Life Insurance Policies

Group Life Characteristics 1

75% of members in contributory plans 100% participation of members in noncontributatory plans

Variable Universal Life (VUL)

Insurance is combination of variable life and Universal life. Option A- policy's face amount is guaranteed at a level amount and its cash value fluctuates with no guarantee value Option B- both the policy's face amount and cash value fluctuate with no guaranteed values.

If a life insurance policy is renewable and convertible

It can be renewed nor another term period and or converted to a permanent life policy without proof of insurability

Whole Life insurance advantages

low cost per thousand of coverage in the later years provides permanent protection for the life of the insured provides a level or fixed premium that will not increase with age provides a savings element that may be borrowed or surrendered provides flexibility through the use of nonforfeiture values

Whole life insurance

permanent insurance protection for the life of the insured level premiums payable for a specified period or to age 100 Nonforfeiture values/Cash value Whole life is also know as straight life insurance, or cash value insurance

Covertible Feature

permits the insured the option to convert his term policy to a level premium permanent policy without evidence of insurability.

20-pay life

Issued at age 35 would build cash value the fastest. And also have the highest initial premium per thousand of coverage

Reentry Provision

A policy provision that is commonly found in Level Term Policies which permits the insured the option to requalify for insurance at a lower rate

Current Assumption Whole life (CAWL)

An indeterminate premium policy and cash values are credited at current interest rates. premium life policy with cash values being credited at current interest rates guaranteed minimum interest rate along with current and maximum guaranteed mortality charges that are used.

Cash values accumulate at current interest rates, guaranteed minimum interest rates are provided, it may be issued on either a low premium or high premium version.

CAWL current assumption whole life

Continuous premium whole life, 20 payment life, life paid up at 65

Classifications of whole life policies

Universal Life (UL)

Combination of term insurance and a separate savings account joined into one policy. Option A level death benefit-similar to a traditional whole life policy. As its cash value grows the insure's net amount at risk decreases. Option B increasing death benefit-is an increasing death benefit equal to the policy's face amount plus its increasing cash value. This option will result in lower cash value accumulation. The premium payment period and the time period the death benefit will be in force.

Universal Life (UL) 1

Combination of term insurance and a separate savings account joined into one policy. The premium payment period and the time period the death benefit will be in force.

A indeterminate premium policy with cash values being credited at current interest rates

Current Assumption Whole life

Single Premium Whole Life (SPWL)

Level death benefit with the payment of a single premium payment at policy inception Most SPWL policies issued today are interest sensitive type

Variable Life (VL)

Level fixed premium investment based product The insured has the option of investing in various stock bond or money markets. You have to have a securities license to sell it. Similar to a 401k

Universal Life UL 2

Planned premium is used to pay the term insurance costs with the balance being deposited into the cash value account at current interest rates

Group Life Characteristics

Premiums are determined by age, sex and occupation as a group policies are guaranteed issued with no individual underwriting policy amounts are issued according to nondiscriminatory rules 75% of members in contributory plans 100% participation of members in noncontributatory plans Employer paid coverage above 50,000 is taxed to the employee Terminated employees are permitted to convert their group insurance to individual insurance without evidence of insurability. This option must be initiated during the conversion period which is within 31 days of termination of employment.

Level Term Insurance

Provides a death benefit on a level basis. It is the amount indicated in the policy at inception. The premium charges on level term policies either increase each year or at the end of a specified term period, or may be level for the entire policy term.

Survivorship Life

Second to die or Last to die- level premium policy that covers two people and pays when the second person dies.

Which policy provides a large death benefit compared to other policies

Single Premium Whole life

Master policy

Sponsoring organization with each individual employee receiving a certificate of insurance as evidence of group insurance

Under a Universal Life Policy

Surrendered cash value amount and accumulated cash value amount may be different

Term Life Insurance

Temporary protection for a stated term period. Premium may be level, decreasing, or increasing with age. Coverage may be level, decreasing, or increasing with age. No nonforfeiture values.

The beneficiary may receive more than the policy initial face amount

Under a Universal Life Policy

Surrendered cash value amount and accumulated cash value amount may be different

Universal life policy

Under a universal life policy

a beneficiary may receive more than the policy's initial face amount.

