Different Types Of Life Policies Flashcards
to have the cash value of a whole life policy reach the contractual face amount
Endow
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
No forfeiture values
in life policies, the time when the face value is paid out
Policy maturity
contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Variable life insurance products
Provides the greatest amount of coverage for the lowest premium
Term life
T/F: term life insurance has no cash value
True
term insurance that refers to the death benefit, which does NOT change.
Level
the purest form of term insurance. may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.
Annually renewable term
policies that feature a level premium and a death benefit that decreases each year over the duration of the policy term. commonly purchased to insure the payment of a mortgage or other debts
Decreasing term
features level premiums and a death benefit that increases each year over the duration of the policy term. Great to account for inflation.
Increasing term
allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability.
Renewable
Renewal on term life is usually based off the
Attained age at time of renewal
provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability. The premium will be based on the insured’s attained age at the time of
Convertible provision
Whole life policies endow at the age of —-
100
Provided lifetime (permanent) protection and accumulated cash value.
Whole life insurance
Of the common whole life policies, which one will have the lowest annual premium.
Straight life
whole life policy that is designed so that the premiums for coverage will be completely paid-up well before age 100.
Limited-pay whole life
designed to provide a level death benefit to the insured’s age 100 for a one-time, lump-sum payment.
Single premium whole life
If an insured skips a premium payment on a ____________ life policy, the missing premium may be deducted from the policy’s cash value. The policy will NOT lapse.
Universal
In _________ contracts, the policyowner bears the investment risk (assets in a separate account).
Variable
Key Features: Can be Term or Whole Life; can convert from one to the other
Premium: Can be increased or decreased by policyowners
Face Amount: Flexible; set by policyowner with proof of insurability
Cash Value: Fixed rate of return; general account
Policy Loans: Can borrow cash value
Adjustable life
Key Features: Permanent insurance with renewable term protection component
Premium: Flexible; minimum or target
Face Amount: Flexible; set by policyowner with proof of insurability
Cash Value: Guaranteed at a minimum level; general account
Policy Loans: Can borrow cash value
Universal life
Key Features: Permanent insurance
Premium: Fixed (if Whole Life); flexible (if Universal Life)
Face Amount: Can increase or decrease to a stated minimum
Cash Value: Not guaranteed; separate account
Policy Loans: Can borrow cash value
Variable life
Premium rates on a joint life policy are determined by ____ __ ____ of both insureds.
Averaging the ages
Joint life = ___ to die; survivorship life = ____ to die (last survivor).
First, second
Juvenile policy where face amount increases at a predetermined age, often age 21. premium remains level.
Jumping jevenile
Group insurance is written as ______ _____ term insurance.
Annually renewable
In group insurance, the master contract is for the_________ , and certificates of insurance are for __________.
Employer, individual insureds
If an employee terminates membership in the insured group, the employee has the right to convert to an individual policy without __________ _________ at a standard rate, based on the individual’s attained age
Proving insurability
An employee usually has a period of __ days after terminating from the group in order to exercise the conversion option.
31
If the master contract on group is terminated, every individual who has been on the plan for at least _ years will be allowed to convert to individual permanent insurance of the same coverage.
5
When converting from group life to individual life insurance, evidence of insurability is or is not required? Premiums rates will _____
Is not, increase
Who bears the investment risk on a whole life
The insurance coMpany
Cash value is in separate accounts and values can fluctuate
Variable life
Who beats the investment risk on a variable product
The insured
When would a 20-pay whole life policy endow?
When the insured reaches age 100
Who is entitled to the cash values in a life insurance policy?
The policyowner
The policyowner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy’s face amount?
100
In variable universal life insurance, to what policy component does the term variable refer?
Cash value and death benefit
What happens to the cash value when a whole life insurance policy matures?
The cash value is paid to the policy owner
What type of life insurance policy offers pure death protection?
Term
A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?
20 year level term
: Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?
For 20 years or until the insured’s death, whichever occurs first.
Group life insurance policies are written as what type of insurance?
Annually renewable term
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide?
Evidence of insurability
What type of life insurance policy is Life Paid-up at Age 65?
Limited pay whole life
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner?
Universal
Q: When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of insurability
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group’s purpose, size, financial strength and turnover
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
What does level refer to in level term insurance?
Face amount
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy?
Limited-pay whole life
The death protection component of a universal life policy is expressed as what type of coverage?
Annually renewable term
Regarding taxation, how does the cash value of a universal life policy accumulate?
Tax deferred
What universal life option has a gradually increasing cash value and a level death benefit?
Option A
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
: Universal life policies have two types of interest rates. What are they?
Guaranteed and current
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?
Universal life
What elements of an adjustable life policy can be changed by the policyowners?
The amount and payment period of the premium, the face amount, and the period for protection
Limited Pay Whole Life premiums are all paid by the time the insured reaches age —. The policy endows when the insured turns —. It is the premium _____ ——- that is limited, not the maturity.
65, 100, payment period
Issue age vs attained age
Age at time of initial issue vs current age (ie age of insured at time of annual renewal)
A 20 pay limited-pay whole life policy, just like straight life, endows for the face amount at age __ . The premium is, however, completely paid off in __ years.
