Types of Life Policies and Features
10% of the exam
This domain is roughly 10% of the Florida 2-15 exam — about 15 of the 150 scored questions. It covers every life product (term, whole, universal, variable, indexed), the full annuity classification system and payout options, and the Florida rules attached to them: the 14-day and 21-day free looks, the senior annuity protections, and which products require a securities registration on top of your 2-15.
Term life: pure protection, two rights that matter
Term buys pure death protection for a set period. No cash value. Lowest cost per dollar of death benefit. Four benefit shapes: 1. Level term — face amount stays flat. 2. Decreasing term — face drops, premium stays level (mortgage protection). 3. Increasing term — face rises. 4. Return of premium (ROP) — refunds premiums paid if the insured outlives the term. Annually renewable term (ART) holds the face level while the premium climbs each year with attained age. Two features drive exam questions. Renewable: extend coverage without proving insurability, at a higher premium. Convertible: exchange for permanent coverage without evidence of insurability. Both protect against becoming uninsurable. Neither one freezes the premium.
Whole life and the two-insured contracts
Whole life guarantees three things: a level premium, a fixed death benefit, and a cash value table that endows at the maturity age. Money sits in the insurer's general account, so the insurer carries the investment risk. The variants change only the premium schedule, never the guarantee: - Straight (ordinary) life — premiums until the maturity age; lowest annual outlay. - Limited pay (20-pay, paid-up at 65) — same death benefit, higher premium, faster cash value, paid up sooner. - Single premium — one payment, large immediate cash value, almost always a modified endowment contract. - Modified or graded premium — low early premiums that step up later. Two insureds, one contract: joint life pays at the first death; survivorship (second-to-die) pays at the second.
Universal life and indexed UL: unbundled and interest-sensitive
Universal life unbundles the policy. You see the mortality charge, the expense load, and the interest credited. Premiums are flexible; the death benefit is adjustable, though increases require evidence of insurability. Two death benefit options: - Option A — level face amount, so the pure insurance corridor shrinks as cash value grows. - Option B — face amount plus accumulated cash value, so the total rises. It costs more. Interest is credited at a current rate with a contractual guaranteed minimum. Indexed UL credits interest tied to an index such as the S&P 500, limited by a cap, a participation rate, and a floor (often 0%). Indexed money stays in the general account, so IUL is not a security. Florida sets a floor on grace periods: not less than 30 days for any premium after the first (s. 627.453, F.S.). Because universal life has no scheduled premium, the contract itself states when that grace period begins running once the cash value goes insufficient.
Variable products: separate account, owner's risk, second license
Variable products place cash value in a separate account of subaccounts the owner selects. The owner carries the investment risk; there is no guaranteed cash value. - Variable life — fixed, level premium; the death benefit varies with performance but never drops below a guaranteed minimum. - Variable universal life — flexible premium plus separate account. Maximum flexibility, no guaranteed cash value and no guaranteed minimum death benefit unless a rider adds one. Florida's variable contract part runs ss. 627.801–627.807, F.S. Section 627.801 sets the part's application — annuity and life contracts providing variable or indeterminate benefits, values, or premiums — and s. 627.802 governs the establishment and maintenance of separate accounts. Variable contracts are securities. A 2-15 alone is not enough — you also need FINRA registration (Series 6 or Series 7) through a broker-dealer.
Annuity anatomy: classify on four axes
An annuity is the mirror image of life insurance. Life insurance protects against dying too soon; an annuity protects against living too long. Classify every annuity on four axes. 1. Funding — single premium (one payment) vs flexible premium (a series). Flexible premium is always deferred. 2. Payout start — immediate (income begins within one payment interval, normally 12 months; single premium only) vs deferred (accumulates first). 3. Underlying — fixed (general account, guaranteed minimum rate, insurer bears risk), variable (separate account, owner bears risk, a security), indexed (general account, index-linked credits with cap, floor, participation rate). 4. Phase — accumulation period (money in, accumulation units, surrender charges apply) vs annuity period (money out, annuity units, generally irrevocable).
