Life Insurance Products and Features
Core product families
Candidates must distinguish term, whole life, universal life, and variable products by three tests: premium flexibility, cash value ownership, and who bears investment risk. Term insurance is pure protection with no cash value; level term locks the premium for a stated period, while annually renewable term (ART) rises each year. Whole life is permanent, guarantees a level premium, and builds guaranteed cash value; the insurer bears mortality and expense risk. Universal life separates the policy into a cash-value account and a cost-of-insurance deduction, so premiums are flexible but guarantees are minimal. Variable life and variable universal life place cash value in separate accounts, shifting investment risk to the owner and requiring securities registration and a prospectus.
Endowment, limited-pay, and specialized products
Limited-pay whole life (e.g., 20-pay, paid-up at 65) compresses premiums into fewer years. Endowments mature at a set date, paying the face amount if the insured survives. Juvenile products often include payor waivers.
Traps in questions
Watch for (1) confusing face amount with cash value; (2) assuming universal life cash value is guaranteed once the minimum premium is paid; (3) treating variable products as insurance-only, ignoring FINRA and prospectus requirements; (4) missing that decreasing term's face drops while premium stays level; and (5) failing to note that whole life's guaranteed column in a ledger illustration is the only contractual portion.
Rule of thumb
Ask: Who takes the investment risk, and what is guaranteed? If the answer is "the insurer, and premium plus cash value," it is whole life. If it is "the owner, and nothing but the mortality charge structure," it is variable. If it is "the insurer, but only a minimum crediting rate," it is universal.
Worked example
A 45-year-old wants permanent coverage with the ability to skip payments during a layoff. Because universal life permits premium flexibility (subject to lapse risk if the account is exhausted), it fits better than whole life, which requires the contractual premium to avoid lapse.