Life Insurance Policies
Term Life Insurance
Provide greatest amount of coverage for the lowest premium as compared to any other form of protection
Term Life Insurance
Temporary protection because it only provides coverage for a specific period of time. Also known as pure life insurance
the contract
a copy of the application of the policyholder must be attached to the policy when issued
interest - sensitive whole life
a fixed premium whole life policy that provides a guaranteed death benefit to age 100; aka current assumption. credits the cash value with the nonguaranteed interest rate that is usually comparable to money market rates, as well as a minimum guaranteeed rate of interest.
permanent life insurance
a general term used to refer to various forms of life insurance policies that build cash value and reamin in effect for the entire life of the insured as long as the premium is paid
decreasing term
a policy that features a level premium and a death premium that decreases each year over the duration of the policy term
target premium
a recommended amount that should be paid on a policy in order to cover the cost of insurance and to keep the policy in force throughout its lifetime
Joint Life
a single policy that is designed to insure two or more lives, can be in the form of term or permanent insurance, premium would be less than for the same type and amount of coverage on the same individuals.
credit life insurance
a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. usually written as decreasing term insurance, and may be written as an individual policy or a group plan; creditor is owner and beneficiary
term-to-65
a term insurance policy with level premium and level death benefits that provides coverage until the insured's 65th birthday
Mortgage Protection Term Life
a type of decreaseing term insurance in which the face amount directly correlates with the amount of outstanding loan and length of time remaining on a mortgage
cash value
created by the accumulation of the premium, scheduled to equal the face amount of the policy when the insured reaches the age 100, and is paid out to the policyowner
limited payment
designed so that premiums for coverage will be completely paid up well before age 100. this type of policy has a shorter premium-paying period that straight life insurance, so the annual premium will be higher
single premium
designed to provide a level death benefit to the insured's age 100 for a one-time, lump-sum payment. the policy is completely paid-up after one premium and it generates immediate cash
adjustable life
developed in an effort to privde the policyowner with the best of both world (term and permanent coverage). can assume the form of either term or permanent insurance
group standard provisions
every group life insurance policy must contain: -the contract -certificates -beneficiary -new persons eligible -insurablility -grace period -incontestability -nonforfeiture -continuation to end of premium period
insurability
every policy must specify the circumstances under which the insurer can require an individual to furnish proof that they are insured as a condition of obtaining coverage under the policy
group underwriting requirements
group life insurance is underwritten on a group basis as opposed to an individual basis. each participant completes a short application that identifies the insured and the beneficiary. no medical questions
types of plan sponsors
group life insurance plans may be sposnsored by employers, debtor groups, labor unions, credit unions, associations, and other organizations
death benefit
guaranteed and remains level for life
death pending conversion
if a person's group policy terminates and the person is entitled to recieve an individual policy but dies before he/she can apply for one, the amount of individual insurance to which he/she would have been entitled under an individual policy will be payable as a claim under the group policy
conversion to individual policy
if an employee terminates membership in the insured group, the employee has the right to convert to an individual policy without proving insurability at a standard rate, based on the individual's attained age
conversion on termination policy
if the group policy terminates the insurance of any class of insured individuals, every individual that has been insured for at least 5 years prior to the termination date will be entitled to an individual policy of life insurance issued by the same insurer
conversion on termination of eligibility
if the insurance on an individual covered undr the policy ceases because of termination of employment or of membership in the class eligible for coverage under the policy, the individual will be entitled to different coverages under the same insurer without having to provide proof of insurability
misstatement of age
if the insured person lies about his/her age, there must be an adjustment of benefits to reflect the person's actual age
grace period
if the policyholder does not pay the premium on time, the policy will still be in force for 1 month
options of a policyowner with adjustable life insurance
increase/decrease the premium or the premium paying period. increase/decrease the face amount. change the period of protection.
Survivorship Life
inusres two or more lives for a premium that is based on a joint age, but the benefit is paid on the last death rather than the first, has a lower premium, often used to offset the liability of the estate tax upon the death of the last insured
certificates
issued by the insurer to the policyholder; must be distributed to employees who are covered by policy; describe the protection to which the individuals are entitled, to whom the benefits are payable, and what the conversion rights are
Group Life Insurance
issued to the sponsoring organization, and covers the lives of more than one individual member of that group; each member of the group receives a certificate of insurance.
types of term coverage
level increasing decreasing
characteristics of whole life insurance
level premium death benefit cash value living benefits
Final Expense/Pre-Need
life insurance that can be used to fund future funeral expenses, the insurer and applicant enter in an agreement that details products and services to be delivered upon the insured's death
types of premiums of universal life
minimum premium target premium
decreasing term
primarily used when the amount of needed protection is time sensitve, or decreases over time
Pure Death Protection
provided with term life insurance; if the insured dies during this term, the policy pays the death benefit to the beneficiary; if the policy is cancelled or expires prior to the insured's death, nothing payable at the end of the term; there is no cash value or other living benefits
level premium
provides a level death benefit and a level premium during the policy term
whole life insurance
provides lifetime protection, and includes a savings element, or cash value.
Characteristics of Group Plans
purpose of the group size of the group turnover of the group financial strength of the group
minimum premium
the amount needed to keep the policy in force for the current year, paying this premium will make the policy perform as an annually renewable term product
straight life
the basic whole life policy. the policyowner pays the premium from the time the policy is issued until the insured's death or age 100
annually renewable term
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 probabilty of death increases
Option B death benefit
the death benefit that includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases
Option A death benefit
the death benefit that remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years
re-entry option
the insured, upon the end of a term policy with guaranteed renewable option, may answer medical questions to prove insurability and qualify for a discounted premium rate
level term insurance
the most common type of temporary protection purchased; the death benefit that does not change throughout the life of the policy
Universal Life Insurance
the policy owner has the flexibility to increase the amount of premium going paid into the policy and to later decrease it again, aka flexible premium adjustable life.
living benefits
the policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered
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
exceptions of a joint life insurance policy
the premium is based on a joint average age between the 2 insureds. the death benefit is paid upon the first death only.
incontestability
the validity of the policy cannot be contested after it has been in force for 2 years; the only exception to this rule is if the insured does not pay the required premium, thus the policy may be terminated after this period ends
new persons eligible
this specifies at what time intervals new employees or members will be added to the insurance plan
continuation to end of premium period
when an employee's job is terminated or a group member leaves, the insurance for that member will not end immediately, since a premium has already been paid to cover that person, the coverage ends when the premium ends
beneficiary
when the individual insured dies, any death benefit must be paid, as designated by the policy
forms of whole life insurance
whole life (straight life) limited payment single premium
indeterminate premium
whole life policies in which the premium rate may vary from one year to another
