- | Page
Colorado Life & Health Insurance Exam| Guide with Questions and Verified ANSWERs| 100% Correct What are the types of Traditional Whole Life Insurance?
ANSWER: Ordinary (Straight) Life, Limited-Pay & Single-
Premium Whole Life, Adjustable Whole Life
What are the key features of Ordinary (Straight) Life insurance?
ANSWER: Provides coverage until age 100 or death, whichever
comes first; offers permanent protection; rates and benefits are based on the law of large numbers (mortality rate); features a guaranteed, tax-deferred interest rate; premium remains level while the company’s risk decreases as cash value increases; insurer retains cash value at death to offset risk; has the lowest net cost in the long run; client can access cash through cash surrender or policy loan; rates are per unit of protection (1,000 is
- unit); cash value is guaranteed and equals the face amount at
policy maturity
What distinguishes Limited-Pay & Single-Premium Whole Life insurance?
ANSWER: Premium paying period is shorter; cash value equals
face amount at age 100; 20-pay life is paid up in 20 years; life
- | Page
paid up at age 65 is paid up at 65; a single premium policy has an immediate cash value (1-pay life)
What is Adjustable Whole Life insurance designed for?
ANSWER: Sold to clients with fluctuating incomes; combines
term and whole life; coverage may not be increased without a physical exam
What are the types of Interest/Market Sensitive Whole Life Products?
ANSWER: Universal Whole Life, Variable Whole Life,
Variable/Universal Whole Life, Equity-Indexed Life
What are the characteristics of Universal Whole Life insurance?
ANSWER: Offers guaranteed minimum interest rates; provides
extreme flexibility regarding premium payments; is the most flexible product; target premium is based on projected earnings; Option A has level death benefits; Option B pays beneficiary both face amount and cash value
What defines Variable Whole Life insurance?
- | Page
ANSWER: Cash value is deposited into a separate account;
requires FINRA Series 6 or 7 license to sell; regulated by SEC and FINRA (formerly NASD); NYSE license not required; minimum death benefit (face amount) is guaranteed; has a fixed premium
What are the features of Variable/Universal Whole Life insurance?
ANSWER: Requires FINRA Series 6 or 7 licenses to sell;
allows client to self-direct cash values into sub-accounts; features flexible premiums
What is unique about Equity-Indexed Life insurance?
ANSWER: Cash value has a guaranteed minimum death benefit
and minimum earning in the general account; securities license not required; fixed premium; cash accumulation linked to an index (e.g., S&P) with excess credited if the index outperforms the guaranteed rate
What are the types of Term Life Insurance?
ANSWER: Level Term, Decreasing Term, Increasing Term
- | Page
What are the general characteristics of Term Insurance?
ANSWER: Premium increases annually; may be converted to
whole life at current attained age regardless of health; may be renewable up to a certain age without a physical exam
What defines Level Term insurance?
ANSWER: Both premium and face amount remain level for a
specified period
What are the features of Decreasing Term insurance?
ANSWER: Face amount decreases but premium remains the
same; usually convertible to whole life regardless of health; cost increases as face amount decreases
What characterizes Increasing Term insurance?
ANSWER: Face amount increases; allows beneficiary to receive
face amount plus premiums or cash values; also known as Universal Life Option B
What special features does Term Insurance offer?