CFP 512 UNIT 3 EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS
Whole Life or Universal Life insurance
Low to moderat risk tolerance level
Variable Life or Variable universal life
Moderate to high level risk
Age and health factors don't preclude the availability o particular product
Unless of a advanced age and then its more expensive
Annual Renewable Term Insurance
Term coverage that provides a level face amount that renews annually. This type of
coverage is guaranteed renewable annually without proof of insurability. Lowest initial
premium too
Usually have guaranteed maximum premium and are renewable for a specified period
of time
Allow keep it p until 70 or longer
Level Term Insurance
Term insurance where the face value of policy remains the same from the date the
policy is issued until the date the policy expires. Have to age 100 0r 120 will e similar to
approaching a whole lie policy
,Rennes try term policies can permit underwritten every 5 years so if still same
classification premium can drop or triple or quadruple if not
Decreasing Term Insurance
term insurance in which the annual premium remains constant but the face amount of
the policy declines each year. Been sold to cover home mortgages 15 or 30 yr typically
Uses straight lines depreciation
Less common today people living in multiple homes
Term policies
Allowed to lapse prior to insureds death
Majority claims paid on cash value
Usually larger in death benefits than cash value
Highest premium paid end of life
Many lapse as a result and are converted to cash value polcs r are allowed to lapse
prior to death
Term Insurance
Guaranteed premium for time period (term), a guaranteed death benefit and no cash
value
Whole Life (also called "permanent insurance")
Premiums higher than term insurance but remain the same throughout the policy period
Cash account is invested in company's general act
If offering whole life insurance must provide nonforfeiture values—-which provide a
benefit payable to the policy owner if they discontinue premiums before the death of the
, insured
Rarely pay dividends and are referred to as nonparticipating whole life
Whole life by mutual companies which are owned by policy owners sometimes
pay dividends to policy owners
Policy that receives divides is said to be partcipating
whole life insurance
Provides a guaranteed death benefit for life and requires premium payments be made
until death or policy maturity
Guaranteed premium guaranteed death benefit guaranteed cash value—if client is very
conservative this is a suitable policy
Variable Life Insurance VL
Policy's cash value is not guaranteed and is invested in a separate account
This is unlike whole life which invests in general account
Premiums are fixed
Cash values vary
Guaranteed death benefit that will never be less than initial face amount
Premiums are higher than on an equal amount of whole life
Prospectus must be used when selling
COMPLETE SOLUTIONS
Whole Life or Universal Life insurance
Low to moderat risk tolerance level
Variable Life or Variable universal life
Moderate to high level risk
Age and health factors don't preclude the availability o particular product
Unless of a advanced age and then its more expensive
Annual Renewable Term Insurance
Term coverage that provides a level face amount that renews annually. This type of
coverage is guaranteed renewable annually without proof of insurability. Lowest initial
premium too
Usually have guaranteed maximum premium and are renewable for a specified period
of time
Allow keep it p until 70 or longer
Level Term Insurance
Term insurance where the face value of policy remains the same from the date the
policy is issued until the date the policy expires. Have to age 100 0r 120 will e similar to
approaching a whole lie policy
,Rennes try term policies can permit underwritten every 5 years so if still same
classification premium can drop or triple or quadruple if not
Decreasing Term Insurance
term insurance in which the annual premium remains constant but the face amount of
the policy declines each year. Been sold to cover home mortgages 15 or 30 yr typically
Uses straight lines depreciation
Less common today people living in multiple homes
Term policies
Allowed to lapse prior to insureds death
Majority claims paid on cash value
Usually larger in death benefits than cash value
Highest premium paid end of life
Many lapse as a result and are converted to cash value polcs r are allowed to lapse
prior to death
Term Insurance
Guaranteed premium for time period (term), a guaranteed death benefit and no cash
value
Whole Life (also called "permanent insurance")
Premiums higher than term insurance but remain the same throughout the policy period
Cash account is invested in company's general act
If offering whole life insurance must provide nonforfeiture values—-which provide a
benefit payable to the policy owner if they discontinue premiums before the death of the
, insured
Rarely pay dividends and are referred to as nonparticipating whole life
Whole life by mutual companies which are owned by policy owners sometimes
pay dividends to policy owners
Policy that receives divides is said to be partcipating
whole life insurance
Provides a guaranteed death benefit for life and requires premium payments be made
until death or policy maturity
Guaranteed premium guaranteed death benefit guaranteed cash value—if client is very
conservative this is a suitable policy
Variable Life Insurance VL
Policy's cash value is not guaranteed and is invested in a separate account
This is unlike whole life which invests in general account
Premiums are fixed
Cash values vary
Guaranteed death benefit that will never be less than initial face amount
Premiums are higher than on an equal amount of whole life
Prospectus must be used when selling
