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Questions and Answers

Which type of term protection has an increasing face value as the insured gets older?

  • Increasing Term (correct)
  • Renewable Term
  • Decreasing Term
  • Level Term

    • How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy?

    The ability to invest the cash values in various separate accounts.

    Where does the initial benefit money from a long-term care rider come from in a participating life insurance policy?

    An advance of the face amount of the policy.

    Which of the following term policies costs the most, all other factors being equal?

    <p>Renewable and convertible</p> Signup and view all the answers

    What must Jill do after recovering from disability if her policy contains a waiver of premium rider?

    <p>Begin paying the premiums as they become due.</p> Signup and view all the answers

    Ideally, which rider should Sean acquire to cover the balance of his outstanding mortgage?

    <p>Decreasing Term Rider</p> Signup and view all the answers

    Which type of rider covers all members of a family with one policy?

    <p>Family Rider.</p> Signup and view all the answers

    How is insurance protection increased to keep a Current Assumption policy from endowing?

    <p>Without evidence of insurability.</p> Signup and view all the answers

    What provides the basis for the benefit amount paid to an insured under a disability income rider?

    <p>The face amount of the policy.</p> Signup and view all the answers

    An insured owning an Adjustable Life Policy enjoys a policy that has characteristics of both ______ and _______.

    <p>Permanent and Term.</p> Signup and view all the answers

    What is a viatical settlement?

    <p>Contract between a life insurance policy owner and a viatical settlement provider.</p> Signup and view all the answers

    What is required if a policyholder wants to increase the death benefit of an Adjustable Life Insurance policy?

    <p>Prove insurability for the increase.</p> Signup and view all the answers

    If a policy owner cancels a rider, what will be the total premium annually for a policy with a waiver of premium rider?

    <p>$750.</p> Signup and view all the answers

    At what age does the waiver of premium rider normally expire?

    <p>Age 65.</p> Signup and view all the answers

    What is the fastest way to pay up a traditional whole life policy?

    <p>Buy a single premium policy.</p> Signup and view all the answers

    Variable whole life has all of the following features, except:

    <p>Partial surrenders are allowed</p> Signup and view all the answers

    Which of the following would have the lowest first-year annual premium for a 30-year-old, all other factors being equal?

    <p>Term to age 40</p> Signup and view all the answers

    Life insurance that does not require a medical exam is known as:

    <p>Simplified issue.</p> Signup and view all the answers

    Which of the following policies cannot have a premium payment period of less than to age 100?

    <p>Ordinary Straight Whole Life</p> Signup and view all the answers

    What is the risk to the purchaser in a viatical settlement transaction?

    <p>The insured does not die within the time period anticipated.</p> Signup and view all the answers

    Which of the following Whole Life insurance policies has the highest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal?

    <p>20-Pay Ordinary Whole Life</p> Signup and view all the answers

    All of the following riders will waive the premiums in the event of a disability, except:

    <p>Guaranteed Insurability</p> Signup and view all the answers

    What do Variable Life Policy owners allocate their premiums into?

    <p>A subaccount which is part of the separate account.</p> Signup and view all the answers

    All of the following are risks to the life settlement purchaser, except:

    <p>The insured dies sooner than expected</p> Signup and view all the answers

    Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except:

    <p>The death benefit is not guaranteed</p> Signup and view all the answers

    What death benefit option provides for an increasing death benefit in Universal Life policies?

    <p>Death Benefit Option B.</p> Signup and view all the answers

    Which of the following policies requires a producer to have both a life and securities license to sell?

    <p>Variable Universal</p> Signup and view all the answers

    What should a life insurance applicant purchase if they want a combination of savings and insurance protection with guarantees, paying premiums only until age 65?

    <p>Limited Pay Whole Life</p> Signup and view all the answers

    All of the following are true regarding Current Assumption Whole Life, except:

    <p>If current rates decrease, the policyowner pays reduced premiums, or the cash values will grow faster</p> Signup and view all the answers

    What rider is designed to help the insured offset the effects of future inflation on the policy's face amount?

    <p>Cost of Living</p> Signup and view all the answers

    When does the rider benefit start for a whole life insurance policy with a disability waiver of premium?

    <p>Typically 6 months after the disability occurs</p> Signup and view all the answers

    What do Equity Universal, Variable, and Variable Universal each have in common?

    <p>The overall policy performance is tied to the stock market</p> Signup and view all the answers

    Which of the following policies must be sold by prospectus?

    <p>Variable Whole Life</p> Signup and view all the answers

    What happens to any extra premium charged for the waiver of premium rider?

