---
name: product-knowledge
description: Life insurance product knowledge covering whole life, term life, universal life, variable universal life, indexed universal life, and joint survivorship products. Use when explaining product features, riders, options, or when helping customers understand their coverage. Covers policy mechanics, nonforfeiture options, dividend options, death benefit options, and common riders.
---

# Product Knowledge Skill

You are an expert in life insurance products, understanding the mechanics, features, options, and trade-offs of each product type. You explain complex insurance concepts in clear, accurate terms.

## Product Types

### Whole Life (WL)

**How it works:** Provides guaranteed lifetime coverage with level premiums. Builds guaranteed cash value on a fixed schedule. Participating policies earn dividends (not guaranteed).

| Feature | Details |
|---------|---------|
| **Coverage duration** | Lifetime (to maturity age, typically 100 or 121) |
| **Premiums** | Level, guaranteed — never increase |
| **Cash value** | Guaranteed accumulation schedule |
| **Dividends** | Participating policies earn dividends (not guaranteed) |
| **Death benefit** | Guaranteed face amount (plus any PUAs or dividend additions) |
| **Flexibility** | Low — fixed premiums, fixed face amount |
| **Best for** | Guaranteed lifetime protection, estate planning, conservative accumulation |

**Dividend Options (Participating Policies):**

| Option | Description |
|--------|-------------|
| **Paid-Up Additions (PUAs)** | Dividends purchase small blocks of additional paid-up whole life — increases death benefit and cash value over time |
| **Accumulate at Interest** | Dividends held in an interest-bearing account by the insurer |
| **Premium Reduction** | Dividends applied to reduce the premium payment |
| **Cash** | Dividends paid out in cash to the owner |
| **One-Year Term** | Dividends purchase 1-year term insurance equal to the cash value |

### Term Life (TL)

**How it works:** Pure death benefit protection for a specified period (10, 20, or 30 years). No cash value. Level premiums for the term period, then substantially increase if renewed.

| Feature | Details |
|---------|---------|
| **Coverage duration** | 10, 20, or 30 years (level period) |
| **Premiums** | Level during term, then increase annually |
| **Cash value** | None |
| **Renewable** | Yes, annually at attained-age rates after level period |
| **Convertible** | Yes — convert to permanent without evidence of insurability |
| **Best for** | Temporary needs — mortgage protection, income replacement, supplemental coverage |

**Conversion privilege:** The most valuable feature of term insurance. Allows the owner to convert to a permanent product without medical underwriting. Key details:
- Conversion deadline varies by product and insurer
- Available products limited to current offerings at time of conversion
- Conversion is at attained age (higher premium) unless original-age conversion is offered
- No evidence of insurability required — even if health has declined

### Universal Life (UL)

**How it works:** Flexible permanent coverage. Owner can vary premiums (above a minimum) and adjust the death benefit. Cash value earns a credited interest rate (with a guaranteed minimum). Monthly cost of insurance (COI) and charges are deducted from the account value.

| Feature | Details |
|---------|---------|
| **Coverage duration** | To maturity (age 100+), subject to sufficient funding |
| **Premiums** | Flexible — minimum, target, or maximum |
| **Cash value** | Earns current credited rate (with guaranteed minimum, typically 2-3%) |
| **Death benefit options** | Option A (level) or Option B (increasing — face + account value) |
| **Flexibility** | High — adjust premiums, death benefit, and payment schedule |
| **Best for** | Flexible lifetime coverage, business planning, key person insurance |

**Caution:** UL policies can lapse if underfunded. The guaranteed rates may not sustain the policy long-term. Regular reviews are essential.

### Variable Universal Life (VUL)

**How it works:** Like UL, but the account value is invested in sub-accounts (similar to mutual funds). Higher growth potential but also investment risk — the cash value can decrease.

| Feature | Details |
|---------|---------|
| **Coverage duration** | To maturity, subject to sufficient funding |
| **Premiums** | Flexible |
| **Cash value** | Invested in sub-accounts (equities, bonds, money market, etc.) |
| **Investment risk** | Yes — owner bears the investment risk |
| **Death benefit options** | Option A or Option B |
| **Flexibility** | Very high — premiums, death benefit, and investment allocation |
| **Best for** | Clients who want market exposure within a life insurance wrapper |
| **Requires** | Securities license to sell; registered as a security |

### Indexed Universal Life (IUL)

**How it works:** Like UL, but the account value is credited interest based on the performance of a market index (e.g., S&P 500), subject to a cap and floor. The floor (typically 0%) protects against market losses.

| Feature | Details |
|---------|---------|
| **Coverage duration** | To maturity, subject to sufficient funding |
| **Premiums** | Flexible |
| **Cash value** | Credited based on index performance, subject to cap/floor/participation rate |
| **Index options** | Typically S&P 500, with annual point-to-point crediting |
| **Floor** | 0% — account value never decreases due to index performance |
| **Cap** | Maximum credited rate per segment (e.g., 10-12%) |
| **Participation rate** | Percentage of index return credited (e.g., 100%) |
| **Best for** | Growth potential with downside protection, retirement income planning |

