Types of Life Insurance Policies - Illinois

Universal Life

"Interest sensitive product" The policy is flexible and can be changed to meet the insured's financial and insurance needs without issuing a new policy. Withdrawals from the cash value do not affect the death benefit (loans against policy, do affect benefit)

Term Riders

Are attached to a whole life policy or term policy, that provide temporary coverage for a period of time for the insured or another person **Term Policies do not have cash value**

Interest Sensitive Whole Life

Characterized by premiums that vary to reflect the insurer's changing assumptions with regard to death, investment, and expense factors. Policy owner can lower premium or increase cash value.

Survivorship Life "second to die"

Combination plan that covers two or more lives and provides for the payment of the proceeds at the death of the last insured.

Joint Life

Combination plan that covers two or more lives and provides payment at the death of the first insured.

Variable Universal Life

Combines features of the variable life and universal life. Coverage ends when there is no money in the sub accounts. Level or Flexible -premiums can be level for a paying period OR flexible to allow for changes as the insured's needs and income changes over time

Variable Life

Considered a non-traditional life product, but is still permanent (main difference between whole and variable life - investments) Minimum death benefit equal to the face amount of the policy is guaranteed regardless of the performance of investments

Equity Indexed Life

Contracts that have death benefits and cash surrender values that mirror some index -calculations -floor interest rate -cap rate -participation rate

Term Policies

Issued for a specified face amount and for a specified period of time and are referred to as temporary insurance coverage -level term remains the same for a specified period of time

Modified Endowment Contract (MEC)

Policies that combine a death benefit along with an investment plan must meet a "7-pay" test to avoid being classified as an MEC "If during the first 7 years the total amount a policy owner pays into a life contract exceeds the sum of the new level premiums to provide paid-up future benefits, the policy becomes a MEC"

Convertible Term

Policy can be converted to a permanent policy without evidence of insurability

Renewable Term

Policy can be renewed at the end of the policy term without evidence of insurability Annual Renewable Term (ART) renews each year with premiums based on current age

Renewable & Convertible Term

Premium and coverage are fixed for a number of years, policy owner has a right to renewal for a fixed number of years at their current age or can convert to any permanent plan the company offers at any time

Limited Pay Whole Life

Premiums are paid for a limited number of years. Name of the policy determines how long the premiums will be paid (ex. 20-pay life)

Whole Life

Provides permanent protection from the date of policy issue to the date of the insured's death. Matures at age 100

Single Premium Whole Life Policy

The policy requires a large one-time only premium to be paid at the time the policy is issued. Protection extends until death of the insured, or age 100.