Types of Policies

What are the different types of Term insurance (3)

1 - Level term - (a) annual renewable - (b) Level premium term 2 - decreasing term 3 - Convertible term.

Annual renewable term

A policy in which the face amount stays level, but the premium increases each year.

Variable Life

Also a type of level premium whole life insurance where the cash value is invested in a separate account. - Does not pay guaranteed rate of interest on accumulated cash value.

Universal Life

An adjustable benefit life insurance contract that accumulates cash values and has a flexible premium.

Single Premium

Becomes fully paid up by paying just one large premium at policy inception.

Fixed vs Flexible Premium

Fixed premium stays level and never changes. Flexible premiums are adjustable.

Convertible term

In order to make term life insurance easier to sell, most level and decreasing term policies are convertible at any time to whole life insurance without a physical exam.

Single Premium Policies

Life insurance loans are not taxable.. Used by wealthy customers when interest rates are high so the cash value would immediately earn tax deferred interest.

Graded premium whole life policy

Much lower premium for the first five years, but the premiums will increase gradually each year for five years until they reach a point at which they will remain level at an amount that would be higher than they would have been if the insured had purchased traditional whole life.

Non-participating life insurance policy

Non-Par or non-participating life insurance policies are issued by stock insurers, which are owned by their shareholders, who might participate in the insurer's profits in the form of dividends.

Par vs non-par

Par are issued by mutual insurers Non-Par are issued by stock insurers

True OR False: On whole life, the cash value will equal the face amount of the policy at maturity?

TRUE

Modified Premium whole life policy

The insured would pay the reduced premiums for a specified period of time, such as five years, during which the cash values would build very slowly.

Persistency

The percentage of policies that have not lapsed. (used in relation to Level Term insurance)

Life Paid Up at 65 (LPU65)

This policy requires the client to pay all of their premiums by age 65

Ordinary life insurance

Use the Commissioner's standard Ordinary life insurance mortality table. Three types: 1 - whole life 2 - term 3 - endowment. (Also known as Individual Life Insurance)

Modified Pay

When insurers offer premium discounts during the early years of a policy to make it easier to sell

re-entry option

insurers give the insured the opportunity to pass a physical exam at the end of the term in order to qualify to renew the policy at a lower premium rate.

juvenile policies

life insurance written on children on the basis of 3rd party ownership

Convertible term

most level and decreasing term policies are CONVERTIBLE at any time to whole life insurance without a physical exam.

Industrial (home service) life

premium was paid in weekly and there are four weeks in a month, the grace period on industrial policies is 28 days.

Limited Pay

the premium is paid over a shorter period of time.

Whole life (4)

1 - Covers insured until they die. 2 - Also called: level premium continuous premium whole life or permanent or traditional whole life insurance, since premium doesn't change as insured ages. 3 - Whole life policies mature at age 100. 4 - The accumulated cash value will equal the face amount of the policy at maturity.

What are the two options concerning death benefits under Universal Life? (2)

1 - Level death benefit 2 - increasing death benefit

Group Life

Most group life is written for employer groups and consist of annual, renewable level term insurance. Employer is the main policyholder and certificates summarize coverage for employees.

Participating life insurance policy

Par or Participating life insurance policies are issued by mutual insurers, which are owned by their policyholders, who might participate in the insurer's profits in the form of dividends.

Renewable term

Term insurance that can be renewed withough proof of the insured's insurability

Option A (level death benefit) under Universal Life

The death benefit is the policy's stated face amount, which is actually made up of the sum of the accumulated cash value, plus the amount of risk.

Family protection policy or Family policy

a combination of whole life on the primary insured and level term family riders on the spouse and children.

Endowment Policy

a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness.

Decreasing term

a policy in which the premium stays the same each year, but the amount of coverage decreases.

Adjustable whole life insurance

an insured may adjust the face amount of the policy, the amount and/or frequency of premium payments or the period of protection, generally without any underwriting.

Interest Sensitive Whole Life

another name for Universal Life b/c the current interest paid will fluctuate periodically with changes in the economy

grace period, loan provisions, and non-forfeiture provisions

are al the same as those found in whole life policies.

Family income policy

combines whole life insurance with a decreasing term rider also written on the same person.

Joint Life (First-to-die)

covers two insureds, but only pays a death benefit when the first insured dies.

Variable/Universal Life

has both a flexible premium and a rate of return that depends on the performance of the underlying separate account.

level premium

premiums do not increase or decrease for as long as the policy remains in force

Participation requirements

require a certain percentage of employees to enroll in the coverage

Level Term

the amount of insurance protection in a level term policy remains constant during the policy period

Viatical Settlement

the sale of a policy owner's existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit. Such a sale provides the policy owner with a lump sum. The third party becomes the new owner of the policy, pays the monthly premiums, and receives the full benefit of the policy when the insured dies.

contributory premiums

when premiums are shared by the employer and employee

Return of premium rider

you buy an increasing amount of term insurance that always equals the total amount of premiums paid to date.

noncontributory premiums

premiums paid entirely by the employer

Family maintenance policy

a policy that combines whole life insurance and a level term rider, but cover the same person.

20 Pay Life/ 30 Pay Life

require the client to pay over a shorter period of time (pay contract in "X" years, where "X" is the number of years in an "X Pay Life"

Option B ( Increasing Death Benfit) under Universal Life

a policy that provides for an increasing death benefit that is made up of the policy face amount plus the cash value account. (face amount + cash value account)

Payor Benefit

a rider or provision, usually found in juvenile policies, under which premiums are waived if the payor of the premium (usually a parent) becomes disabled or dies while the child is still a minor.

Decreasing term

a term life policy where the premium stays level over the term, but the amount of coverage decreases. If used to cover mortgage, it is known as mortgage protection life insurance. Upon death of insured, the policy will pay no more and no less than the amount of the unpaid mortgage. (You buy this to cover your mortgage in case you die and it hasn't yet been paid off)

mortgage redemption policy

a type of decreasing term life insurance that is set up so that the amount of protection will be note more and not less than the amount of the policyowner's mortgage at the time of their death. (The face amount of the policy will decrease at the same rate as the mortgage amortizes)

Universal Life

a type of whole life that has a flexible premium and a current interest rate. Also known as: "interest sensitive whole life"

Level Premium Term

both the premium and the face amount stay the same for a period of time.

re-entry option

gives the insured the opportunity to pass a physical exam at the end of the term in order to qualify to renew the policy at a lower premium rate.

Guaranteed at initial level vs. initial and maximum premium tables

insurers may offer an initial premium that never changes, or a premium that is subject to possible increases shown in a maximum premium table in the policy. Maximum premium table protect insurers against future increases in mortality.

Joint Survivorship (Second-to-die)

similar to joint life, but only pays a death benefit when the second insured dies. (EX: Often purchased by husband and wife to cover estate taxes)

Credit life insurance

the coverage may be individual or group, but it is usually written on a group basis and proceeds are payable to the creditor to extinguish the debt.

jumping juvenile policies

the face amount of the policy will increase by a multiple, usually 5, of the original amount when the insured reaches 18.

Indexed Whole life

the face amount of the policy will vary based upon the performance of specific index of prices.

Term life insurance

the most INexpensive type of life insurance to buy in the short run since it does not accumulate any cash values. The premium increases as the insured grows older and the coverage period is temporary.