LLQP Life SeeWhy

Question 1

What are three things an insurer will guarantee in a whole life policy?

Answer 1

1. The premium will never increase (level)
2. Coverage is permanent
3. The cash value will grow at a guaranteed pace

Question 2

How do modal factors work in Universal Life (UL) policies?

Answer 2

$100 per month. UL insurance policies offer modal factors so periodic payments equal the annual premium over a year. In contrast, term and whole life policies typically have higher periodic payments than the annual premium.

Question 3

How does adjustable whole life insurance work?

Answer 3

Premium and coverage are only guaranteed for a limited time. After that, the insurer can adjust premiums. Example: Trent’s $150 premium increased to $158 after 10 years due to lower investment returns.

Question 4

What are examples of permanent insurance needs?

Answer 4

• Pay taxes due at death (property, cottages)
• Gift to charity at death
• Pay for funeral costs at death
• Bequeath funds to beneficiaries at death

Question 5

What are the differences between level, decreasing, and increasing term insurance?

Answer 5

Level Term: Coverage and premium remain level
Decreasing Term: Coverage decreases, premium stays level
Increasing Term: Coverage and premium increase each year

Question 6

What are examples of temporary insurance needs?

Answer 6

• Paying off a mortgage: temporary because mortgages are amortized over 25 years or less
• Funding a child’s education: temporary because needs end by age 18

Question 7

What are the three main types of permanent insurance?

Answer 7

1. Term-to-100 (least expensive)
2. Whole life insurance
3. Universal life insurance (most expensive)

Question 8

What are the four non-forfeiture benefits of a whole life policy?

Answer 8

1. Cash Surrender Value (CSV)
2. Automatic Premium Loan (APL)
3. Reduced Paid-up Insurance
4. Extended Term Insurance
   (Memory Aid: CARE)

Question 9

What are the five dividend payment options on a participating (PAR) policy?

Answer 9

1. Cash
2. Premium reduction
3. Paid-up additions
4. Accumulation
5. Term insurance (one year)
   (Memory Aid: Can Participating Policies Accumulate Term?)

Question 10

What does LCOI mean?

Answer 10

LCOI stands for Level Cost of Insurance. It means premiums remain unchanged (level) for the entire term of the policy.

Question 11

What is the maximum percentage of a whole life policy’s cash value that an insurer will lend as a policy loan?

Answer 11

90%. The loan (including interest) must not exceed the cash value, which is the collateral for the loan.

Question 12

What is meant by ‘mortality cost’ in insurance?

Answer 12

Mortality cost, or Cost of Insurance (COI), refers to the risk cost of death. It’s expressed as the expected number of deaths per 1,000 people per year in a group defined by age/gender or similar criteria

Question 13

What insurance product can help address the risk of living too long?

Answer 13

An annuity. It provides guaranteed income over a specified period in exchange for a premium. Example: $500,000 premium gives $30,000 annual income for life.

Question 14

What is a policy reserve?

Answer 14

A policy reserve is the excess portion of premiums not used immediately, set aside to cover future insurance costs when the initial premium may no longer be sufficient. Example: Michael’s $162/month builds a reserve for later years.

Question 15

What are the 4 Death Benefit Options in a UL

Answer 15

1) Level Death Benefits
2) Level Death Benefits +Account Value
3) Level Death Benefits +Cumulative Premiums
4) Indexed Death Benefits