    <p>Does not apply to the policy's cash value</p> Signup and view all the answers

    Which permanent policy could act like term life insurance?

    <p>Adjustable Life</p> Signup and view all the answers

    What transaction took place when XYZ Inc. purchased Quentin's life insurance policy for more than cash value but less than face amount?

    <p>Life Settlement</p> Signup and view all the answers

    What best describes a Straight Whole Life Policy?

    <p>Level guaranteed premium and face value for the life of the insured</p> Signup and view all the answers

    What type of policy does a payor rider keep in force?

    <p>Juvenile insurance policy</p> Signup and view all the answers

    If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a _____________ is in force.

    <p>Waiver of premium rider</p> Signup and view all the answers

    How much did Z have to pay before the waiver of premium benefit started after his total disability?

    <p>$600</p> Signup and view all the answers

    All of the following are correct about Decreasing Term, except:

    <p>The premium declines throughout the term of the policy</p> Signup and view all the answers

    How is a life settlement transaction similar to a viatical settlement transaction?

    <p>A third party buys a life insurance policy for less than its face amount</p> Signup and view all the answers

    Which Whole Life insurance policy has the lowest annual premium payment per $1,000 of coverage for a 35-year-old?

    <p>Ordinary Straight Whole Life</p> Signup and view all the answers

    Some traditional whole life policies offer a(n) __________ feature to keep the policy in force if there are sufficient cash values to do so.

    <p>Automatic premium loan</p> Signup and view all the answers

    What is the purpose of the Re-Entry Term option?

    <p>Obtain a new term policy at a lower rate</p> Signup and view all the answers

    What is a single policy covering two or more lives that pays benefits upon the death of the first insured called?

    <p>Joint Life</p> Signup and view all the answers

    All of the following are true regarding re-entry term, except:

    <p>The new policy's premium will be based on the insured's original age</p> Signup and view all the answers

    What is a contractual agreement that allows a company or person to buy rights of ownership in a life policy if the owner/insured becomes terminally ill?

    <p>Viatical Settlement</p> Signup and view all the answers

    What happens to the overall policy premium when most riders on a life insurance policy expire?

    <p>It goes down</p> Signup and view all the answers

    Most group life insurance has a(n) ______ term death benefit.

    <p>level</p> Signup and view all the answers

    Which features are included in a Child Rider added to an insured's permanent policy?

    <p>All children are covered, and the rider may be converted to permanent coverage at a specified age without evidence of insurability</p> Signup and view all the answers

    All of the following are characteristics of Universal Life Insurance, except:

    <p>The policyowner can choose which investment(s) to place the cash values into from those available</p> Signup and view all the answers

    How does an Option A death benefit feature of a Universal Life policy work?

    <p>It pays out the policy's face amount</p> Signup and view all the answers

    Who is typically not the owner of a juvenile policy from the outset?

    <p>A brother or sister</p> Signup and view all the answers

    What does a Guaranteed Insurability rider allow Greg to do?

    <p>Purchase more insurance on his own life at certain specified ages without proof of insurability</p> Signup and view all the answers

    What happens to premium payments made into a variable universal life policy?

    <p>Are invested in one or more investment portfolios at the policyowner's option</p> Signup and view all the answers

    Which statement is incorrect when a producer explains limited-pay life insurance?

    <p>By paying over a shorter period of time, each of the payments will be lower</p> Signup and view all the answers

    Which of the following are characteristics of universal life insurance policies?

    <p>Death benefit options and premium flexibility</p> Signup and view all the answers

    What type of policy has a death benefit that can increase or decrease based on stock market performance?

    <p>Variable Life</p> Signup and view all the answers

    What jumps in a jumping juvenile policy?

    <p>The face amount jumps one time, usually to five times the amount of insurance, at age 21 or 25</p> Signup and view all the answers

    A Last-to-Die policy would be most appropriate for which of the following situations?

    <p>A husband and wife concerned about estate taxes after they die</p> Signup and view all the answers

    Which of these best describes a disability income rider?

    <p>Pays a percentage of the death benefit as monthly income when totally disabled</p> Signup and view all the answers

    What does a long-term care rider offer that a Living Needs rider does not?

    <p>Provides up to 100% of the death benefit in a daily or monthly amount for the non-hospital expenses of a chronically ill person who cannot perform any 2 of the 6 activities of daily living.</p> Signup and view all the answers

    A viatical settlement is made between the purchaser of a person's life insurance policy and _____________.

