Whole Life Insurance Policies

Question 1

True or False.
All whole life policies create living benefits or nonforfeiture values

Answer 1

True

Question 2

A policyowner is able to take a loan against the cash value in the whole life policy. How long can an insurer defer the loan?

Answer 2

up to six months

Question 3

What are the 3 basic ways to pay whole life premium?

Answer 3

straight life, single premium, limited payment

Question 4

At what age of the insured is a whole life policy considered mature and the face value is paid out

Answer 4

100 years old

Question 5

At what stage of the whole life policy is there liquidity available?

Answer 5

no later than year 3

Question 6

True or false. The cash value of the insured is subject to income tax while policy is in force.

Answer 6

False. Cash value is not tax during the life of the policy

Question 7

Which of the following whole life policies have the lowest premium?
a. single premium
b. limited payment
c. straight life

Answer 7

c. Straight life

Question 8

In which whole life policy does the insurer guarantee the cash value and death benefit?

Answer 8

Straight life policy

Question 9

Define indeterminate premiums

Answer 9

Level premiums for x amount to time then the insurer can increase, lower or keep the current premium amount the same. The max amount of premium that may be charged must be specified in the policy

Question 10

Define interest sensitive policies

Answer 10

Permanent life policies whose cash value is tied to interest rate fluctuations

Question 11

What are the benefits offered in interest sensitive policies?

Answer 11

Allows policyholder to pay in additional funds that can either increase cash value amount or decrease premium payment period.

Question 12

What is another term for interest sensitive whole life policies?

Answer 12

Current Assumption

Question 13

Define Modified Life Policy

Answer 13

Whole life policy that allows the flexibility to pay lower premiums the first 3-5 years; then the premium increases for the rest of the policy’s life.

Question 14

Define Equity Index Life

Answer 14

Permanent life policy where the interest on the cash value is based upon investments.

Question 15

True or False.
You need a securities license in order to sell Equity Index Life Policies.

Answer 15

False. You do not need a securities license because it has a guaranteed minimum rate of interest.

Question 16

What is a modified life insurance policy in which the premium is 50-75% less than the premium of a straight life policy and increases gradually each year for 5-10 years before remaining level?

Answer 16

Graded Premium

Question 17

What does SPWL stand for?

Answer 17

Single Premium Whole Life

Question 18

Which whole life policy immediately generates a cash value upon issuance?

Answer 18

Single Premium Whole Life Policy

Question 19

Define Variable Life Policy

Answer 19

A policy in which the premium is fixed but has an underlying investment account

Question 20

True or False.
An agent/producer is required to hold just a life license in order to sell a variable whole life insurance policy

Answer 20

False. An agent/producer must hold both life and securities licenses.

Question 21

Name 3 major types of flexible life policies.

Answer 21

1. Adjustable life
2. Indexed Life
3. Universal Life

Question 22

Define Universal Life Policy

Answer 22

It is a permanent life policy that has flexible premium payments and no cash value guarantee.

Question 23

Define adjustable life

Answer 23

whole life policy in which the premium, face value and cash value are flexible

Question 24

Define Indexed Life policy

Answer 24

fixed premium whole life policy in which the cash value has interest that follows the index (i.e. S&P 500, Dow Jones). There is also a minimal interest guarantee

Question 25

What is option A for Universal Life?

Answer 25

death benefit remains level, cash value gradually increases

Question 26

What is option B of Universal Life?

Answer 26

both cash value and death benefits increase over time.