NC Life insurance state exam study guideline

NC Life insurance state exam study guideline Term Insurance Used for Temporary Situations. Net cost highest in the long run. Premiums goes up every year based on current (attained)age. Term Insurance Expire's at a certain age/Time in the future. May be renewable up to a certain age or date with out a phyical Exam. Level Term Insurance Term insurance can be Renewed annually. Has a level Face Amount at renewal, Premiums goes up. Can be purchased for a Year or as often as 5, 10, 15, to 20 years inclements with average premium. Premiums and Face Amounts are "Level" for a period of "Time". Decreasing Term Insurance It is NOT Annual Renewable term. Face Amount goes down, while Premiums remain the same. Decreasing Term insurance is often used as a mortage redemption. Can be converted to Whole Life, regardless of health. Premiums stays the same. Costs increases as Face Amount decreases, by expiration the Face Amount is Zero. Increasing Term Insurance Term is added as a rider to Whole Life policies, at an extra cost. Face Amount goes up. It Allows beneficiary to recieve Face Amount plus Premiums or Cash Value. Renewability Most Term Is renewable up to a certain age regardless of health. That can be renewed without proof of the insureds insurability, up to a certain specified maximum age. Convertibilty Most are convertible to Whole Life policies regardless of health. Conversions are based on current "attained" age. NOT original age. Conversion may only be to a move expensive policy, such as Whole Life. Term insurance You can not convert "Term to Term" You can convert "Term to Whole Life" You can never convert to more coverage than you have. " If you want more insurance, you will have to pass a physical exam and pay premiums upon your current "attained" age. What are the 9 types of Whole Life Insurance Policies? "Ordinary (Straight) Life" " Limited Pay" " Single-Premiums Whole Life" "Adjustable Whole Life" Universal Whole Life" Variable Whole Life" "Variable/Universal Whole Life" "Interest Sensitive Whole Life" " Equity-indexed Life "Ordinary (Straight) Life" (Fixed Premiums) Permanent protection (matures at age 100) Guaranteed Tax deferred Interest rate on Cash Value. Cash Value builds slowly for the first 3 years. Premiums are level, since the company risks goes down as Cash Value goes up. If you die the insurer keeps the Cash Value to offset their risks. Insureds has access to Cash through Cash Surrender or a policy loan. "Rates are per unit of protection" ($1,000 is 1 unit) C/V is guaranteed to be a certain amount per $1,000 (in the future). C/V will equal F/A at policy maturity (age 100). Limited Pay and Single premium Whole Life (Fixed Premiums) Limited Pay can also be as LP65 or 20pay life 30 paylife, so don't get these confussed, they are the same thing. Premium paying period is shorter. Still matures at age 100 (Not end of premium paying period) Client pays same amount of money over a shorter period of time. The shorter the premium paying period, the higher the premium. C/v builds faster than Oridary WL. A single-premium policy will have an Immediate C/V. Limited-pay Whole Life A 20 paylife will be paid up in 20 years If purchased at age 30, paid up at age 50. The premium is paid up, your still covered till the policy matures at age 100. A life paid up at age 65, will be paid up at age 65 (LP65) If purchased at age 30, paid up at age 65. The premium is paid up at age 65, your still covered until policy matures at age 100. Adjustable Whole life ( Flexible Premium) Is a combination of Term and Whole Life! Still cover you until you die or age 100 (matures) Insureds can adjust Face Amount, Premiums or Term of Protection. Sold to Clients with Fluctuating income ( real estate brokers) Coverage may not be increased beyond the original amount without an physical. Universal Whole Life (Flexible Premiums) Guaranteed "Minimum" Interest Rate. Current interest rate which varies year to year. Has Extreme Flexibilty regarding premiums payments. Insured does not have to pay annual premium ( Cash Value may be debited to pay cost of protection) "THIS WOULD NOT BE A LOAN" Protection portion of policy is actually term insurance ( cost increases) Target Premium based on projected earnings. Option A: Universal Life has a level death benefit (term) Face Amount is made of term insurance Option B: Universal Life will pay beneficiary both Face Amount PLUS Cash Value. Variable Whole Life (Fixed Premiums) Cash Value deposited into a "Separate Account" (Like a mutual Fund) NO guaranteed rate of return or Cash Value. It does have a "Minimum