S6C2.8

Whole Life (WL)

What is the foundation for all permanent insurance?

Variable Life (VL)

What type of cash value policy has a fixed scheduled premium , minimum death benefit and also identifies as Security?

Universal Variable Life (UVL)

What type of cash value has a flexible premium and adjustable death benefit and also considered Security?

No

Once a policy has been identified as a Modified Endowment (MEC), can it be reversed?

Prospectus must be delivered prior to or at the time of solicitation and may not be altered,

When must a prospectus be delivered?

Sales load, State taxes and Administrative fee (Administrative fee is normally a one time fee)

.What are the charges and expenses that are deducted from gross premium?

Mortality Risk Fee (Cost of Insurance)
expense Risk Fee
Investment fee

What charges are deducted from Separate account?

Mortality Risk

What type of risk is taken into account that the policy owner may live other than assumed?

Expense Risk

What type of risk takes into account the cost of administering and issuing the policy may be greater than assumed?

P- Premium
A- Administrative Fee
S-Sales Load
S- State Premium tax

Acronym for Charges deducted from gross premium.

1. Life Insurance and Securities

1. What tow types of licenses are required for any product that include Variable?

Cash Value- No
Death Benefit- Yes

In an variable life policy, does Assumed Interest Rate (AIR)
have an effect on cash value?, death benefit?

If separate acct performance for the year is greater than AIR, death benefit will increase if it is equal to AIR the death benefit will remain the same. If it is less than AIR, the death benefit will decrease.

How does Assumed interest rate (AIR) affect the death benefit in a variable life policy?

Death Value -Annually, Cash Value-Monthly, and Unit Value-Daily

In a variable life policy, when are the following calculated, Death Benefits, Cash Value, and Unit Value?

1. 75%

1. What percentage of cash value must be available for loan after 3 years?

Must be available for a minimum of 2 yrs, and, No proof of insurability.

How long must the contract exchange provision be available, and, Is proof of insurability required?

1. The Maximum sales charge is 9%.

1. What is the maximum sales change over the life of the contract?

Mutual Fund is... One vote per unit.
Variable Life is... One vote per $100 cash value, fractional votes are allowed.

As it relates to voting rights, what is the difference between Variable and Mutual Funds?

1. Lump Sum paid out at once

1. Life settlement option where proceeds are paid all at once is called

It is treated as ordinary income and 10% penalty if prior to age 59 1/2.

In a MEC, once cash is removed, how is it treated as it relates to taxes?

A general account.

If you do not see the word Variable where does the cash value get invested?

A separate account

Any insurance product that include the word Variable, where does the cash value get invested?

The death benefit is reduced by the amount of the loan.

What happens if an insured dies with an outstanding loan?

2. Owner must make a payment within 31 days to correct the imbalance.

What must the policy owner do if the cash value drops below the policy loan amount?

Year 1 Sales charges deducted in excess of 30%
Year 2 Sales charges deducted in excess of 10%, thereafter, the policy owner has access to cash value only

In life insurance there is a 2 yr provision, what happens in yr. 1, yr. 2 and thereafter?

Policy owner has 45 days.

Within how many days does a policy owner receive all monies paid in a refund?

Interest only income-Interest taxed at ordinary income and principle may be take out at anytime tax free.

The beneficiary leaves the principle with the insurance company and receives a monthly check based on interest earned in the account is called?

Annuity

Settlement options that allow beneficiaries to be paid out either over time or immediately?

2nd to die, (primarily used for state taxes)

In a joint life settlement where a policy pays upon the last person's death is called