    <p>The terminally ill insured</p> Signup and view all the answers

    If Joe exercises all options under the guaranteed insurability rider, how many policies will he end up with?

    <p>7</p> Signup and view all the answers

    All of the following are true regarding the accelerated death benefit rider, except:

    <p>Accelerated death benefits have to be repaid if the insured's health improves</p> Signup and view all the answers

    Generally, how many death benefit options does Universal Life have?

    <p>2</p> Signup and view all the answers

    Equity Universal, Variable, and Variable Universal all have which of the following characteristics in common?

    <p>The overall policy performance is tied to the stock market</p> Signup and view all the answers

    What happens to the death benefit of a variable life policy?

    <p>May go up or down but will never fall below the face amount of the policy.</p> Signup and view all the answers

    What must producers selling variable life insurance have?

    <p>A valid life license and must also be registered with FINRA.</p> Signup and view all the answers

    How is variable whole life different from variable universal life?

    <p>The policy has a guaranteed minimum face amount.</p> Signup and view all the answers

    What happens when the cash value account of a universal life policy reaches zero?

    <p>The policy goes into the grace period.</p> Signup and view all the answers

    Which of the following policies could be expected to have the lowest premium?

    <p>Whole life</p> Signup and view all the answers

    If the insured of a Whole Life policy is on claim with a Waiver of Premium rider, what happens to the cash values?

    <p>Cash value and dividends are not affected.</p> Signup and view all the answers

    All of the following statements regarding the Living Needs Rider are true, except:

    <p>The insurer charges an annual premium for this rider</p> Signup and view all the answers

    Which policy provides the highest face value for the lowest premium amount for a 22-year-old with a limited budget?

    <p>Annually Renewable Term.</p> Signup and view all the answers

    All of the following are characteristics of Universal Life Insurance, except:

    <p>The policyowner can choose which investments to place cash values into</p> Signup and view all the answers

    An existing term life insurance policy may be exchanged for a new term life insurance policy on the __________ date.

    <p>Re-Entry</p> Signup and view all the answers

    Which statement is true regarding Mary converting her Term Policy to permanent protection?

    <p>She may convert without evidence of insurability.</p> Signup and view all the answers

    Which of the following policies cannot have a premium payment period of less than age 100?

    <p>Ordinary Straight Whole Life</p> Signup and view all the answers

    What happens to a spouse or child rider just prior to expiration?

    <p>The spouse or child has a conversion option.</p> Signup and view all the answers

    Which of the following policies must be sold by prospectus?

    <p>Variable Whole Life</p> Signup and view all the answers

    If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, the benefit payable to the beneficiary would be __________ if the policy had $25,000 in cash values.

    <p>$275,000</p> Signup and view all the answers

    The face amount of an Ordinary Whole Life Policy __________ over the life of the policy.

    <p>Remains the same.</p> Signup and view all the answers

    In which of the following circumstances would an accidental death benefit not apply?

    <p>Death caused by an intentional act</p> Signup and view all the answers

    Which of the following statements about Equity Indexed Life insurance is TRUE?

    <p>The interest credited to the policy is based off the performance of a stock market index</p> Signup and view all the answers

    In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the __________.

    <p>Risk corridor</p> Signup and view all the answers

    Which of the following is correct regarding a 15-Pay Life policy?

    <p>It is permanent insurance but the insured only pays premiums for 15 years</p> Signup and view all the answers

    ______________ is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

    <p>Current Assumption Whole Life</p> Signup and view all the answers

    What is the total premium annually the policyowner must pay to keep a $100,000 policy with a waiver of premium rider and $30,000 of cash value in force?

    <p>$800</p> Signup and view all the answers

    With a Variable Life Policy, which of the following is guaranteed?

    <p>Death benefit</p> Signup and view all the answers

    The cash value of a permanent life insurance policy can be used for all of the following, except:

    <p>Accidental death benefits</p> Signup and view all the answers

    An indeterminate premium whole life policy has __________ premiums.

    <p>Adjustable.</p> Signup and view all the answers

    If X has a life insurance policy that is no longer wanted or needed, how much might X receive if the premiums are $10,000 annually, the cash value is $200,000, and the face amount is $1,000,000?

    <p>More than $200,000 but less than $1,000,000.</p> Signup and view all the answers

    All of the following provisions of an adjustable life policy may be changed to meet the policyholder's needs, except:

    <p>The person named as the insured on the policy</p> Signup and view all the answers

    How long would a policyowner have to pay premiums on a term life policy to age 65 that was taken out at age 35?

