Life Insurance Policies
Term insurance
Term covers a defined period and has no cash value; it pays only on death during the term. Variations include level term, decreasing term (mortgage protection), increasing term, renewable term (guaranteed renewal without evidence, at higher premium), convertible term (to permanent without evidence of insurability), and return of premium term. The convertible right matters most in the contestable period - converting while healthy preserves insurability.
Whole life and its relatives
Straight whole life has level premiums to age 100 (or MEC-limited variants), guaranteed cash value, and guaranteed death benefit. Limited-pay (20-pay, paid-up at 65) and single premium compress the payment period. Modified/graded premium policies start lower and step up. Universal life unbundles the elements: flexible premiums, an adjustable death benefit, a cost of insurance charge, and a cash value credited with current interest. UL offers Option A (level death benefit) and Option B (increasing, cash value plus face). UL can lapse if the cash value is exhausted; guaranteed no-lapse riders protect against that.
Variable and indexed products
Variable life and variable universal life place cash value in separate accounts invested in subaccounts. These are securities: the producer needs a life license plus a FINRA registration (typically Series 6/7 and 63) and the client receives a prospectus. Indexed universal life credits interest linked to an index (such as the S&P 500) with a cap, a floor (often 0%), and a participation rate; it is not a securities sale but carries illustrated, non-guaranteed values.
The main exam trap
Variable products shift investment risk to the owner, not the insurer. Fixed products guarantee minimum cash values. If a question mentions a prospectus, separate accounts, or securities registration, the answer involves a variable product.