Payout options and the Florida annuity overlay
Payout options, from largest check to smallest: - Straight life (life only) — largest payment; stops at death, nothing to heirs. - Life with period certain — pays for life; if death falls inside the certain period, the beneficiary receives the remaining payments. - Life with refund (cash or installment) — guarantees at least the premium back. - Joint and survivor — pays while either annuitant lives; smallest payment. - Period certain or fixed amount — not life contingent, no mortality guarantee. Florida overlay: 1. Free look — a fixed or variable annuity must provide an unconditional refund for at least 21 days (s. 626.99(4)(b), F.S.). 2. Best interest — the agent must act in the consumer's best interest, with duties of care, disclosure, conflict of interest and documentation (s. 627.4554(5)(a), F.S.). 3. Senior surrender cap — for a senior consumer age 65 or older, a surrender or deferred sales charge may not exceed 10% of the amount withdrawn, and must be reduced so that no charge exists after the end of the 10th policy year, or 10 years after the date of each premium payment if multiple premiums are paid, whichever is later (s. 627.4554(9), F.S.).
Where people lose points
✗ Assuming Florida's free look is the same number of days for every product — or confusing free look with the grace period.
✓ Life insurance: unconditional refund for at least 14 days (s. 626.99(4)(a), F.S.). Fixed and variable annuities: at least 21 days (s. 626.99(4)(b), F.S.). Medicare supplement: 30 days. Individual health: 10 days. Free look runs from delivery and cancels the contract for a refund. The grace period is the opposite animal — not less than 30 days after a missed premium to keep an existing policy in force (s. 627.453, F.S.).
✗ Joint life vs survivorship life — reading "two insureds" and picking the wrong trigger.
✓ Joint life = first-to-die. One death benefit, paid when the first insured dies. Higher premium (the insurer pays sooner). Used for buy-sell funding and income replacement. Survivorship = second-to-die. Nothing is paid until both insureds have died. Lowest premium per dollar of coverage. Used for estate liquidity, because cash arrives when estate taxes fall due.
✗ Universal life Option A vs Option B — mixing up which one has a level death benefit.
✓ Option A = level death benefit. The face amount never changes, so as cash value grows the pure insurance corridor shrinks and the cost of insurance stays contained. Option B = increasing death benefit: face amount PLUS accumulated cash value. The corridor stays constant, the total benefit rises, and the policy costs more because the insurer keeps insuring the same net amount at risk. A drops the corridor; B keeps it.
✗ Calling an indexed annuity or indexed UL a "variable" product because the return moves with the market.
✓ Indexed products stay in the general account. The insurer bears the investment risk and guarantees a floor (often 0%); the index only sets the crediting formula through a cap and a participation rate. They are not securities — no prospectus, no FINRA registration. Variable products use a separate account, the owner bears the investment risk, there is no guaranteed cash value, a prospectus is required, and you need Series 6 or Series 7 in addition to your 2-15.
✗ Accumulation period vs annuity period, and accumulation units vs annuity units.
✓ Accumulation period: money going in. The owner buys accumulation units, the number of units grows with each deposit, withdrawals may trigger surrender charges, and the contract can still be surrendered. Annuity period: money coming out. At annuitization the accumulation units convert to a fixed number of annuity units, and it is the value of each unit (not the count) that varies in a variable annuity. Annuitization is generally irrevocable — a settlement election, not an investment.
✗ Straight life vs life with period certain vs period certain only.
✓ Straight life (life only) is life contingent with zero guarantee: highest payment, and payments stop at death even if it happens in month one. Life with period certain is still life contingent — payments continue for life — but the insurer guarantees a minimum number of years to a beneficiary. Period certain only is NOT life contingent: it pays for a set number of years regardless of whether the annuitant lives, so it carries no protection against outliving the money.
✗ Thinking the senior surrender-charge cap always ends at exactly the 10th policy year.
✓ Two clocks run, and the LATER one controls. The charge must be gone after the end of the 10th policy year, OR 10 years after the date of each premium payment if multiple premiums are paid — whichever is later (s. 627.4554(9), F.S.). On a flexible-premium contract a deposit made in year 6 can therefore still carry a charge into year 16. The 10% cap on the amount withdrawn applies the whole time.
