LifeHappens.org : Boomers Message to the Industry


The Things We Do For Love...




 Would you secure their Financial Future?

The "Except" Questions

A common area of complaint about state tests is the use of "except" questions.

You can't do anything about it except prepare for it.  

When your exam starts, "mind-dump" this information onto your scrap paper so you have it next to you for the entire exam.  It will help you make sure you're looking for the right answer.  It will eliminate doubt and frustration.

Confidence and efficiency during the test is a big factor towards success.

All the following are ...

True   about  .........   Except    =     False
False  about  .........   Except    =     True
Not True   ..............   Except    =     True
Not False  ..............   Except    =     False

Dividends vs. Dividends

Helping students study for the exam, I've noticed a big area that leads to confusion, and maybe a few wrong answers, is that of the differences between Stock Insurers, and Mutual Insurance Companies.

The problem is so many similar phrases are used for each topic, it's easy to "cross-your-wires".  Here's a lot of what you need to know about this topic.


Stock Insurers                    Mutual Insurers
owned by ...
Shareholders                                  Policyholders
they want Profit                              they want Refunds of any over-payment
                                                           (as an owner / client, they wouldn't over charge themselves)
These profits are called                These refunds are called 
Stock DIVIDENDS                           Policy DIVIDENDS
As Profit they are                            As a Refund, they are
TAXABLE                                         NOT TAXABLE


The Clients...
Have NO VOTING RIGHTS,          Have VOTING RIGHTS,
NO OWNERSHIP,                           An OWNERSHIP STAKE, 
NO RIGHT TO PROFITS                A RIGHT TO SURPLUS FUNDS

So they are called...                        So they are called... 
NON PARTICIPATING                    PARTICIPATING POLICIES (par)
POLICIES (non-par)


                                      < < <  --------  When a Mutual Company switches to
                                                             become a Stock Insurer, it's called ...
                                                              DEMUTUALIZATION

                                                              These Dividends are...
                                                               NOT TAXABLE &
                                                               NOT GUARANTEED

                                                              The 5 Dividend Options:
                                                                     O = one year term (more ins.)
                                                                     C = cash
                                                                     R = reduce next / current premium
                                                                     A = accumulate with / at interest
                                                                     P = paid-up additions (more ins.)
                                                                                  "Oh CRAP"

* Rarely, but it's possible, you might see Policy Dividends referred to
as Divisible Surplus, or Earnings Surplus.

The Evolution of Cash Value

Do you know the major characteristics of the main cash value policies?

As the policies were developed, they were slight variations of the previous versions.  Whole life could maybe be thought of as the original "Grand-daddy."  Everything about it is fixed, level, and predictable.  It was designed "pre-computers".

As time went on, other option became available with varying levels of flexibility (ie: universal) and fluctuation in value (ie: invested in the stock market).  The clients wanted more choice and potential.  

Of course the more a policy can fluctuate, the more aggressive it is (red).  Results are less predictable.  The more stable it is, the more conservative it is (green).

Of course in the end, if the client dies while the policy is in force, they all pay a death benefit.

Which one's best?  That always open to debate, and client preferences and tolerances.

(Always consult with a licensed, knowledgeable insurance agent before making a buying decision.  These policies have more factors than is discussed here.  This site is merely to help future agents learn the basics to pass the exam.)

Initial Premium Payments

What if you were asked to ranks these three Whole Life payment arrangements in order according to their initial (very first) premium payment:

Ordinary (Traditional) Whole Life
Single Premium Whole Life
& a Modified Whole Life plan

It often helps to draw out what you know.

The order could be remembered as: M.O.S.