NJ Life Producer Exam Terms, Policies, and Regulations
Term Life Insurance Temporary coverage for a set period. Builds NO cash
value. Lowest premiums. For those seeking
temporary protection and affordability.
Level Term Term insurance where the FACE AMOUNT stays
constant throughout. 'Level' refers to the face
amount, not the premium.
Decreasing Term Decreasing death benefit with LEVEL premiums.
Used for mortgage protection — cheapest way to
cover a 30-year mortgage.
Increasing Term Term insurance where the FACE AMOUNT grows
over time. Purpose: hedge against inflation or a
growing financial need.
Renewable Term Guarantees renewal to a predetermined date/age
WITHOUT proof of insurability. Premium rises with
age at each renewal.
Convertible Term Allows switching from TERM to a PERMANENT
policy within a set window, without proving
insurability.
Annually Renewable Term (ART) Renews each year without proof of insurability,
repriced at the insured's new (older) age each time.
Cheapest at first, most expensive later.
Renewal The automatic continuance of insurance coverage.
Different from reinstatement (reviving a lapsed
policy).
Whole Life Permanent coverage, fixed level premium,
guaranteed cash value growth rate. The baseline all
other permanent products vary from.
Limited Pay Whole Life Premiums paid for a specified number of years;
benefits last a LIFETIME. 'Paid up after 20 years' =
limited pay.
Single Premium Whole Life A policy that is paid up after only ONE payment — no
more premiums ever.
, NJ Life Producer Exam Terms, Policies, and Regulations
Modified Whole Life Premiums LOWER than typical whole life during the
first few years, then HIGHER than typical thereafter.
Adjustable Life Allows the policyowner to change TWO features:
premium and face amount. Does NOT allow
increasing the death benefit via nonforfeiture options.
Equity Index Whole Life 80-90% of premium invested in traditional fixed
income securities; remainder tied to a stipulated
stock index.
Endowment Policy LIFE INSURANCE that pays the face amount at
death OR at the end of a specified period if the
insured is still alive — whichever comes first.
Universal Life — defining feature FLEXIBLE PREMIUM SCHEDULE. Also has a
guaranteed minimum interest rate with potential to
earn more.
Universal Life interest rate Guaranteed minimum rate with the possibility of
earning HIGHER. Subject to a contract rate or current
annual rate.
Universal Life death claim Pays the death benefit PLUS the savings element.
The Corridor The gap between a Universal Life policy's total death
benefit and its cash value. Required by the IRS to
keep the policy classified as life insurance.
Partial Surrender Allows an interest-sensitive life policyholder (e.g.,
Universal Life) to withdraw cash value INTEREST-
FREE — unlike a policy loan, which charges interest.
Variable Whole Life Cash values vary with the investment performance of
common stocks held in separate accounts.
Variable Universal Life (VUL) Three elements: FLEXIBLE PREMIUM + DEATH
BENEFIT + choice of how cash value is invested.
Combines UL structure with investment choice.
, NJ Life Producer Exam Terms, Policies, and Regulations
Securities license required for... Variable life insurance and variable annuities.
Requires FINRA registration plus a state insurance
license.
Joint Life Covers two people, payable upon the FIRST death.
Coverage ends after that payout — no further
protection.
Survivorship (Last Survivor) Life Covers two or more people, payable upon the LAST
death. Used in estate planning.
Modified Endowment Contract (MEC) A life insurance contract that accumulates cash
values HIGHER than the IRS allows — it fails the 7-
pay test.
MEC tax consequence PRE-DEATH DISTRIBUTIONS BECOME TAXABLE.
Taxed LIFO (gain first), plus 10% penalty under 59½.
Adverse Selection The tendency of LESS FAVORABLE insurance risks
to seek or continue insurance to a greater extent than
others.
Certificate of Coverage and Benefits Describes the coverage, conditions, and limitations
found in the MASTER POLICY of a group contract.
Conversion (group insurance) Changing group insurance to an INDIVIDUAL policy
with the SAME insurer at termination of employment.
Family Term Rider Provides a death benefit if the SPOUSE of the
insured dies (often covers children too).
Child Term Rider LEVEL TERM insurance added to an existing policy
to cover a child. Can be converted to permanent
coverage WITHOUT evidence of insurability.
Payor Benefit Rider Waives premiums ONLY on JUVENILE insurance —
if the paying adult dies or becomes disabled. Pays
until the child reaches a specified age.