Surrender Charges

are fee incurred when a person sells or cancels certain types of investments of annuity policies

Annual renewable, 5 year C&R term, 10 year C&R term

are types of level term insurance

Single Premium Whole life policy can

be used to as a way to transfer wealth issued on an interest sensitive basis triggers MEC status

Universal life policy will terminate when

cash value account is too small to pay the monthly insurance costs

Renewable feature

enables the insured to renew the policy at the end of every term without evidence of insurability. The insured only has to pay the premium to renew for another term period.

Joint life

first to die- level premium covering two or more people with death benefits payable at the first death

Term Life insurance disadvantages

high cost per thousand of coverage to the later policy years coverage may expire or decrease when protection is still needed accumulates no cash value

A juvenile life policy is

individual policy issued on the life of a minor with a parent or guardian being the applicant

Flexible premium advantages

insured has the option to skip premiums insured has the option to invest cash values

What's true about Survivorship life insurance policy is

known as second to die life, covers two individual lives and pays when the scone person dies, is used extensively for estate planning purpose

Term Life insurance advantages

low cost per thousand of coverage in the early policy years Ideal for couple with major family obligations and limited incomes Ideal method to insure debt obligations such as a mortgage

Attained age method

most common form of term conversion

A credit life death benefit that is in excess of the outstanding loan balance is

paid to the beneficiary or to the insured estate

Limited Premium whole life policy

premiums are payable in installments for a specified period at which time the policy becomes paid up for life

Decreasing Term Life Insurance

provides a death benefit on a decreasing basis. The initial coverage is indicated in the policy with a schedule reflecting the reduction of death benefit coverage over the policy term. Mortgage Redemption insurance is an example of decreasing term insurance.

Flexible Premium Policies

refer to nontraditional policies that are flexible and may change by premium payment of coverage amount These policies were introduced in the late 1970's to off set the high inflationary rates that made traditional Whole life insurance less attractive. They offer higher cash value returns than traditional whole life policies.

Limited premium Whole life

similar to Continuous premium whole life in that it provides a level death benefit. however premiums are only paid for a specified period at which time the policy becomes paid up for life Examples of limited payment policies include 20-pay life and life paid up at age 65. Forced saving

When group Insurance is written

the sponsoring organization is the policyholder

Annual Renewable Term

Issued at age 35 requires the lowest initial premium per thousand of coverage

Attained-age method

a new permanent policy is issued based upon the insured's current attained age. For example and individual purchases a term policy in 2008 at age 30 and coverts the policy in 2013 at his current attained age of 35.

Original age method

a policy is issued retroactive back to the original date of issue. For example an individual purchase a term policy in 2008 at age 30 and coverts his policy in 2013 when he is age 35 back to his original age of 30.

Term Policy may be converted retroactively under the original age method up to a period of

five years

Whole Life insurance disadvantages

high cost per thousand of coverage in the early years payment period may extend into retirement years

Flexible Premium Policies/Equity Index Universal life

insurance is a universal life policy with an equity index (S&P 500) as its investment feature. It has many of the same characteristics as the Variable Universal Life policy with the primary difference being the investment feature

Adjustable Life (AL)

insurance provides the insured with flexibility in coverage amounts and premium payment. Not as attractive as Variable Life, Equity, or Universal from an investment viewpoint, the insured can adjust coverages and payment within broad policy provisions.

Flexible premium disadvantages

insurer may increase mortality cost insurer may decrease interest rates investments chosen by insured may have negative growth

Continuous Premium Whole life

is a level death benefit policy that requires continuous level premium payments in installments throughout life or to age 100 when the policy's cash value equals its face amount. It is a combination of decreasing term insurance and increasing cash value.

Group Life Insurance

is written to provide coverage to members of a group. This type of insurance is common in employment situations. When group insurance is written the sponsoring organization is the policyholder and exercises control over the plan. master policy is issued to the sponsoring organization certificate of insurance is issues to the employees

What's true about Universal life policy is

it provides a current and guaranteed mortality cost, provides a current and guaranteed interest rate, provides either a level or increasing death benefit.

What's true about Single premium whole life policy is

its purchase generally triggers MEC status, it is generally issued on an interest sensitive basis, it can be used as a way to transfer wealth

Juvenile Life

refers to policies written on minor children. In these instance the parent or guardian is the applicant for the minor insured. Typically juvenile insurance is written to provide the minor child with a savings program to insure the childs future insurability. Payor benefit rider can be used as well.