Types of Life Insurance Policies

Pure Death Protection

(Term/temporary protection) if the insured dies during this term, the beneficiary receives the pay out; if policy is cancelled/expires prior to insured death, there is nothing payable at the end; NO cash value; maximum age that coverage is not offered is 80

Credit Life Insurance (Individual and Group)

Written to insure debtor and pay off balance of loan. Usually written as decreasing life. Creditor is owner and beneficiary, debtor receives very of insurance. Cannot pay out more than balance of debt.

Conversions on termination of policy

Everyone in policy for 5 years is entitled to policy

Joint Life (FTD)

A single policy designed to insure two or more lives. Can be in form or term or permanent insurance. Premium is less than for the same type of coverage for the same individuals. Premium based on joint average age, death benefit paid upon first death only

Flexible premium policies

Allow the policy owner to pay more or less than the planned premium

Universal life components

Annually renewable term and interest sensitive cash value component

Continuous Premium (Straight Life)

Basic whole life policy, lowest annual premium of whole life policies, premium paid until death or age 100

Agents selling variable life products must

Be registered with FINRA, have a securities license, and be licensed by the state to sell life ins.

Adjustable life

Best of both worlds. Policy owner can change the period of protection, increase or decrease the face amount, premium, or premium paying period. Policy owner has option of converting to term or whole life or vice versa. However increases in the death benefit may require proof of insurability. Cash value only develops if premiums paid are more than the cost of the policy

Indexed whole life

Cash value is dependent upon the performance of the equity index, such as s&p500 although there is a guaranteed minimum interest rate. The policy's face amount increases annually to keep pace with inflation without requiring evidence of insurability. Classified depending on who assumes the risk. If policy owner, premiums increase. If insurer, premiums level

Variable life insurance

Contracts in which the cash values accumulate based on the performance of stocks without guarantees. Fixed premiums. Policy owner bears the risk. The underlying assets must be kept in separate account

limited-payment life insurance

Designed so that premiums will be completely paid-up well before age 100. Ideal for people who want to retire and not have to pay premiums. Cash value build up faster, annual premium is higher

Single Premium Whole Life

Designed to provide a level death benefit to the insureds age 100 for a one time lump sum. Policy is completely paid up after one premium and generated immediate cash value.

Regulations of variable products

Display regulated by state and federal government, classified as securities and thus regulated by the SEC, FINRA, and adept of Ins.

Group Underwriting Requirements

Each participant completes short application that clearly identifies the beneficiary, if large enough group there are no medical questions

Re-entry option

Feature on term policies gives the insured the opp. to pass a physical exam at the end of the term to qualify to renew the policy at a lower premium rate than the guaranteed rate available

Variable universal life insurance

Flexible premium which can be skipped as long as there is enough value to fund the death benefit, increasing or decreasing amount of insurance, cash withdrawals or policy loans. Does not guarantee return

Death pending conversion

If individual does in window between termination and application they are entitled to payment

Universal Life Increasing Death Benefit Option (B)

Includes annual increase in cash value so that the death benefit increases each year by the amount that the cash value increases. Expenses are higher with this option bc of the pur insurance, cash value lower than other option

Return of Premium (ROP)

Is an increasing term policy that pays an additional death benefit to the beneficiary equal to the amount of premiums paid. Structured to consider the low risk factor of a term policy but at a significant increase in premium cost, sometimes at 25% to 50% more. Offers the pure protection of a term policy, but if the i sured remains healthy once the term expires, the company guarantees a return, not taxable

Conversion on termination of eligibility

LA specific If individual is fired, they are entitled to different coverage with same provider without providing proof of insurability. Policy will be without disability or other supplementary benefits. App and premium submitted within 31 days of coverage termination. Must be not more than previously provided and not more than $1000 less.

Increasing term insurance

Level premium and death benefit that increases each year over duration of policy term. Usually used to find rider such as refund of premiums. Type of policy is ideal to handle inflation and rises in cost of living

Decreasing Term Insurance

Level premium with decreasing death benefit. Typically to pay off debt such as mortgage if the insured dies prematurely. Not renewable since death benefit is $0 at the end of the policy term

Key characteristics of whole life insurance

Level premium, death benefit is guaranteed and remains the same for the life of the policy, cash value (credited to the policy regularly and collect interest), living benefits (such as borrowing against the cash value) cash value doesn't come until year 3 and grows tax deferred

Juvenile Life (aka Jumping Juvenile) policy

Policy covering minor child; premium fixed but death benefit increases by 5 times @ age 18 or 21.premium remains level

Survivorship Life (STD)

Premium based on joint age, pays upon last death. Lower premium. Often used to offset the liability of the estate tax upon the death of the last insured.

Universal life insurance

Premium can be adjusted, interest sensitive.

Whole life insurance

Provides lifetime protection, including cash value, endows at age 100 when the cash value equals the face amount. Premiums are typically higher than term insurance

Characteristics of group plans

Purpose of group, size of group (larger is more accurate based on law of large numbers), turnover of group (out with old in with new), financial strength of group. Cost of coverage is based on average age of group and ratio of men to women

Universal Life Level Death Benefit Option (A)

The death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance in the later years. Pure insurance gradually decreases then ticks up at the later part to comply with the irs definition of life insurance.

Level term insurance

The most common type of temporary protection. Death benefit does not change throughout the life of the policy

Annually renewable term insurance

The purest form of term insurance. 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 probability of death increases.

Fixed life insurance

contracts that offer guaranteed minimum or fixed benefits that are stated in the contract

Term Insurance (pure life insurance)

life insurance protection for a specified period of time. Greatest amount of coverage for the lowest premium. Usually a maximum age above which coverage will not be issued or renewed

Level premium term

provides a level death benefit and a level premium during the policy term

Group life insurance

provides life insurance on a group of people in a single master contract. Usually in employee-employer groups, often annually renewable without proof of insurability, participants do not receive a policy bc they don't own or control it. Instead issued a cent of ins. Master contract is issued to sponsor