3 Types of Life Policies ***

Types of coverage

-level -increasing -decreasing

Joint Life

A single policy that is designed to insure two or more lives. -it can be term insurance or permanent insurance -premium is based on joint average age of the two -death benefit is paid on first death only

Credit Life

A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.

Decreasing Term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy. commonly purchased to insure payment of mortgage or debt if insured dies prematurely usually not renewable since the death benefit is $0 at the end of the term KNOW (Most commonly used in credit life insurance)

Interest Sensitive Whole Life

EX: depending on companies expenses and investments, the cash values could change interest rates will affect cash value

KNOW THIS!

If an insured skips a premium payment on a UNIVERSAL life policy, the missing premium may be deducted from the policy's cash value. The policy will NOT lapse.

GOOD TO KNOW

In increasing and decreasing term policies , what policy fluctuates throughout the policy term? =death benefit there are three basic types of terms, level, increasing and decreasing. regardless of type premium is often level throughout, only the amount of the death benefit may change

Whole Life Insurance

Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be. lifetime protection and accumulates cash value most common type of permanent insurance is whole life insurance -lifetime protection -saving element (cash value) -endow at the insured's age 100 Three Basic Forms of whole life: -Straight life -limited pay whole life -single term whole life Key Characteristics: -level premium -death benefit -living benefits

Credit Life Insurance

Insures the life of a debtor

Term Insurance

Life insurance coverage for a specified period of time, less expensive than whole (also known as pure life insurance) Know this! term insurance provides the GREATEST amount of value for the lowest premium - term insurance has no cash value

Return of Premium (ROP)

Life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. The return of premium is paid if the death occurs within a specified period of time or if the insured outlives the policy term.

Single Premium

Lifetime coverage purchased with a single premium. SPWL single premium whole life (KNOW: generates immediate cash flow)

Death Benefit Options

Option A (Level death benefit option)- Pays the face amount of the policy and provides a level death benefit. As the cash value increases, the company's risk decreases. ="Gradually increasing cash value and a level death benefit" •Option B (Increasing Death benefit option)- Pays the face amount stated in the contract which is level term, plus any cash values accumulated over the years. This provides for an increasing death benefit. The mortality charge for Option B is greater than Option A. =the death benefit increases each year by the amount the cash value increases Individuals purchasing Option A will benefit from larger cash value accumulations while individuals purchasing Option B will benefit from greater death benefits.

Adjustable Life

Permanent + Term Combines permanent and term life policies allowing changes to face amount, period payments, and term during policy lifetime. -usually requires proof of insurability -cash value of an adjustable life policy only develops when the premiums paid are more than cost of policy

Limited Payment

Premiums paid until a certain time; coverage in effect to age 100

Jumping Juvenile Policy

Provides a low face amount in the early years and then increases, usually by 5 times the amount when the insured reaches an age specified in the policy. (normally 21)

Increasing Term

Term life insurance that provides an increasing face amount (death benefits) over time based on specific amounts or a percentage of the original face amount.

noncontributory group plan

The employer receives a master policy and employees receive a certificate of insurance -100% of employees must take part in the noncontributory group life plan

Continuous Premium

The most common type of whole life insurance sold. Coverage has a level face amount and level premiums payable over the entire life of the insured. Synonymous with straight life and ordinary life. AKA straight life or ordinary life

Survivorship Life (second-to-die)

Two or more insureds. Pays upon death of the last -premium is lower than a joint life

Cash Value

a policy's savings element or living benefit

Renewable

allows the policyowner the right to renew the coverage without evidence of insurability

Universal Life

allows the policyowner to pay more or less than the planned premium

Universal Life

also known as of a flexible premium and adjustable life insurance. - the policyowner has the flexibility to increase amount of premium paid into policy and to decrease it again -policyowner may skip a premium and policy won't lapse if there is enough cash value

Interest sensitive/ current assumption

another whole life policy: provides same benefits as other whole life policies with added benefit of current interest rates which may allow for a greater cash value accumulation or a shorter premium paying period

Nonforfeiture Values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Universal life insurance policy

best described as annually renewable term policy with a cash value account

Accumulate

build up

Variable Universal Life

combines the flexible premium features of universal life with the component of whole life and investment component of variable life making it a securities version of universal life insurance -flexible premium and variable investment component**

Variable life insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits.

Convertible

convertible provision allows the policyowner to convert policy to a permanent policy without evidence of insurability the premium will be based upon the insured's attained age at the time of conversion

Securities

financial instruments that may trade for value (for example, stocks, bonds, options)

Variable Whole Life

has a guaranteed death benefit unlike variable universal life

Universal Life Insurance Policy

has two types of interest rates -guaranteed -current (IS interest sensitive and a flexible premium policy) Two components of Universal Policy -insurance -cash account Universal Life Insurance Policy is best described as a annually renewable term policy with a cash value account -Target premium will keep it from lapsing

Straight Life

have a level guaranteed face amount and a level premium for the life of the insured

Good to Know (securities)

if an agent wishes to sell variable life policies, what license must the agent obtain =securities

Policy Maturity

in life policies, the time when the face value is paid out

20 pay whole life

in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for 20 YEARS or until death whichever occurs first

MUST KNOW!!

in order to qualify from conversion from a group life policy that has been terminated to an individual policy of the same coverage, an individual must have been insured under the group plan for how many years? =5

Variable Life Insurance

is a level fixed premium, investment based product. whole life insurance that invests the cash value of the policy in stocks or other high-yielding securities (know this! in variable contracts the policyowner bears the investment risk (assets in a separate account) (Know this! Variable life insurance is a securities product, so producers must be dually licensed in both life insurance and securities)

Variable Life Policy

is regulated by the Securities and exchange commission and the insurance department

Indexed Whole Life

may automatically increase the face amount of the policy as the consumer price index increases

Flexible Premium policies

pay more or less than the planned premium

Lapse

policy termination due to nonpayment of premium

Level Term Insurance

provides a level amount of protection for a specified period, after which the policy expires. Level premium and level death benefit the word level refers to the death benefit that does not change throughout the life of the policy Most common type of temporary protection plan (know this! Level, in level term insurance refers to the death benefit which does not change) if you renew after five years your premium will change based off new age

Target Premium

recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime

Minimum Premium

the amount needed to keep the policy in force for the current year

Face Amount

the amount of benefit stated in the life insurance policy

Attained Age

the insured's age at the time the policy is issued or renewed

Level Premium

the premium that does not change throughout the life of a policy

Annually Renewable Term (ART)

the purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases. (least expensive first year premium

Endow

to have the cash value of a whole life policy reach the contractual face amount

Level

what does level refer to in level term insurance =face amount

GOOD TO KNOW

when an employee terminates coverage under a group insurance policy, coverage continues in force for =31 days

Indexed Whole Life policy

which of the following features is not fixed = cash value growth

Benefits Payments Provision

will pay a max amount of 2,000 if there is no beneficiary living at time of death of insured person