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