    <p>To the earlier of the insured's death, or to age 65.</p> Signup and view all the answers

    What is the maximum amount Jason can borrow using his Whole Life insurance policy with a face amount of $100,000 and cash value of $10,000?

    <p>$10,000.</p> Signup and view all the answers

    Adjustable life allows the policyowner to do all of the following, except:

    <p>Change the insured</p> Signup and view all the answers

    Which of the following term life insurance policies would have the lowest first-year annual premium, all other factors being equal?

    <p>1-year</p> Signup and view all the answers

    Study Notes

    Life Insurance Policies and Riders

    • Limited Pay Whole Life: Offers a combination of savings and insurance protection, requiring premiums until age 65. The policy becomes fully paid-up at this age.
    • Current Assumption Whole Life: Premiums are affected by current interest rates; if rates increase, premiums may decrease, leading to faster cash value growth.
    • Cost of Living Rider: Adjusts the policy's death benefit to counteract inflation without requiring insurability proof, although premiums increase.
    • Disability Waiver Rider: Begins typically six months after a qualifying disability occurs, requiring the insured to continue paying premiums during this period.
    • Equity Universal, Variable, and Variable Universal Life Policies: All have death benefits associated with stock market performance and lack guaranteed death benefits.
    • Variable Whole Life Policy: Must be sold with a prospectus as it is classified as a security; requires a securities registration for sale.
    • Waiver of Premium Rider: Extra premium does not contribute to the cash value of the policy; it covers the cost of the rider itself.
    • Adjustable Life Insurance: Provides the flexibility of adjusting features and can function similarly to term insurance if premium payments are reduced.
    • Life Settlement: Transaction where an individual sells a life insurance policy for cash, typically for more than cash surrender value but less than face value.
    • Straight Whole Life Policy: Offers a level guaranteed premium and death benefit for the insured's life, characterized by fixed costs and little flexibility.
    • Payor Rider: Maintains juvenile insurance policies by waiving premiums if the policy's payor (usually a parent) becomes disabled or dies.
    • Viatical Settlement: Involves selling a life insurance policy by someone terminally ill; they must receive at least as much as the cash value from surrendering the policy.
    • Group Term Life Insurance: Often features a level death benefit, providing uniform coverage for members of a group.
    • Child Rider: Covers all children (over 14 or 15 days of age) and allows conversion to permanent life insurance without proof of insurability.
    • Universal Life Insurance: Offers flexibility in premium payments and death benefit adjustments, but does not allow policyowners to choose investments for cash values.
    • Option A Death Benefit in Universal Life: Provides the face amount upon death, while Option B includes the cash value in the total benefit.
    • Juvenile Policies: Typically initiated by parents or grandparents, not siblings, and can include features like jumping benefits at specific ages.
    • Guaranteed Insurability Rider: Allows the individual to purchase additional insurance amounts at specified ages without needing proof of insurability.
    • Variable Universal Life: Features cash value based on the performance of selected investment portfolios as per the policyowner's discretion.
    • Jumping Juvenile Policy: Provides a face amount increase (usually by five times) at ages 21 to 25 without a change in premium.
    • Last-to-Die Policy: Best suited for married couples concerned about estate taxes, as it pays the benefit after the second insured's death.
    • Disability Income Rider: Offers monthly income based on a percentage of the death benefit during total disability without impacting the policy's death benefit.
    • Long-Term Care Rider: Provides financial support for non-hospital expenses during chronic illness, claiming daily or monthly benefits up to the full death benefit.
    • Re-Entry Term Option: Permits healthy insureds to obtain a new term policy at a lower rate based on improved health.
    • Rider Expiration Effects: Linked premiums typically decrease once associated riders expire, as do obligations to maintain additional premium payments.### Accelerated Death Benefit Rider
    • Accelerated death benefits usually do not include disability income.
    • Benefits must be repaid only if the insured’s health improves.
    • Benefits can be triggered by catastrophic illnesses, like the need for an organ transplant.
    • Long-term care qualification can also trigger benefits if the insured cannot perform daily activities.

    Universal Life Insurance

    • Offers two death benefit options: Option A and Option B.
    • Death benefit can change based on cash value and investment performance.

    Equity Universal, Variable, and Variable Universal Life Policies

    • Performance is linked to the overall stock market.
    • All have death benefits associated with market performance.
    • No guaranteed death benefit, and securities registration required for sale.

    Variable Life Policy Death Benefit

    • Death benefit may fluctuate but never falls below the policy's initial face amount.

    Selling Variable Life Insurance

    • Requires both a valid life insurance license and registration with FINRA.
    • Investment risks are borne by the policyowner, classifying these products as securities.

