Premiums

during the first 7 years of a minimum deposit policy, how many of the 7 annual premiums must be paid form the funds other than policy loans?

4

Single Premium

Lifetime coverage purchased with a single premium

Graded Premium Whole Life

Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off

Net Premium

Mortality - Interest

net single premium

Mortality - Interest = Net Premium includes mortality and interest components to keep policy in force until maturity

Factors in computing premiums

Mortality, interest, expense

Modified Life Policy

Whole Life Insurance with reduced premiums during the initial years and higher premiums during later years. Can be structured as Term insurance during the initial years and changing to Whole Life in the later years.

limited Pay

a level annual premium. policy designed so premiums for the coverage will be completely paid up before age 100

modified pay

a lower premium is charged in the first few years of the policy and then a higher level premium for the remainder of the insured's life

what do modified life and straight life policies have in common

accumulation of cash value

premium deposit or financial insurance plan

cash value of a permanent policy is used to pay the premiums on the policy thought the use of policy loans

Premiums

consideration paid to the insurance company for life insurance protection.

Gross annual premium

cost of 1 year of mortality + (commissions +taxes +advertising + profit margin)

premium tables

determines the cost of insurance based on the insured's age and other underwriting factors

higher frequency (mode)

equals higher premium

Fixed vs. Variable

fixed premium- same amount paid periodically. Varied- policy owner is allowed to pay more or less than the planned premium

interest

interest is the primary factor in lowering the premium rate

Non-Payment of Premium

lapsed policy can be terminated

mortality tables are statistical tables used by life insurance to help predict

life expectancy and the death rates for specific groups of individuals

which of the following premiums would result in the highest annual cost for an insurance policy?

monthly

gross premium

mortality - interest + expenses (loading)

Gross Premium

net premium + expenses (loading)

which type of insurance policy pays dividends if there are excess premiums over the cost of providing insurance?

participating

guaranteed at initial level

premiums can remain the same for entire policy period

initial and maximum premiums

premiums increase or decrease at different times

level

premiums remain the same throughout the duration of the contract

comparative interest rate

rate of return that must be earned on a "side fund" in a buy term invest the difference plan so that the fund will be equal to the surrender value of the higher premium policy at a designed point in time

reserves

set aside funds to insure that it can cover liabilities

Mortality tables

show statistical averages or possibility of death at a certain age - helps determine premium

an insured's life insurance policy include an automatic premium loan provision, which e uses 3 years after he buys his policy. what will happen if he never repays it?

the face value of the policy will be reduced at the maturity date.