NC LIFE INSURANCE STATE EXAM STUDY GUIDE
Term Insurance - Answers - Used for Temporary Situations. Net cost highest in the
long run. Premiums goes up every year based on current (attained)age.
Term Insurance - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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? - Answers - "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) - Answers - 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) - Answers - 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 - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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? - Answers -
>ordinary whole life
>Limited-pay whole life
>Single-premium whole life
>Variable whole life
>Equity-indexed whole life
Fixed premium? - Answers - 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? - Answers - >Adjustable whole
life
>Universal whole life
>Variable/universal whole life
>Interest-sensitive whole life
Endowment - Answers - 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.
Term Insurance - Answers - Used for Temporary Situations. Net cost highest in the
long run. Premiums goes up every year based on current (attained)age.
Term Insurance - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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 - Answers - 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? - Answers - "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) - Answers - 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) - Answers - 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 - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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) - Answers - 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? - Answers -
>ordinary whole life
>Limited-pay whole life
>Single-premium whole life
>Variable whole life
>Equity-indexed whole life
Fixed premium? - Answers - 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? - Answers - >Adjustable whole
life
>Universal whole life
>Variable/universal whole life
>Interest-sensitive whole life
Endowment - Answers - 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.
