Chapter 3 Life & Health
Effect on Death Benefit
Payable Death Benefit = Face Amount - Amount withdrawn - Earnings lost by insurer in interest
Accidental Death and Dismemberment
Pays the principal sum (face amount) upon accidental death, loss of sight, or loss of 2 limbs. It pays the capital sum per policy schedule (up to 50% of the face amount) for the loss of vision in 1 eye or loss of 1 limb. It may be a stand-alone policy or added as a rider to a Disability Income, Medical Expense or a Life Insurance Policy.
Family Protection Policy
Policy that provides protection for all family members. Term insurance for children and spouse. If a child converts to a permanent plan of life insurance, evidence of insurability is not required.
Limited Premium Payment
Premium payments are for a specified time, age. Example (paid to age 65). Paid for a shorter amount of time.
Long Term Care Rider
Provides up to 100% of the policy benefits if the insured qualifies for long-term care benefits as defined in the rider, such as the inability to perform 2 out of 6 activities of daily living. Any payout is an acceleration of the life insurance death benefit, meaning it will reduce the ultimate death benefit payable to the beneficiary. The amount of protection is determined at the time of policy purchase. Long-term care benefits are paid income tax free after the insured meets the qualifying requirements.
Inspection Report
Report of an investigator providing facts required for a proper underwriting decision on applications for new insurance and reinstatements. (General Report)
Disability Riders
Some riders provide benefits in the event of insured's disability,while other riders provide for partial payment of death benefit prior to the insured's death
Term Riders
allow for an additional amount of temporary insurance to be provided on the insured without the need to issue another policy. they are usually attached to a whole life policy to provide greater protection at a reduced cost.
accelerated death benefits rider
allows insureds who are terminally ill to collect part or all of their life insurance benefits before they die
Renewable Feature
allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability. The premium of the new term policy will be based on the insured's current age.
Rider
an added benefit attached to the insurance company modifies existing coverage.
Return of Premium Rider
pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a certain time period specified in the policy. It also returns premiums to the living insured at the end of a specified period of time, as long as the premiums have been paid.
Juvenile Policy
"Jumping Juvenile" any policy written on a minor . Face value increased usually between 21 and 25.
Universal Life Insurance
(Flexible Premium Adjustable Life Insurance) has a flexible premium. Policy owner can adjust death benefit, and increase face amount whenever insured passes the physical for additional coverage
Return of Cash Value rider
A death benefit rider of increasing term insurance equal to the cash value.
Interest Sensitive Whole Life
A form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates. Interest rate changes affect the policy premiums.
Single Premium
A lump sum payment is made into an annuity
Viatical Settlement Representative
A person who is an authorized agent of a duly licensed viatical settlement provider or viatical settlement broker, as applicable, and who acts or assists in any manner in the solicitation of a viatical settlement on behalf of such viatical settlement provider or viatical settlement broker.
A flexible premium
A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.
Flexible Premium
A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.
Credit Life Insurance
A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.
convertible feature
ALLOWS EXISTING TERM POLICY TO BECOME PERMANENT WITHIN A SPECIFIED TIME PERIOD.
Family Income rider
Added to a Whole Life policy for an additional premium, this rider is similar to the Decreasing Term Rider except that payments to the beneficiary are in the form of monthly income rather than a lump sum.
Living Needs Rider
Allows the early payment of a portion of the face amount before death, should the insured become terminally ill, usually 12-24 months life expectancy.
Re-Entry Term
Characterized by lower premiums at issue. The insured is able to renew the policy at the lower premium classification as long as he/she can provide evidence of insurability. If health declines, premiums will increase on the policy anniversary stipulated as the "re-entry date".
Waiver of Premium
Continuation of life insurance coverage if the insured becomes totally disabled and is unable to pay the premiums.
INCREASING LIFE INSURANC
DEATH BENEFIT INCREASES OVER THE LIFE OF THE POLICY, PREMIUMS REMAIN LEVEL
Intermediate Premium
Intermediate Premium Whole Life Insurance - Like a non-participating whole life plan, except it provides for adjustable premiums - A "current" premium is charged based on current estimate of investment earnings, mortality, and expense costs - If estimates change later, insurer adjusts premium accordingly, but never above maximum guaranteed premium stated in policy
Joint Life (First to Die)
Joint Life is a whole life policy that is written to cover 2 or more lives. The death benefit is paid upon the first insured to die and the policy terminates.
Equity Index Life
Life insurance largely based on the rate of market return. It offers its policyowners the ability to transfer funds from a fixed account to an indexed account. Cash value can only increase if the market is favorable, but cannot decrease when the market declines.
