Questions and Answers
What key feature defines an Adjustable Life policy?
What is a Universal Life policy?
Permanent insurance with renewable term protection component
Variable Life insurance has guaranteed cash value.
False
What is the main characteristic of Annually Renewable Term insurance?
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What does FINRA stand for?
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When an employee terminates from a group policy, they have ___ days to convert to an individual policy.
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What is required for entering a group outside the open enrollment period?
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What is a prerequisite for group insurance?
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Where must assets in variable life products be kept?
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What license must an agent obtain to sell variable life policies?
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Agents selling variable life products must also be registered with?
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The premium of an individual policy converted from a group policy is based on what?
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How many years must an individual work under a group contract to convert to individual insurance?
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What does Option B in Universal Life insurance provide?
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How is Group Life Insurance usually written?
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What type of policy provides the least expensive first-year premium?
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Which policy covers two lives and pays only upon the first death?
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What is the main distinguishing factor of variable life products?
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What component does a Universal Life policy always include?
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What are the two types of interest rates in a Universal Life insurance policy?
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What is the cost of group life insurance typically based on?
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Study Notes
Types of Life Policies
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Adjustable Life
- Can be term or whole life; flexibility to convert between the two
- Policy owners can increase or decrease premiums
- Face amount is determined by policy owners with proof of insurability
- Offers fixed cash value return from the general account
- Policy loans can be borrowed against cash value
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Universal Life
- Permanent insurance with a renewable term protection feature
- Premiums are flexible with minimum or higher payment options
- Face amount can be adjusted by policy owners with proof of insurability
- Guarantees a minimum cash value from the general account
- Policy loans are available against cash value
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Variable Life
- Permanent insurance policy with fixed or flexible premium options
- Face amount can be adjusted to a stated minimum
- Cash value is not guaranteed and is held in a separate account
- Loans can be taken from the cash value
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Annually Renewable Term (ART)
- Considered the purest form of term insurance
- Provides a level death benefit but premiums increase annually with age
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FINRA
- Stands for Financial Industry Regulatory Authority
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Group Life Policy to Individual Premium
- Employees have a 31-day period post-termination to convert from group to individual policy
- Coverage continues under the original group policy during this period
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Evidence of Insurability for Group Insurance
- Required if an employee wishes to enroll outside the open enrollment period to mitigate adverse selection
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Prerequisites for Group Insurance
- Groups must be established for purposes other than obtaining life insurance to qualify for small group life insurance
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Variable Products and Underlying Assets
- Assets must be allocated into a separate fund primarily investing in stocks, bonds, and security options
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License Requirement for Selling Variable Life Policies
- Agents selling these policies need a securities license and must be registered with FINRA
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Conversion of Group Policy to Individual Policy
- Premiums for the individual policy are based on the attained age of the insured
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Group Insurance Master Contract
- The master contract is held by the sponsor (like an employer), while participants receive certificates of insurance
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Group Life Insurance Features
- Often underwritten as an annually renewable term insurance
- No evidence of insurability required unless enrolling late
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Death Benefit Options in Universal Life
- Two options:
- Option A has a level death benefit; cash value gradually increases
- Option B includes annual cash value increases contributing to a gradually increasing death benefit
- Two options:
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Limited Pay Life Policy
- Requires premiums to be paid for a specified number of years and becomes paid-up before the insured reaches age 100
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Joint Life Policy
- Covers two lives; premiums are based on average age and only pays out on the first death
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Straight Life Policy
- Represents a traditional level premium contract with guaranteed face amount and level premiums for the insured's life
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Decreasing Term Insurance Component
- Face amount decreases over the term while premiums remain level
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Annually Renewable Term Cost
- Offers the least expensive first-year premium, but premiums increase annually
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Survivorship Policies
- Similar to joint life policies in that they provide death benefit on the passing of the first insured
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Universal Life Insurance as an Insurance Type
- Comprises an annually renewable term component with a cash value account
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Interest Rates in Universal Life
- Comprised of guaranteed and current interest rates credited to cash value
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Comparison of Variable Whole Life and Variable Universal Life
- Variable whole life guarantees a minimum death benefit, unlike variable universal life which may not
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Funding for Cash Values in Life Policies
- Cash values grow in a tax-deferred manner based on guaranteed and current interest rates
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Term Policies Coverage Comparison
- Provide the greatest amount of coverage at the lowest premium compared to other protection forms
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Description
Explore the various types of life insurance policies in this quiz, including Adjustable Life, Universal Life, Variable Life, and Annually Renewable Term. Each type offers unique features and benefits, which you will need to understand to answer the questions. Test your knowledge and deepen your understanding of life insurance options.