    Variable Whole Life vs. Variable Universal Life

    • Variable whole life guarantees a minimum face amount if premiums are paid on time, unlike variable universal life that does not guarantee a death benefit.

    Universal Life Policy Cash Value

    • If cash value reaches zero, the policy enters a grace period before lapsing if no premium is paid.

    Premium Structures

    • Whole life insurance offers the lowest premiums compared to limited-pay policies.
    • Cash value and dividends remain unaffected under a Waiver of Premium rider.

    Living Needs Rider

    • Typically added without additional premiums and allows early face amount payment under terminal illness circumstances.
    • Does not involve an insurer-charged annual premium.

    Term Life Policy Exchange

    • A term life policy can be exchanged for a new term policy based on specific dates mentioned in the original policy.

    Term Policy Conversion

    • Allows conversion to permanent insurance without proof of insurability, typically within the first 10 years or before a specified age.

    Adjustable Life Policy

    • Options for modification include death benefit, premiums, and insurance protection period, but not the insured individual.

    Death Benefit Characteristics

    • A variable universal life policy guarantees a death benefit as long as premiums are paid.
    • Cash values can be utilized for loans and nonforfeiture options but not for accidental death benefits.

    Life Settlement

    • A life insurance policy can be sold for a price higher than the cash value but lower than the face amount.

    Term Insurance for Limited Cash Flow

    • Term life insurance delivers the highest coverage for the lowest cost due to the exclusion of cash value accumulation.

    Increasing Term Insurance

    • Provides an increasing death benefit annually and is often used as a rider on permanent policies.

    Current Assumption Whole Life

    • Features adjustable premiums and interest rates based on market conditions.

    Payment Requirements Post-Disability

    • After recovery from disability with a waiver, premium payments resume as due.

    Family Rider

    • Offers affordable life insurance coverage for the family under one policy.

    Corridor of Insurance Protection

    • Increases in insurance coverage are added to prevent policies from maturing before age 100 without needing evidence of insurability.### Disability Income Rider
    • The benefit amount from a disability income rider is typically based on the face amount of the attached life insurance policy.
    • The income provided is usually expressed as a specified dollar amount per $1,000 of coverage.

    Adjustable Life Policy

    • Combines features of both permanent and term life insurance.
    • Precursor to Universal Life policies.

    Viatical Settlement

    • A contract between a life insurance policyholder and a viatical settlement provider.
    • A viatical settlement broker may facilitate but is not party to the contract.

    Increasing Death Benefit

    • Policyowners must prove insurability to increase the death benefit in an Adjustable Life Insurance policy.

    Premium Costs

    • If a waiver of premium rider is canceled, the annual premium for a $100,000 policy drops to $750, excluding the rider's cost.

    Waiver of Premium Rider

    • Generally expires when the insured reaches age 65.

    Whole Life Policy Payment

    • Purchasing a single premium life policy is the fastest way to pay off a traditional whole life policy.

    Variable Whole Life Features

    • Allows owners to choose separate accounts for premium investment but does not permit partial surrenders.

    Lowest First-Year Premium

    • Term to age 40 offers the lowest first-year premium for a 30-year-old, compared to longer term policies.

    Simplified Issue Life Insurance

    • This type of insurance requires no medical exam, only basic health-related questions, and is often available for lower face amounts.

    Whole Life Premium Payment Period

    • Ordinary Straight Whole Life policies cannot have a premium payment period of less than to age 100.

    Viatical Settlement Risks

    • Purchasers risk losing money if the insured does not die within the expected time frame.

    Whole Life Premium Comparisons

    • 20-Pay Ordinary Whole Life has the highest annual premium payment per $1,000 of coverage due to its shorter premium-paying period.

    Premium Waiving Riders

    • Guaranteed insurability does not waive premiums in the event of a disability; it allows future coverage purchases at specified times.

    Variable Life Policy

    • Owners allocate premiums into a separate account, part of the insurer's separate accounts akin to mutual funds.

    Life Settlement Purchaser Risks

    • Risks include third-party insolvency or inability to cover ongoing premiums, but not if the insured dies sooner than expected.

    Current Assumption Whole Life Characteristics

    • Guarantees a death benefit.
    • Premiums and interest credited can be adjusted based on current interest rates.

    Universal Life Death Benefit Options

    • Death Benefit Option B provides an increasing death benefit by adding cash value to the level term face amount.

    Licensing for Variable Life Policies

    • A securities license is required to sell Variable Universal Life policies, in addition to a life insurance license.

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