life insurance policies

Renewable term:

A feature of term insurance that allows the policyowner to renew the coverage after the designated term expires without having to prove insurability.

Equity Index Universal Life lnsurance (EIUL):

A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. typically contain a minimum guaranteed fixed interest rate component along with the indexed account option. Potential extra interest based on the investments of the company's general account.

Convertible term:

A term life policy that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.

Single Premium life:

Allows the insured to pay the entire premium in one lump-sum and have coverage for the insured's entire life.

Modified Endowment Contracts (MEC):

For those policies that do not meet the 7-pay test, they are considered_____ and will lose favorable tax treatment. The 7-pay test is a limitation on the total amount you can pay into your policy in the first seven years of its existence. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven-year period. For example, if yearly premium is $500, in a seven year period a total amount paid would equal $3,500. If you paid $3,501, it has now exceeded the 7-pay test and is no longer a life insurance contract. It will now be taxed as an investment. If withdrawn prior to age 59 ½, there is a 10% penalty Taxation only occurs when cash is distributed The gain is taxable first on a Last In First Out (LIFO) basis

Ordinary life

Is made up of several types of individual life insurance, such as temporary (term), permanent (whole)

Modified whole life:

Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter. Premiums increase just once.

Whole Life Insurance:

Provides both living and death benefits. Provides permanent life insurance protection for the insured's entire life. It also provides living benefits such as cash value and policy loans.

Graded whole life:

Starts out with a low premium then has slight increases yearly for a set period of time. Premiums then level off for the remainder of the policy. For example, a policy can start out low and increase a small amount every year up until the fifth year, then levels off for the remainder of the policy

Annual renewable term:

Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.

Decreasing term:

Term life insurance that provides a decreasing face amount over time with fixed premiums. These policies are usually used for mortgage protection.

Increasing term:

Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

Straight life:

This is basic whole life insurance with a level face amount and fixed premiums payable over the insured's entire life. Premium payments made until death of insured or age 100.

Limited Pay life:

This is whole life insurance where the insured is covered for his entire life, but premiums are paid for a limited time. As the premium payment period shortens, cash values increase faster. For example, under a life paid-up at 65 policy, premiums are only paid until the insured is 65 years old. With a 20-pay life policy, the insured only pays for 20 years. The policies are in effect until the insured's death or they reach age 100.

Variable universal life (VUL):

a type of life insurance that builds cash value. the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner. ability to invest in separate accounts whose values vary—they vary because they are invested in stock and/or bond markets. owner has in making premium payments. This provides the policyowner with flexible premiums, adjustable death benefits, a guaranteed minimum death benefit and gives the insured growth potential for higher returns, but also potential for loss.

Level Term

also called_______ premium. has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal.

Adjustable life policies:

are distinguished by their flexibility that comes from combining term and whole life insurance into a single plan. The policyowner determines how much face amount protection is needed and how much premium the policyowner wants to pay. allows you to vary your coverage as your needs change. Consequently, no new policy needs to be issued when changes are desired.

Industrial life:

insurance issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.

Whole life

insurance provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100.

Term life:

insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. _______ life insurance does not accrue cash value.

Group life:

insurance written for members of a group, such as a place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. The ______ is underwritten as a whole, not on each individual member. One of the benefits of this coverage is usually there is no evidence of insurability required.

Universal life:

is a variation of whole life insurance, characterized by considerable flexibility. allows its policyowners to determine the amount and frequency of premium payments which will adjust the policy face amount. Basic characteristics are flexible premiums, flexible benefits, no minimum death benefit, and cash value withdrawals.

Variable life insurance:

was created to help offset the effects of inflation on death benefits. It's permanent life insurance with many of the same characteristics of traditional whole life insurance. The main difference is the manner in which the policy's values are invested. the policy values are invested in the insurer's separate accounts which house common stock, bond, money market, and other securities investment options. Values held in these separate accounts are invested in riskier, but potentially higher yielding, assets than those held in the general account. The basic characteristics are: fixed premiums, a guaranteed minimum death benefit which fluctuates over the minimum, and cash values which fluctuate and are not guaranteed