personal finance ch 12
Double indemnity
A better fit under which the company pays twice the face value of the policy of the insured's death results from an accident
Annuity
A contract that provides a regular income for as long as the person lives; tax deferred investment plan, supplements retirement income and shelters income from taxes
Rider
A document attached to a policy that modifies it's coverage
Chartered life underwriter
A life insurance agent who has passed a series of college-level examinations on insurance and related subjects
Interest adjusted index
A method of evaluating the cost of life insurance by taking into account the time value of money
Beneficiary
A person designated to receive something, such as life insurance proceeds, from the insured
Suicide clause
A provision stating that if the insured dies by suicide during the first two years the policy is in force, the death benefit will equal the amount of the premium paid
Incontestability clause
A provision stating that the insurer cannot dispute the validity of a policy after a specified period
Nonforfeiture clause
A provision that allows the insured not to forfeit all accrued benefits
Universal life
A whole life policy that combines term insurance and investment elements; gives you more direct control; can pay premiums and time, any amount. Can be changed more easily than traditional policy. increase in cash value reflects increase in interest earned on short term investments
Whole life policy
An insurance plan in which the policyholder pays a specified premium each year for as long as he or she lives; also called a straight life policy, cash value life policy, or ordinary life policy. Provides death benefits and accumulates a cash value that can be borrowed against or drawn out at retirement
Term insurance
Life insurance protection for a specified period of time; sometimes called temporary life insurance; if you stop paying premiums...coverage stops. You can renew at end of policy without physical exam
Nonparticipating policy
Life insurance that does not provide policy dividends; also called a non-par policy; same premium every year; owned by shareholders- stock life insurance companies
Participating policy
Life insurance that provides policy diffidence; also called a par policy; higher premiums, owned by policyholders; mutual life insurance companies; part of premium refunded annually (policy dividend) and these policies pay some money back
Cash value
The amount received after giving up a life insurance policy
Conversion option
can exchange term policy for whole life policy without physical
Group life insurance
good if you don't want to have a physical, if you smoke. offered through employers, term insurance
Variable life policy
minimum death benefit guaranteed but death benefit may be greater than minimum depending on earnings from investments in separate bond/stock fund - more risk
Limited payment policy
paid premiums for stipulated period (30 years) and at the end or when you reach specified age, your policy is 'paid up' and you are insured for life
Accelerated benefits
pays to those who are terminally ill before they die, also called living benefits
Return of premium
policy refunds every penny of premiums if one outlives defined term
Decreasing term insurance
premium stays same but amount of coverage decreases as you age, mortgage insurance
Endowment life insurance
provides coverage from beginning of contract to maturity and guarantees payment of specific sum to insured
Life insurance
purchase policy, insurance company promises to pay a lump sum at time of policy holder's death (or sometimes when they're still alive); Why? protect someone who depends on you from financial loss r/t your death, leave money for estate, save money for retirement/children education
Second to die
survivorship life, insures two lives
Adjustable life policy
whole life policy, but can change policy as needs change by increasing/decreasing premium