### Joint Survivorship / Second-to-Die (JL)

**How it works:** Insures two lives (typically spouses) and pays the death benefit upon the second death. Used primarily for estate planning to provide liquidity for estate taxes.

| Feature | Details |
|---------|---------|
| **Coverage duration** | Lifetime — pays on second death |
| **Premiums** | Generally lower than two individual policies (lower mortality risk) |
| **Cash value** | Depends on the underlying product (usually whole life or UL) |
| **Best for** | Estate tax liquidity, wealth transfer, charitable giving |
| **Common ownership** | Irrevocable Life Insurance Trust (ILIT) to keep proceeds out of taxable estate |

## Common Riders

| Rider | What It Does | Available On |
|-------|-------------|-------------|
| **Waiver of Premium** | Waives premiums (or COI) if the insured becomes disabled | All products |
| **Accelerated Death Benefit (ADB)** | Advances a portion of the death benefit for terminal, chronic, or critical illness | All products |
| **Accidental Death Benefit** | Pays an additional benefit if death is accidental | All products |
| **Children's Term Rider** | Provides term coverage on the insured's children (typically $10-25K each) | WL, UL, IUL |
| **Guaranteed Insurability (GIO)** | Allows additional coverage purchases at specified dates without evidence | WL, TL |
| **Return of Premium (ROP)** | Refunds total premiums if the insured survives the term period | TL |
| **Paid-Up Additions (PUA)** | Allows additional premium to purchase paid-up whole life additions | WL |
| **Overloan Protection** | Prevents lapse if loan balance approaches account value | UL, VUL, IUL |
| **Long-Term Care** | Accelerates death benefit for qualifying long-term care expenses | WL, UL, IUL |
| **Index Lock** | Allows locking in index gains mid-segment | IUL |

## Nonforfeiture Options

If a permanent policy lapses (premiums stop and cash value is insufficient), the owner has nonforfeiture options:

| Option | Description |
|--------|-------------|
| **Cash Surrender** | Receive the net cash surrender value in a lump sum. Policy terminates. |
| **Reduced Paid-Up** | Use the cash value to purchase a paid-up policy at a reduced face amount. No further premiums due. |
| **Extended Term** | Use the cash value to purchase term insurance at the original face amount for as long as the value will support. |
| **Automatic Premium Loan** | If elected, the company automatically borrows from cash value to pay overdue premiums. |

## Death Benefit Options (UL/VUL/IUL)

| Option | Description | Death Benefit |
|--------|-------------|---------------|
| **Option A (Level)** | Death benefit stays level at the face amount | Face amount (or corridor minimum if CSV exceeds net amount at risk) |
| **Option B (Increasing)** | Death benefit equals face amount plus account value | Face amount + current account value |

**Option A** is more cost-efficient (lower COI) because the net amount at risk decreases as cash value grows.
**Option B** provides a larger death benefit but costs more (higher COI) because the net amount at risk stays level.

## Tax Considerations

| Topic | Rule |
|-------|------|
| **Death benefit** | Generally income-tax-free to beneficiaries (IRC §101(a)) |
| **Cash value growth** | Tax-deferred while inside the policy |
| **Policy loans** | Not taxable as long as the policy remains in force |
| **Surrender** | Gain (cash value minus cost basis) is taxable as ordinary income |
| **Modified Endowment Contract (MEC)** | If the policy fails the 7-pay test, withdrawals and loans are taxed LIFO (gains first) and subject to 10% penalty if under age 59½ |
| **1035 Exchange** | Tax-free exchange of one life insurance policy for another (same insured) |
| **Transfer for value** | If a policy is sold or transferred for valuable consideration, the death benefit may become partially taxable |

## Using This Skill

Use this knowledge when:
- Explaining product features or options to a customer or agent
- Processing transactions that depend on understanding product mechanics (e.g., conversion privilege, nonforfeiture options)
- Evaluating whether a requested change is consistent with the product's design
- Advising on the implications of a policy action (loan, surrender, conversion)
- Comparing products for suitability purposes

## Response Constraint

- Provide requested product explanations and implications only.
- Do not include follow-up recommendations, option menus, or "next steps" prompts.


---
Source attribution: FDU-INS
Original project: https://github.com/FDU-INS/Insurance-Skills/blob/b22eca2e974f918ce591c5b2bd829fb7510e0191/Skills/product-knowledge/SKILL.md
License: Apache-2.0
License information: https://www.apache.org/licenses/LICENSE-2.0
Original upstream instructions; downloaded from Mega AI Hub.

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# Mega AI Hub resource metadata

Creator / publisher: FDU-INS
Original project: https://github.com/FDU-INS/Insurance-Skills/blob/b22eca2e974f918ce591c5b2bd829fb7510e0191/Skills/product-knowledge/SKILL.md
Attribution basis: Source repository record

Fields of work: Finance & Accounting, Marketing, Sales
Roles: Customer Success Manager, Financial Analyst, Product Marketer, Sales Engineer
Specialties: Specialty not specified
Tools: Tool not specified
Country applicability: Country not specified
Classification basis: Source catalog labels
Instruction SHA-256: cec475ffd0b91e1de0138b1e8efa063faf35c1491b38c4bb298dfacff973e9af