death beneft (Face Amount) is guaranteed. Projections may be used as long as they are not guaranteed. Requires FINRA Series 6 or 7 license to sell! FINRA ( Financial industry Regulatory Authority) Variable/ Universal Whole Life (Flexible Premium) Combines best features of both Universal and Variable whole life. Requires a FINRA series 6 or 7 securities license to sell. Clients can self direct cash values into sub-accounts. No guaranteed Interest Rate or Cash Value. Face Amount is term insurance (option A) Policy may pay out mopre upon death if (option B) is selected, Face Amount plus Cash Value Interest Sensitive Whole Life (Flexible Premium) General just another name for UNIVERSAL LIFE (UL) Current Interest rate that varies year to year Has Guaranteed "Minimum" Interest Rate A combination of Term and Interest bearing savings account. Equity-Indexed Life (Fixed Premium) A type of Cash Value Life insurance, where the Minimum death benefit is Guaranteed, as well as the Minimum earning on the Cash Value in the General Account. Not classified as securities, Securities license is NOT required. Cash Value accumulation is usually linked to an Index S&P 500. Index outperforms the guaranteed interest rate, the difference is credited to the Cash Value as per the insurance contract. Which Whole life Insurance policies have a level or Flexible premium? ordinary whole life Limited-pay whole life Single-premium whole life Variable whole life Equity-indexed whole life Fixed premium? Term policies have a fixed premium for the term. Can be for a year or more depending on the policy purchased. Which life insurance policies has a Flexible premium? Adjustable whole life Universal whole life Variable/universal whole life Interest-sensitive whole life Endowment A Cash Value whole life policy for which premiums are paid for a limited number of years, such as age 65. If the insured is alive at the end of this premium paying period, he/she recieves Face Amount of the policy. If the insured dies before maturity of the policy, the beneficiary recieves the proceeds. The most expensive type of Cash Value life insurance, since the policy teaches maturity prior to age 100. Endowments are often purchased to supplement retirement or for children's education purposes. What is Endowment Life insurance? This is a combination of pure endowment plus term insurance for a specific period. The pure endowment paid a living benefit at the end of the endowment period and the term insurance paid a death benefit. Return of Premium (ROP) A type of term insurance in which the insured gets back the premiums paid in at the end of the term, IF they are still alive. Premiums returned to the insured tax-free as the premium is paid with after tax dollars. The premium for a return of premium is generally more than that for a term policy, but less than that of a traditional whole life policy. What are the different types of Premium Variations? " Single" "Level ( continous/straight)" "Adjustable/Flexible" "Modified" "Graded" "Indeterminate(nonguaranteed)" Single A life insurance policy on which the entire premium is paid in one payment (lump sum). Creates an immediate Cash Value. Level Continous/ straight Continous: For the entire policy and does not change premium Straight: is level term that the amount of premium based on inclements of 5, 10, 20 years to age 65 of policy which can be increased at the end of each year term. Adjustable/Flexible Adjustable: Adjust Face Amount, Premiums or Term of protection Flexible: Fluctating incomes Modified It is a flexible premium policy, the premium can be changed , at anytime or frequency as long as enough cash value remains in the life insurance policy to allow it to pay itself for its monthly cost of insurance deductions. Ex: Universal Life, Variable/Universal life and Adjustable Whole life Graded The policy usually pays out limited death benefits during the first few years and usually requires premiums that are somewhat higher than standard life insurance policies. Does not require medical exams or a medical questionaire. Starts out with a lower usual premium which increases every year for a certain number of years, and then levels off and remains level for as long as you own the policy. Indetermindate (Nonguaranteed) A type of Whole Life policy or a (Permanent life insurance policy) will most probably vary from year to year. It's distinguishable characterics is that this type of Insurance has a provision for adjustable premiums. Were developed to compete with participating policies they employ a dual premium - A maximum premium and discounts that might reduce the premium.