Term Life Insurance Temporary coverage for a set period. Builds NO cash
value. Lowest premiums. For those seeking
temporary protection and affordability.
Level Term Term insurance where the FACE AMOUNT stays
constant throughout. 'Level' refers to the face
amount, not the premium.
Decreasing Term Decreasing death benefit with LEVEL premiums.
Used for mortgage protection — cheapest way to
cover a 30-year mortgage.
Increasing Term Term insurance where the FACE AMOUNT grows
over time. Purpose: hedge against inflation or a
growing financial need.
Renewable Term Guarantees renewal to a predetermined date/age
WITHOUT proof of insurability. Premium rises with
age at each renewal.
Convertible Term Allows switching from TERM to a PERMANENT
policy within a set window, without proving
insurability.
Annually Renewable Term (ART) Renews each year without proof of insurability,
repriced at the insured's new (older) age each time.
Cheapest at first, most expensive later.
Renewal The automatic continuance of insurance coverage.
Different from reinstatement (reviving a lapsed
policy).
Whole Life Permanent coverage, fixed level premium,
guaranteed cash value growth rate. The baseline all
other permanent products vary from.
Limited Pay Whole Life Premiums paid for a specified number of years;
benefits last a LIFETIME. 'Paid up after 20 years' =
limited pay.
Single Premium Whole Life A policy that is paid up after only ONE payment — no
more premiums ever.
, NJ Life Producer Exam Terms, Policies, and Regulations
Modified Whole Life Premiums LOWER than typical whole life during the
first few years, then HIGHER than typical thereafter.
Adjustable Life Allows the policyowner to change TWO features:
premium and face amount. Does NOT allow
increasing the death benefit via nonforfeiture options.
Equity Index Whole Life 80-90% of premium invested in traditional fixed
income securities; remainder tied to a stipulated
stock index.
Endowment Policy LIFE INSURANCE that pays the face amount at
death OR at the end of a specified period if the
insured is still alive — whichever comes first.
Universal Life — defining feature FLEXIBLE PREMIUM SCHEDULE. Also has a
guaranteed minimum interest rate with potential to
earn more.
Universal Life interest rate Guaranteed minimum rate with the possibility of
earning HIGHER. Subject to a contract rate or current
annual rate.
Universal Life death claim Pays the death benefit PLUS the savings element.
The Corridor The gap between a Universal Life policy's total death
benefit and its cash value. Required by the IRS to
keep the policy classified as life insurance.
Partial Surrender Allows an interest-sensitive life policyholder (e.g.,
Universal Life) to withdraw cash value INTEREST-
FREE — unlike a policy loan, which charges interest.
Variable Whole Life Cash values vary with the investment performance of
common stocks held in separate accounts.
Variable Universal Life (VUL) Three elements: FLEXIBLE PREMIUM + DEATH
BENEFIT + choice of how cash value is invested.
Combines UL structure with investment choice.
, NJ Life Producer Exam Terms, Policies, and Regulations
Securities license required for... Variable life insurance and variable annuities.
Requires FINRA registration plus a state insurance
license.
Joint Life Covers two people, payable upon the FIRST death.
Coverage ends after that payout — no further
protection.
Survivorship (Last Survivor) Life Covers two or more people, payable upon the LAST
death. Used in estate planning.
Modified Endowment Contract (MEC) A life insurance contract that accumulates cash
values HIGHER than the IRS allows — it fails the 7-
pay test.
MEC tax consequence PRE-DEATH DISTRIBUTIONS BECOME TAXABLE.
Taxed LIFO (gain first), plus 10% penalty under 59½.
Adverse Selection The tendency of LESS FAVORABLE insurance risks
to seek or continue insurance to a greater extent than
others.
Certificate of Coverage and Benefits Describes the coverage, conditions, and limitations
found in the MASTER POLICY of a group contract.
Conversion (group insurance) Changing group insurance to an INDIVIDUAL policy
with the SAME insurer at termination of employment.
Family Term Rider Provides a death benefit if the SPOUSE of the
insured dies (often covers children too).
Child Term Rider LEVEL TERM insurance added to an existing policy
to cover a child. Can be converted to permanent
coverage WITHOUT evidence of insurability.
Payor Benefit Rider Waives premiums ONLY on JUVENILE insurance —
if the paying adult dies or becomes disabled. Pays
until the child reaches a specified age.