100; 20
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
Typically, the owner of an ———— life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
Adjustable
Also known as pure life insurance.
Teen insurance
_____ insurance provides what is known as pure death protection.
Term
Policy is guaranteed renewable annually without proof of insurability but the premium increases annually according g to the attained age.
Annually renewable term (ART)
Provision that allows the policy owner the right to renew coverage at expiration without evidence of insurability.
Renewable
1) Level premium based on issue age
2) Death benefit guarantees and level for life
3) cash value windows at age 100 and is paid out to policy owner. Cash value is credited to policy on regular intervals with guaranteed interest rate.
4) living benefits - liquidity / cash value
All characteristics of what?
Whole life insurance
Cash value in a whole life policy does not usually accumulate until when? And it grows __ deferred.
The 3rd year. Tax deferred.
Nonforfeiture values are a trait of what kind of life insurance.
Whole life
Allows the policy owner to pay more or less than the planned premium.
Flexible premium policies
With an __________ life policy the policy owner has the option of converting from term to whole or vice versa; however increases in the death benefit or changing to a lower premium type policy will usually require _____________.
Adjustable; proof of insurability
In the case of converting from whole life to term the insurer may adjust _________.
The death benefit.
The amount needed to keep the policy in force for the current year under a universal policy. Performs as an annually renewable term product.
Minimum premium
The recommended amount under a universal policy that should be paid to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Target premium
Interest on a universal life May be _______ than the contact interest rate because of current market conditions.
Be higher
The insurance component and and a cash account are the two components of a _____________ life policy.
Universal
The insurance component of a universal policy is always __________ __________ term insurance
Annually renewable
Level death benefit will see an in crease in death benefit in later years in order to maintain a _____________ between the level of cash value and the death benefit amount in order to qualify as insurance.
Corridor
Under Universal __________ death benefit option the death benefit increases each year by the amount the _____________ increases.
Increasing; cash value
Since the pure insurance for option B (increasing death benefit) remains level for life the expenses for this option are ________ than those for option A, thereby causing the cash value to be _________ in the older years.
Higher, lower
A universal life policy with an equity index as its investment feature.
Indexed universal life
Under a variable universal life policy, the cash value depends on ______________. Under the equity index universal life policy the cash value is dependent on the performance of the ________________. Sale of the equity indexes product _________ require a securities license whereas the sale of variable universal life _______ require a securities and life license.
Investment funds, equity index, does not, does
Also known as flexible premium adjustable life.
Universal life
Whole life insurance that is like traditional forms of life in that it has fixed premiums and a guaranteed minimum death benefit. But cash value is non guaranteed and investment based.
Variable life
Agents selling ____________
must Be registered with FINRA
Be licensed by the state to sell life insurance
And have a securities license
Variable life
- can be term or whole; and convert
- premium can be increased or decreased by policyowner
- face amount flexible; set by policyowner with proof of insurability
- cash value: fixed rate of return; general account
- policy loans; can borrow cash value
Adjustable life
- permanent with renewable term protection
- premium flexible; minimum or target
- face amount: flexible; set by policyowner with proof of insurability
- cash value: guarantees at minimum level; general account
Policy loans: can borrow cash value
Universal life
- permanent insurance
- premium: fixed (whole); flexible (term)
- face amount: can increase or decrease to a stated minimum
Cash value: not guaranteed; separate account
Policy loans: can borrow cash value
Variable life
An employee usually has a period of __ days after terminating from the group in order to convert their policy.
31
If the master group life contract is terminated, individuals who have been on the plan for at least __ years will be allowed to convert to individual permanent insurance of the same coverage.
5
Level term policies maintains a level ____________
Death benefit
A straight life policy has a _______ annual premium.
Level
The death benefit under universal life option B gradually __________ each year along side the _________
Increases, cash value
A universal life insurance policy is best described as a _____________ renewable term policy with a _______________ account.
Annually; cash value account
Which universal life option has a gradually increasing cash value and a level death benefit?
Option A
Variable universal life may or may not have a minimum _____________, unlike variable whole life insurance which guarantees it.
Death benefit
In a variable universal life policy, the _____________ is adjustable, and the ______________ are not guaranteed.
Death benefit; cash values
In variable universal life the _____________ May decrease and increase; but it cannot go below a guaranteed minimum amount.
Death benefit
For variable products, underlying assets must be kept in __________
A separate account
A domestic insurer issuing variable contracts must establish one or more _______________
Separate accounts
I’m order to avoid having to prove insurability an employee must join a group insurance plan when?
During open enrollment
Which flexible premium plan?
- may adjust premium, face amount, and period of protection
- can convert between term and whole
- cash value only if premiums are more than cost
Adjustable life
Which flexible premium plan?
- annually renewable
- option a - level death benefit / option b increasing death benefit
- partial surrender / cash withdrawal
- flexibility through unbundling (separating)
Universal life
Who bears the investment risk on whole life?
The insurance company
Investment based life insurance product.
Variable life
The recommended amount on universal life that should be paid in order to cover the cost of insurance and to keep the policy in force throughout its lifetime.
Target premium
What are the two components of a universal policy?
Insurance and cash account.
The insurance component of universal life is always ________ renewable term insurance.
Annually
