Module 5

Question 1

Modified whole life

Answer 1

a whole life policy preceded by a period of term insurance. These policies have low, term-like premiums for a number of years, then premiums automatically increase to whole life levels

Question 2

Graded premium life

Answer 2

was designed to ease people into a whole life premium. Its premium per thousand dollars of insurance is fairly low the first year, and increases each year for five to seven years, at which time it
reaches its ultimate premium

Question 3

Adjustable life

Answer 3

built on the whole life insurance chassis. Adjustable life provides policy owners the option of making various and significant adjustments to the policy as their circumstances and needs change. any policy owner-initiated increase in the death benefit
requires evidence of insurability

Question 4

Minimum premium

Answer 4

Premiums large enough to cover expenses and mortality

Question 5

Target premium

Answer 5

based on an interest rate that may be expected to

remain relatively the same over the life of the contract

Question 6

Maximum premium

Answer 6

The most money the contract can accept without converting it into a MEC

Question 7

Minimum guaranteed credited interest

Answer 7

the rate guaranteed in the contract to be credited to the cash value

Question 8

Current rate credited interest

Answer 8

the interest credited on this deposit/premium. The
current rate usually is set by the insurance company, frequently indexed to Tbills or some other current money market-type rate. It usually is guaranteed
for one year, but it may be shorter.

Question 9

Blended rates credited interest

Answer 9

some historical premium may receive a different rate than current premiums. Amounts from prior premiums are blended with pools of interest rates reflecting those earlier economic conditions.

Question 10

Interest credited on loaned amounts

Answer 10

The dollar equivalent of a loan based on the contract may receive the current credited interest or some other lower rate as defined in the contract.

Question 11

Dividends

Answer 11

Since UL policies have the ability to adjust the credited interest rate, it is rare for a company to pay dividends on a UL policy. Even those mutual company policies that state that the policy may share in the divisible
surplus (the term used to identify dividends) seldom make those payments

Question 12

Mortality Charges

Guaranteed.

Answer 12

A schedule of mortality charges is included in the contract, which states the maximum charge against the contract at each particular age based on the 2001 CSO table

Question 13

Mortality Charges

Current.

Answer 13

This is the current year’s charge against the contract, which is usually lower than the guaranteed rate and is usually the rate used in the policy illustration. The current rate is based on the company’s actual experience. It is important to recognize the difference between current rates used in an illustration and guaranteed minimum interest rates.

Question 14

Mortality Charges

Projected.

Answer 14

Some universal life contract illustrations use a projection of the company’s mortality experience rather than the current rates.

Question 15

Administrative Expenses

Guaranteed.

Answer 15

The contract states the maximum dollar or percentage amount that will be withdrawn from the contract in the first year and in all subsequent years. It may be a flat amount per month or per year, or a percentage of the premium

Question 16

Administrative Expenses

Current.

Answer 16

Current charges against the cash fund or each premium paid, depending on how payment is made (monthly, annually, or as a single premium).

Question 17

Administrative Expenses

Banded.

Answer 17

Charges may vary according to face amount. Banding identifies a range of face amounts. Death benefits in a lower band may have one charge, while death benefits in a higher band may have a different charge.

Question 18

Surrender charges

Answer 18

If the contract is terminated before the insured dies, then a charge may be made against the contract cash values. Back-end charges typically range from 5-year to 15-year sliding scales

Question 19

Policy fees

Answer 19

May be for the first year only or annual.

Question 20

Premium fees

Answer 20

Either a percentage of all premiums paid (e.g., 3%) or a fixed dollar amount per premium payment.

Question 21

Withdrawal charges

Answer 21

Fees for taking money out of the contract