
An Indexed Life Insurance policy
Cash value increases with every ________ payment after the _______ year.
Premium; third
Does a term life policy have cash value?
No. Term life is pure insurance
T/F: Upon death, the cash value is payable in addition to the whole life death benefit.
F
What is attained or actual age conversion?
Conversion where new policy premiums are based on a persons current age
A VL contract has a guaranteed minimum ___________________.
Death benefit
A 5-year level term policy will renew every 5 years subject to ___________________.
Maximum age limitations
What whole life product has lower premium that increase each year for the first 3 to 5 years of the policy?
Graded premium whole life
The cash value of a single premium whole life policy will equal the death benefit at age ______.
100
For how long will the premium on a 20-year level term policy remain level?
For 20 years
Cash value generally begins to build within a whole life policy sometime in the _______ year.
Third
The cash value and potential death benefit of a VL policy vary _______.
Daily
What life insurance policy uses dividends to purchase one year term insurance to supplement a reducing death benefit?
Enhance ordinary or econometric life
What life insurance policy pays a benefit at the earlier of death or the end of a specified period?
An endowment
What happens at age 100?
Age 100 is the age at which many insurers calculate the policy’s cash value as equal to its death benefit
Decreasing term insurance has a ______ premium and a _______ death benefit.
Level; decreasing
Term insurance is described as _________ protection.
Pure
The cash value of a whole life policy grows at a minimum interest rate of ____% to _____%.
3-4%
A 10 year level term policy provides coverage for ______ years.
10
A VL policy has a ___________ minimum death benefit, but the cash value is ____________.
Guaranteed; not guaranteed
T/F: A universal life policy allows for partial withdrawals of the cash value.
T
What type of insurance policy is most often used as a mortgage redemption policy?
Decreasing term insurance
T/F: A whole life policy never requires renewal.
T
The death benefit and premium in a whole life contract are ________ throughout the owners lifetime.
Level
What is an unbundled premium?
When a UL life policy owner receives an annual statement breaking down all of the policy expenses and charges.
Which policy pays a death benefit, but only after the last remaining policy insured dies?
Survivorship life
____________ pay a living benefit at end of a set timeframe or a death benefit should death occur during that timeframe.
Endowments
What type of policy protects the bank in the event a borrower dies?
Credit life
Does a variable life policy have a guaranteed minimum death benefit?
Yes. Regardless of account performance, the minimum DB is paid (typically, the initial DB listed on the policy’s face).
Can the death benefit of a variable life policy increase over time?
Yes, assuming the underlying investments outperform expectations and increase in value
At what age is a whole life policy’s cash value assumed to equal its death benefit?
At age 100
What is predetermined in a whole life contract?
The death benefit, cash values, premiums, nonforfeiture and surrender values
What is another name for a Second or Last to Die policy?
Survivorship life
Decreasing term insurance has a __________ death benefit.
Decreasing
At what age does a whole life policy mature?
At age 100
Which type of insurance provides temporary protection?
Term insurance
What whole life product has lower premiums for the first 3 to 5 years of the contract, with a one time premium increase?
Modified premium whole life
When converting policies, what must remain constant?
Generally, the death benefit must remain constant
What non traditional life insurance policy has a flexible death benefit and a rate of return that is interest sensitive?
A universal life policy
What are the advantages of term insurance?
It is initially less expensive than whole life, it may offset debts, and ensures insurability
Who assumes the investment risk in a traditional insurance contract?
The insurance company
What policy combines whole life insurance and a decreasing term rider providing coverage on the breadwinner?
A Family Income policy
T/F: A 20 year family income policy will pay for 7 years if insured dies 13 years after policy issue.
T; the policy will pay the 7 years of remaining benefit as it uses decreasing term insurance
Name the ability to change from a term policy to a whole life policy without providing evidence of insurability?
Convertibility
T/F: term insurance builds cash value.
F
What is straight life or continuous premium life?
Additional ways to describe ordinary whole life
Describe a whole life policy.
A policy providing death benefit protection for life or to age 100, cash value, level death benefit, and level premium
A level term policy has a ________ death benefit and premiums will increase at the
____________ period.
Level; next renewal
Which life insurance policy has a cash value that is invested in securities and has the potential for greater growth?
A variable life policy
A jumping juvenile policy may also be called ________________.
Juvenile life insurance
What two licenses are required to sell variable products?
A life insurance and FINRA license
A VL policy has a ________ premium and a cash value that is ______________.
Level; not guaranteed
What WL product has a guaranteed minimum return and opportunity for CV growth based on the performance of a stock index?
Equity-Index Whole Life
What is 10-pay whole life?
A whole life policy with premiums paid for 10 years and coverage provided until age 100 or death
What is single pay whole life?
A whole life policy with a one time premium and coverage provided until age 100 or death
_______ life insurance is purchased to protect a borrower if a lender does and cannot repay a loan.
Credit
In a group credit policy, the bank is both the __________ and the _____________.
Policy owner; beneficiary
What is the target premium?
The initial premium established to fund a UL policy
Whole life is a combination of term protection and ___________.
Cash value
T/F: A 20 year family maintenance income policy pays for 5 years if insured dies 15 years after policy issue.
F; regardless of the date of death, the policy will pay for 20 years since it uses level term insurance.
Which whole life payment option would have the highest annual premium -10, 20, or 30 pay?
10 pay. The fewer the payments, the greater each payment must be for the policy to mature.
What is policy equity?
The cash value in a whole life policy
Most credit life policies utilize ___________ term insurance and coverage may not exceed the ______________.
Decreasing; amount of the loan
Describe an Adjustable Life policy.
A policy that offers the ability to change the death benefit based on a persons needs
Which WL payment option would have the lowest overall premium over the policy life - 10-pay, 20-pay, or single-pay?
Single-pay
Name the policy that combines whole life insurance and a level term rider providing coverage on the breadwinner.
A Family Maintenance plan
Generally, credit insurance uses __________ term.
Decreasing
Who is the owner of a juvenile insurance policy?
The parent or legal guardian
What does term insurance provide?
The maximum amount of protection with the lowest initial outlay of premiums
A WL death benefit and premium both remain _________ for the life of the policy.
Level
Describe an endowment.
Endowments have heavy cash savings, intended for future uses such as retirement or college funding
Whole life premiums remain _______ for the life of the policy.
Level
Identify the acronym: VL
Variable life
What policy combines variable life with flexible premiums?
VUL
The premium on an annually renewable level term policy increases __________.
Each year
Describe an Equity Index Life Policy.
Usually a UL policy with cash value tied to an equity index account; offers a guaranteed minimum rate of return
Straight life has a _________ and ________ premium.
Predetermined; level
As a client ages, what happens to her premium payments in a variable life policy?
Payments in a variable life policy remain fixed (level)
How long will coverage be provided under a 10-pay whole life product?
Will continue until death or age 100
What is another name for interest sensitive whole life insurance?
Current assumption whole life
What are the disadvantages of term insurance?
Temporary protection, no cash value, premiums increase with each renewal (level term)
Why is whole life insurance more expensive than term insurance?
Because of the building up of cash value
A 20 year endowment will mature at the end of ___ years.
20
What is a lump sum premium?
Another name for single pay whole life
Which policy pays a death benefit and concludes or ends on the death of any insured party listed on the contract?
A joint life policy
T/F: Term insurance is temporary, but whole life is permanent.
T
What is cash value?
The equity that grows inside a permanent policy
Describe a Family Policy.
The policy provides whole life benefits on the breadwinner, with level term insurance on spouse and dependents.