Numbers to memorize
| Life insurance free look (unconditional refund) | At least 14 days — s. 626.99(4)(a), F.S. |
| Fixed and variable annuity free look | At least 21 days — s. 626.99(4)(b), F.S. |
| Fixed annuity refund amount | All premiums paid, including any contract fees or charges — s. 626.99(4)(b), F.S. |
| Variable annuity refund amount | Cash surrender value plus fees or charges deducted from premiums or imposed under the contract, or a refund of all premiums paid — s. 626.99(4)(b), F.S. |
| Free-look exception | Does not apply if the prospective owner is an accredited investor as defined in Regulation D adopted by the SEC — s. 626.99(4)(b)2., F.S. |
| "Senior consumer" age used for annuity protections | Age 65 or older — s. 627.4554(9), F.S. |
| Senior annuity surrender / deferred sales charge cap | May not exceed 10% of the amount withdrawn; must be reduced so no charge exists after the end of the 10th policy year, or 10 years after the date of each premium payment if multiple premiums are paid, whichever is later — s. 627.4554(9), F.S. |
| Senior surrender-cap exception | Does not apply to annuities purchased by an accredited investor under SEC Regulation D, or to contracts described in s. 627.4554(4)(b), F.S. |
| Annuity recommendation standard | Best interest of the consumer under the circumstances known at the time: care, disclosure, conflict-of-interest and documentation obligations — s. 627.4554(5)(a), F.S. |
| Recommending a surrender with no replacement product | Applies to an annuity or a life policy with cash value when no replacement annuity or life policy is recommended. Written disclosure before execution of estimated surrender charges, loss of minimum interest rate guarantees, possible tax consequences, forfeited death benefit and other forfeited investment performance guarantees; the agent keeps a copy and the date provided — s. 627.4553, F.S. |
| Annuity suitability and disclosure forms | Rule 69B-162.011, F.A.C. (amended effective 5/22/2024) adopts DFS-H1-1990 (agent disclosure), DFS-H1-1991 (consumer refusal to provide information) and DFS-H1-1992 (purchase not based on a recommendation). DFS-H1-1981 (Disclosure and Comparison of Annuity Contracts) remains required on an annuity replacement or exchange. |
| Variable or indeterminate value contracts / separate accounts | ss. 627.801–627.807, F.S. — s. 627.801 sets the part's application; s. 627.802 governs establishment and maintenance of separate accounts; s. 627.807 covers reserve requirements |
| License needed to sell variable contracts | Florida 2-15 (or 2-14) PLUS FINRA registration — Series 6 or Series 7 — held through a broker-dealer |
| Life insurance grace period | Not less than 30 days for any premium after the first — s. 627.453, F.S. |
| Nonforfeiture — paid-up benefit trigger (ordinary life) | After premiums paid for at least 1 full year (3 full years for industrial life) — s. 627.476, F.S. |
| Nonforfeiture — cash surrender value trigger (ordinary life) | After premiums paid for at least 3 full years (5 full years for industrial life), on surrender within 60 days after the due date of the premium in default — s. 627.476, F.S. |
| Medicare supplement free look (contrast) | 30 days |
| Individual health free look (contrast) | 10 days |
| Weight of this domain on the exam | 10% — about 15 of the 150 scored questions (Florida content outline effective 1/1/2026) |
Test yourself
No answers here on purpose — retrieving them is the practice. Drill this domain if any of these stall you.
- Name the four term-life benefit shapes and say which one refunds premiums to an insured who outlives the term.
- Your client is 42, now uninsurable, and holds a convertible 20-year term with 6 years remaining. What are her options and what evidence of insurability is required for each?
- For a 35-year-old buying the same face amount, which has the highest annual premium: straight whole life, 20-pay life, or life paid-up at 65? Explain the reason.
- Explain UL Option A versus Option B, and describe what happens to the pure insurance corridor under each as cash value grows.
- Which life and annuity products require a FINRA registration in addition to a Florida 2-15, and what feature of those products makes it necessary?
- A 68-year-old withdraws $50,000 from a Florida annuity in policy year four. What is the maximum surrender charge Florida permits, by when must the charge disappear entirely (state both clocks), and which statute sets the limits?
- Distinguish accumulation units from annuity units, name the phase in which each exists, and say which one varies in value in a variable annuity.
- Rank straight life, life with 10-year period certain, cash refund, and joint and survivor by the size of the monthly payment, and state the general rule that produces the ranking.
- State Florida's free-look period for each of: life insurance, a fixed annuity, a Medicare supplement, and an individual health policy — and say how a free look differs from a grace period.