Types Of Life Policies 2
Term policies are available as level,increasing, decreasing, what policy component fluctates
death benefit
Level Term Insurance
death benefit does not change
Option B
death benefit includes the annual increase in cash value so the death benefit gradually increases each year by the amount the cash value increases
Option A
death benefit remains level while cash value increases
Interest-sensitive Whole Life (current assumption life)
fixed premium whole life to 100, credits cash value with current interest rate that is usually comparable to money market rates
2 types of premium in Universal Life
1. minimum premium 2. target premium
Term Life
coverage for specific period of time; pure life; no cash value or living benefits
Annuitant
person who receives benefits or payments from annuity, life expectancy taken into consideration
3 Characteristics of Variable Annuities
1. underlying investment 2. interest rate 3. license requirements
Two death benefits of Universal Life
Option A-level death benefit Option B- increasing death benefit
Least expensive first year premium payment is found in:
annually renewable term
In adjustable policyowner has the following options
increase or decrease premium, face amount, change period of protection
Interest Rate- Variable Annuity
insurance company doesn't guarantee interest rate
Periodic Payments
level or flexible premium
Decreasing Term
level premium and death benefit decrease each year; used for debts
License Requirements- Variable Annuity
must have security license
Joint Life
pays on first death
Two Components of Universal Life
-insurance component -cash account
Which policy component decreases in decreasing term insurance
face amount
Indexed Annuities
fixed annuities that invest on relatively aggressive basis to aim for higher returns
Return of Premium-ROP
increasing term policy that pays additional death benefit equal to the amount of premiums paid
Whole Life Insurance
lifetime protection & cash value; endow at 100; cash value to scheduled to equal face amount at 100
Survivorship Life
pays on last death
Convertible
right to convert policy to permanent without evidence of insurability
Renewable
right to renew coverage at expiration without evidence of insurability
Two Payment options of Annuity
single payment and periodic payments
3 Forms of Whole Life
straight, limited pay, single premium
What policy allows policyowner to skip premium payments, if there is enough cash value in policy to cover premium
universal life
Equity-indexed Whole Life (indexed whole life)
insurance that is cash value is dependent upon the performance of the equity index, premium is fixed, death benefit is guaranteed
Underlying Investment- Variable Annuity
invested into insurer's separate account, not general account
Increasing Term
level premium and death benefit increase each year; used to fund riders or gradual increase in coverage
Key Characteristics of Whole Life
level premium, death benefit, cash value, living benefits
A policy will pay death benefit if insured dies during 20 year premium paying period and will pay nothing if death occurs after the 20 year period:
level term insurance
Types of Term Life
level, increasing, decreasing
Straight Life
pay premium from issue date to 100 or death
Beneficiary
person who receives annuity assests if annuitant dies
Variable Whole Life
policy owner may allocate the premium into a sub-account that is held by the insurance company called seperate account
Immediate Annuity
start within one year
Annuity
contract that provides income for specified period of years; payments stop upon death of annuitant
minimum premium
amount needed to keep the policy in force
Annuity Income is Based on:
amount of premium paid or cash value, frequency of payment, interest rate, annuitant's age & gender
Permanent Life Insurance
build cash value & remain in effect for the entire life
Adjustable Life
can assume form of either term insurance or permanent insurance; insured determines how much coverage is needed and affordable amount of premium
Universal Life (flexible premium adjustable life)
flexibility to increase amount of premium paid into policy and later decrease again, or can skip paying premium as long as there is sufficient cash value
Variable Universal Life
flexible premiums and adjustable death benefit, policyowner rather than insurer decides where the net premiums will be invested
Fixed Annuity
guaranteed min rate of interest, payments do not vary, insurance company guarantees specified amount and length of time by the settlement option chosen by annuitant
Owner of Annuity
has all the rights, naming beneficiary and surrendering annuity
Variable Annuity
hedge against inflation, annuitant may receive differetn rates of return on funds
Cash Value in Adjustable Life
only develops when premiums paid are more than cost of the policy
Limited Pay Life
paid before 100; such as 20-pay life or paid-up 65
Deferred Annuity
payments start after one year
Accumulation Period (pay-in period)
period of time which the annuitant makes payments into an annuity, they earn interest on tax-deferred basis
Single Premium Whole Life
provide a level death benefit until 100 for one time, lump sum payment
Annually Renewable Term
purest form; guaranteed renewable without proof of insurability; premium increases according to attained age
target premium
recommended amount that should be paid to cover the cost of insurance protection & keep policy in force throughout its lifetime
Common annuities supplement
retirement income and college education
Annuity Period, Annuitization Period, Liquidation Period, Pay-Out Period
the sum that's accumulated is converted into a stream of income payments
