Module 3 Flashcards
Help you study for module 3 with Oliver's learning (32 cards)
How do you enable a life insurance policy to be protected from creditors?
By designating a preferred or irrevocable beneficiary. Policy cannot be claimed by creditors if there is an irrevocable beneficiary (which can’t be changed without consent of the beneficiary) or if you leave it to a parent, spouse, child, or grandchild, also known as a preferred spouse
A whole life participating insurance policy will qualify for dividend payments commencing at the end of the first year of the policy and are paid after the first premium in the second year has been received by the insurer. What are the 3 basic purposes to which policy dividends can be put?
Savings
Acquire more life insurance
Reduce premiums
If a policy owner of a whole life participating insurance policy elects to use his dividends to purchase more insurance, what options can he select?
Paid up additions (PUA): uses the policy dividends to buy additional insurance. The insurance is paid-up which means it needs no premiums. Paid-up additions add to the face value ,cash surrender value and loan value of the original policy.
Term insurance: The annual policy dividend is used as a single premium to buy one-year term insurance. As with the PUA option the medical evidence of insurance not required. The amount of term insurance acquired depends on the size of the dividend and the attained age of the life insured.
What happens to a whole life insurance policy if the policy owner elects to make the policy reduced paid-up insurance?
The cash surrender value of the policy buys a reduced paid-up policy that requires no further premium payments.reduced paid-up insurance uses the cash surrender value of the whole life policy as a lump-sum premium of the whole life that is paid-up. The amount of the coverage is reduced to a lesser face amount, but continues as a permanent policy.
The Reduced Paid-up policy provides many of the features of the original whole policy,including a cash surrender value and insurance coverage for the lifetime of the insured.
When you convert a renewable and convertible term insurance policy to a whole life non-participating policy, what impact does this have on the incontestability and suicide clauses of the converted policy contract?
Nothing changes in regards to the clauses, because the converted policy is considered an extension of the original policy, and therefore the requirements have already been met under the original term contract.
What are the 3 main classes of permanent life insurance products?
Whole life insurance
Term-to-100 insurance
Universal life insurance
If a client has a whole life insurance policy that has been in force for 13 years, what will happen to the policy if the client misses a premium payment?
The missed premium will trigger an automatic premium loan against the cash value of the policy ,so that that policy will stay In effect as long as there continues to be a cash value
Would you recommend a universal life policy to an individual who wants everything in an insurance policy guaranteed?
No UL insurance is a highly involved policy as it requires the policy owner to be active in the decision process and also contains a investment account that is owner run as the investment account is not guaranteed it is not recommended for this type of client
What is the difference between a level cost of insurance and a yearly renewable term cost of insurance in term of morality costing in a universal life insurance policy?
Level cost of insurance has a higher initial cost but level morality cost throughout the life of the policy. Yearly renewable term cost of insurance has a lower initial cost but has an escalating cost over the term of the policy
If a client wants to purchase a universal life insurance policy that has the most future certainty, what would you recommend?
A policy that has a level cost of insurance and a guaranteed 5-year investment account with minimum guarantees.
This choice would provide the greatest guarantee for the cost of insurance as well as for the investment portion of the policy.
What are the most common supplementary benefits and riders that can be added to a personal life insurance policy?
Accidental death benefit
Accidental death and dismemberment
Waiver of premium for total disability benefit
Parent/payer waiver benefit
If you have a whole life insurance policy that has a waiver of premium benefit attached to the policy, what will happen to the premiums on this policy if you have been disabled for 15 months?
The insurance company will “waive” the premium after you have been disabled for a period of six months.
The purchase of a waiver of premium benefit will go a long way to protecting your insurance policy if you become disabled so that your policy will in force during the financial hardship which could occur as a result of a disability.
What is a grace period on a life insurance policy?
It is a period of 30-31 days (depending on the company)during which a policy with overdue premiums will stay in force. A death within this time will still be paid . If over the grace period the policy laspes and becomes void.
What is an automatic premium loan?
If a premium is not paid,then the cash value in the policy will be accessed to pay the premium to continue insurance coverage. The automatic premium loan does not require the policy owner to take any action. The automatic premium loan will continue to pay the premium until there is no cash left in the insurance policy.
Tom and Ellen are a married couple with one young child they both work outside of the home and require both salaries to pay their mortgage and other bills they need some more life insurance they each owe a 100000 of 10 year renewable convertible term insurance they have heard about joint Latch to die insurance from their parents Is this be appropriate product for this young couple
No joint lost to dying transpace the death benefit at the 2nd death this young couple would require money immediately if something should happen to either one of them their financial need will arise at the death of the 1st party before the 2nd party dies
Muhammad and Lisa are a young married couple who are about to purchase their 1st home and will not have a lot of extra disposable income, they know that they need insurance to cover the mortgage if something should happen to either of them they would also want to know that there was a little extra money to get the surviving spouse, through the 1st difficult year and be able to pay off any additional debt. what type of insurance would you recommend they purchase
Is individual tenure renewable and convertible term in terrent policy. the purchase of individual 10 year renewable and confront the ball insurance policies were provided money for the surviving spouse at the time when they require it, at a cost that is, at least initially is less expensive than other insurance alternatives.
Is the cash surrender value of a whole life insurance policy guaranteed?
Yes. The cash surrender value of a whole life policy is guaranteed and stated in the policy contract.
A client purchased the whole life policy Thursday 6 years ago at age 24 the client is ready to retire and does not need the insurance any longer how can I decline how do you quite make this a smaller face amount policy without any further premiums required
By exercising the reduced paid up option under the non forfeiture option of the policy.
Is are premium deposits flexible under a whole life policy?
No. If a client wants premium flexibility, they should be considering a universal life policy. The premiums on a whole life policy are guaranteed impayable for life unless they have chosen unlimited payment whole life policy. If they did choose a limited payment whole life policy, the premium and length of time the premiums must be paid are in the policy contract worth ordering
Sandeep is considering the purchase of a universal life insurance policy he understands that this type of policy requires more decision making than the purchase of a whole life policy what are the decisions that sandeep must make with respect to purchasing a universal life policy ?
- Face Amount
- Life insured
3 . beneficiary - Investment of funds
- Type of type of mortality costing LCOI Or YRT
- Death benefit
Are all investment components of a universal life policy guaranteed ?
No a client may choose a guaranteed investment component (a 5 year guaranteed fund) but not all investment options are guaranteed
Who makes the investment choice of a universal life policy?
The policy owner.
The investments in a universal life insurance policy are controlled by the policy owner to suit his or her needs and preferences ; The policy owner faces all the investment risks including losses if any.
What is a guaranteed insurability benefit (gib) rider?
It guarantees a policy owner the right to increase the amount of life insurance at certain times, over periods of times, or if certain events occur.
The GIP is useful to add more insurance if the circumstances of the life Insured has changed since the policy was issued. Purchase of additional insurance is without evidence of insurability.
What is meant when they refer to a universal life insurance policy as being “unbundled” insurance?
Unbundling makes all of the cost as aspects of the universal life policy transparent.
There are 3 separate parts to a universal life insurance policy:
●Insurance
●investment
●Expenses
A universal life policy less separately the cost of insurance (the mortality charge applied to the policy), The growth rate applied to the account value of the policy, and Expense charges of the insurer (for administration, Expenses,and sales costs) As they apply to the policy the term used to describe the separation is “unbundling”
