Life Insurance
Chapters in this video
- 0:00 Term life: pure protection, no cash value
- 1:58 Whole life: guaranteed cash value and policy loan tax traps
- 3:56 Universal life: premium flexibility, still not a security
- 5:08 The variable litmus test: general account versus separate account
- 6:00 Variable life: security with guaranteed minimum death benefit only
- 7:12 Variable universal life: maximum flexibility, maximum lapse risk
- 7:46 The hard dividing line between insurance and securities
- 8:10 Rapid-fire exam recap: variable rule and three tax traps
What this video covers
- Why term life insurance has zero cash value, zero payout if the term expires, and is never a security
- How whole life insurance builds guaranteed cash value in the insurer's general account, and why policy loans are tax-free unless the policy lapses
- Why universal life is flexible in premiums but still not a security, since the cash value remains in the general account with a guaranteed minimum rate
- The variable litmus test: separate account equals client investment risk equals security requiring SEC registration and a prospectus
- Why variable life insurance has fixed premiums, no guaranteed minimum cash value, but a guaranteed minimum death benefit that never falls below face amount
- How variable universal life (VUL) combines separate account investing with flexible premiums, and why it carries the highest lapse risk
- The three major tax traps: income-tax-free death benefits, potential estate tax inclusion with incidents of ownership, and the taxable forgiven loan on lapse
Read the full lesson, free
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