Life Insurance Products and Underwriting
Product Types
Know term life (pure protection, no cash value), whole life (permanent, level premium, cash value, guaranteed), universal life (flexible premiums and death benefit, cash value tied to interest), and variable life (cash value in separate accounts tied to investments, requiring a securities license). Understand endowment and annuity concepts, including accumulation and payout phases.
Underwriting
Underwriting classifies risk using mortality tables, medical history, occupation, hobbies, and lifestyle. Know the standard classifications: preferred, standard, substandard, and declined. Field underwriting begins with the agent's application and the attending physician statement when needed. MIB (Medical Information Bureau) reports coded information but is not a credit or claims database.
Policy Provisions
Master the grace period, reinstatement, policy loan, nonforfeiture options (cash surrender, reduced paid-up, extended term), dividend options, and settlement options (lump sum, life income, fixed period, fixed amount, interest only). Understand the suicide clause (typically two years) and misstatement of age provision.
Traps
Questions confuse reduced paid-up (smaller death benefit, no more premiums) with extended term (same death benefit for a limited period). Another trap: variable products are not fixed-dollar products and carry investment risk to the policyholder.
Rule of Thumb
Term = temporary, no cash value. Permanent = lifetime, cash value. Variable = securities risk.