Waiver of Cost of Insurance
Life insurance rider that allows a universal life policyowner who becomes disabled to waive the cost of death protection but does not waive the cost of premium required to build cash value.
straight life insurance
Life insurance that requires the payment of premiums until the face value is reached or the insured is deceased; also called ordinary life or whole life
Modified Whole Life
Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter. Premiums increase just once.
Cash Value (Living Benefit)
Money accumulated in a permanent policy which the policyowner may borrow as a policy loan or receive if the policy is surrendered before it matures.
Equity-Indexed Life
Most of the premium (generally 80 to 90%) is invested in traditional fixed income securities. The remainder of the premium is invested in contracts (options and hedges) tied to a stipulated stock index, for example, the S & P 500. When there is an increase in the market, a given percentage of the gain is used to determine the interest credited to the policy. When the market declines, the policy is credited with the minimum guaranteed interest rate or zero interest. The policy's values can never be impaired due to negative index performance. This policy requires fixed premiums and has a guaranteed death benefit.
Death Benefit Options
Option A - Pays the face amount of the policy and provides a level death benefit. As the cash value increases, the company's risk decreases. A universal life policy must include an amount at risk. If the cash value approaches the face amount, the death benefit must increase so as to provide for this amount at risk. This minimum separation between the cash value and the death benefit is called the "risk corridor." This corridor of insurance is automatic and does not require insurability. This prevents the policy from maturing too early. •Option B - 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. Individuals purchasing Option A will benefit from larger cash value accumulations while individuals purchasing Option B will benefit from greater death benefits.
Ordinary Whole Life
Ordinary whole life insurance provides insurance protection to age 100, cash value accumulation to age 100, and fixed level premium payments.
Adjustable Face Amount
The insured can increase or decrease the face amount of the policy. Any increase in the face amount will require evidence of insurability.
Endow (Mature)
The maturity date or time at which the policy's cash value equals the face amount and the proceeds are paid to the policyowner.
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.
Fixed Premium
The premium is determined by the insurer and remains fixed and level throughout the contract.
Annually Renewable Term
The simplest form of term life insurance is for a term of one year. The death benefit remains level and the premiums increase yearly as the policy renews. While it is very inexpensive initially compared to other types of life insurance, over time it can become cost prohibitive. The death benefit is paid by the insurer if the insured dies only while the policy was in force.
Joint Survivorship Life (Last to Die)
This whole life policy is written to cover 2 or more lives, and the death benefit is not paid until the last insured dies. Premiums are based upon a joint issue age which is obtained by an average of both insureds' ages resulting in a lower premium than two separate policies. This policy is often purchased to provide a lump sum benefit to pay estate taxes once the second spouse dies.
permanent insurance
Whole life insurance is considered to be permanent since it covers you until you die or to age 100, whichever comes first. Term insurance is considered to be temporary.
current assumption whole life insurance
a nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience
Variable Universal Life
a universal policy where the premiums are invested in variable rate earning assets
Viatical Settlement Purchaser
anyone who gives a sum of money as consideration for a life insurance policy or interest in the death benefits of a life insurance policy
Accidental Death Benefit Rider
doubles the face amount of life insurance if death occurs as a result of an accident
ajustable life
it offers the best of both words, term and permanent coverage. premium and coverage is determine by the insured and can be change at any time for, period of protection and increase or decrease premium, paying period and face amount. also can be converted from term to whole life and vice versa, however may required proof of insurability. cash value develops when premium amount are more than the policy cost
Term Life: Level Premium Term
level death benefit and level premium
Variable Life Insurance
life insurance in which the benefits are a function of the returns being generated on the investments selected by the policyholder
Guarenteed Insurability Rider (GIR)
protects the insureds right to buy more coverage in the future without the need to prove good health
Cost of Living Rider
provides increases in the amount of insurance protection without requiring the insured to provide evidence of insurability and is designed to keep up with inflation.
Payer Benefit (Waiver of Payers Premium)
rider that waives the premium payment the owner dies or becomes disabled or unable to make premium payment.
Riders Covering Additional Insureds (other insured)
riders that provide level term insurance for children, spouse...
Face Amount
the amount stated in a life insurance policy to be paid upon death
Decreasing Term Insurance
the death benefit decreases, but premiums remain level for the policy term - they are often sold as mortgage protection w the amount of insurance decreasing as the balance of mortgage decreases - if insured dies, the proceeds of the policy can be used to pay off the mortgage - the premiums paid are lower than the premiums payable for level term since the benefit decreases throughout the term of the policy
viators
the insureds in a viatical settlement
Viatical Settlement
the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death
Disability Income Benefir
waiting period premiums initial waiting period
