Permanent Life Insurance

joint life

A single policy that is designed to insure two or more lives.

endowment

another type of whole life insurance with a slight variation in maturity date. Provide a permanent, level death protection if insured should die early, and accumulate cash values.

agents selling variable life must

be registered with FINRA. Be licensed by the state to sell life insurance. have received a securities license.

Indexed Whole Life

cash value is dependent upon the performance of the equity index. the policy's face amount increases annually to keep pace with inflation with requiring evidence of insurability.

adjustable life

insured typically determines how much coverage is needed and as the insured needs change, the policy owner can make adjustments.

key characteristics of whole life insurance

level premium, death benefit, cash value, living benefits

Death Benefit Options

option a: level death benefit option. option b: increasing death benefit option

whole life insurance

provides lifetime protection, and includes a savings element (or cash value)

option a

the death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer with the later years.

types of permanent life insurance

-traditional whole life insurance -endowments -flexible premium policies -interest-sensitive life products -combination plans and variations

Death Benefit

guaranteed and also remains level for life

interest sensitive whole life(current assumption life)

whole life policy that provides a guaranteed death benefit to age 100. The insurer sets the initial premium based on current assumptions about risk, interest and expense.

term insurance(pure life insurance)

Is a temporary protection because it only provides coverage for a specific period of time

level premium

The premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy.

flexible premium policies

allow the policy owner to pay more or less than the planned premium

variable life insurance(variable whole life insurance)

contracts in which cash values accumulate based upon a specific portfolio of stocks without guarantee of performance.

fixed life(annuities)

contracts that offer guaranteed minimum or fixed benefits

universal life (flexible premium adjustable life)

policyowner has flexibility to increase the amount of premium paid into the policy and to later decrease it again. if the cash value is too small, the policy will expire.

two major exceptions of joint whole life

premium is based on joint average age that is between the ages of the insureds and the death benefit is paid upon the first death only. Example: for spouses

indeterminate premium

premium is guaranteed for an initial period, and the the insurer can charge up to a maximum premium charge that is specified in the policy.

survivor ship life(second to die or last survivor)

premium that is based on joint age. the major different is that the survivor ship life pays on the last death rather than upon first death. often used to offset the liability of the estate tax upon the death of the last insured.

Single Premium Whole Life

provide a level death benefit to the insured's age 100 for a one time, lump sum payment. policy is paid up after one premium and generates immediate cash.

Variable Universal Life

provides the policy owner with flexible premiums and an adjustable death benefit.

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

tree basic forms of whole life insurance

straight whole life, limited-pay whole life and single premium whole life

minimum premium

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

term policies provide for

the greatest amount of coverage for the lowest premium and pure death protection

living benefit

the policy owner can borrow against the cash value while the policy or receive cash value when the policy is surrendered.

straight life( aka ordinary life or continuous premium whole life)

the policyowner pays the premium from the time the policy is issued until the insured's death or age 100. Will have the lowest annual premium.

cash value

created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100

option b

death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.

regulations of variable products

dually regulated by the state and federal government. variable contracts are securities and regulated by the SEC and FINRA.

What is pure death protection?

if the insured died during term, policy pays benefit to beneficiary. if the policy is canceled/expires before death, nothing is payable. or there is no cash value

universal life policy has two components

insurance component(usually always annually renewable term insurance) and cash account

permanent life insurance

insurance policies that build cash value and remain in effect for the entire life of the insured as long as premium is paid. most common is "whole life"

Limited Pay Whole Life

is designed so that the premiums for coverage will be completely paid up before age 10. annual premium will be higher and cash value builds faster. for insured who doesn't want to be paying premiums beyond a certain point in time.

variable whole life

is is a fixed premium policy with the addition of an underlying investment account. major distinction is an account for certain deductions from insurance company into a separate account. Example:real estate accounts