Chp 3 Life Insurance Policies - TX Life Annuity Health Insurance License

Endowment policy

Contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the insured's death before the end of the stated period.

Face Amount Plus Cash Value Policy

Contract that promises to pay at the insured's death the amount of the policy plus a sum equal to the policy's monetary value

Joint Life or Last Survivor Life Policies

Cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds; only pay the death benefit upon the death of last surviving insured.

Modified Whole Life Policy (Whole Life - Modified)

Type of whole life policy with FIXED lower premiums than a regular policy for an initial policy period (often 5 years), then increase beginning the next year but then levels off for the remainder of the policy. (Example years 1-5 fixed premium, then year 6 increase, but years 7 through the remainder of policy it levels off); has all same features of any other whole life except the ins company cuts you a break on the premium for the first few years.

Credit policies

Typically purchased using a decreasing term life insurance policy, with the term matched to the length of a loan period and decreasing insurance amount matched to the declining loan balance; payable to the debtor; level premiums. Can be used for auto policies, etc.

Term Life Insurance

A policy that gives you the greatest amount of coverage for a limited time period, only good for a limited period of time because it has a termination date, inexpensive type of insurance, making it an attractive option for large policies, cheapest pure ins policy due to no cash value because it has a termination date and provides pure death protection since only pays the benefit if insured dies during the policy.

Increasing term

A policy that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

Target Premium

Suggested premium used in Universal Life policies; does not guarantee there will be adequate funds to maintain policy to any time, especially to life. May give indication of what will be needed (under conservative estimates) to maintain the policy. Recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime

Annual Renewable Term (ART)

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

Cash Value

The equity amount or "savings" accumulation in a whole life policy.

Limited Payment policy (with Whole Life - Limited Pay)

-Pay premiums for a stipulated period, usually 20 or 30 years, or until you reach a specified age (65) -Your policy then becomes "paid up" and you remain insured for life Policy where you pay premiums for a limited time but covered for life: premium higher but the cost is less; develops cash value sooner; 20PL; LP65

Term Rider

.A type of life insurance which covers children under their parent's policy. Family plan policies usually cover the family head with permanent insurance, and the coverage on the spouse and children is term insurance in this form. Always level; cheaper than every family member getting own policy; can also allow an applicant to have excess coverage by adding this to main policy.

Equity Indexed Life

A flexible premium whole life contract that offers a rate of return on policy cash accumulation based on selected stock market investments from period to period with guarantee of no threat to principal. Guaranteed minimum interest rate; tax deferral of interest accumulations; policy loan access. Hedge against inflation; death benefit amounts are based upon coverage amount selected by the contract owner plus the account value.

Modified Endowment Contract (MEC) (Whole Life-Modified Endowment Contract)

A policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract according to the IRS; also described as you have exceeded the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract; An IRS classification of an actual insurance contract state that if the premiums paid for it is higher than the proportion of the death benefit (overfunded policy) it will lose many of the tax advantages

Level Term or Level Premium

A policy that has a fixed, low premium in exchange for coverage that lasts a specified time period; premiums will increase at each renewal; higher than annual renewable term because payments are spread throughout policy period; expires at end of the policy period.

Decreasing term

A policy that provides an annually decreasing face over time; death benefit adjusts periodically according to a schedule; typically used for mortgage protection as the policy expires after the specified period of time.

Ordinary Life Insurance

A type of insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of individual insurance, such as temporary (term), and permanent (whole).

Joint Life Policy

Covers the lives of two individuals and save on premium cost by averaging the ages of the two insureds; provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.

Whole life insurance

Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be; fixed premium; matures at age 100 and normally has level benefit with cash accumulation; often compared to BUYING (like buying a house)

Non-Medical Life Insurance

Insurance that typically does not require a medical exam and tends to be more expensive than medically underwritten policies; insurer averages out everyone's risk and charges accordingly; insurers still inquire about applicant health, medical history, and lifestyle.

Renewable term

Insurance which can, at the election of the policyowner, be renewed at the end of a term without evidence of insurability; FYI: all TERM insurance has a final TERMINATION DATE where you can no longer renew it.

Group Life Insurance

Insurance written for members of such things as a place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. It is written as a whole, not by each individual member. Benefit is usually there is no evidence of insurability required.

Family Maintenance Policy

Pays monthly income from the date of death of the insured to the end of the preselected period; payment of the face of the policy is payable at the end of such preselected period; provides income for a specific period starting at the death of the insured.

Variable Universal Whole Life policy (VUL)

Policy in which the policy owner controls the investment of cash values and selects the timing and amount of premium payments; allows control of which investment accounts are used for funding; where the returns from those investment accounts go. Same as Universal Life, but cash value put in investment vehicles is chosen by policy owner (stocks, bonds, etc); cash value NOT guaranteed.

Universal Life Insurance

Policy that incorporates flexible premiums and adjustable death benefit; investment gains usually go toward the cash value; policyowner can use the cash value to manipulate the flexible aspects of the policy; can skip payments (stop and go) current percent interest rate set by board of directors, never below min guaranteed, flexible death benefit.

Variable Life Insurance

Policy which requires a producer to have proper FINRA and NASD securities registration prior to selling; also known as interest sensitive policies; fixed level premium, but the cash value and death benefits of this policy can fluctuate according to the performance of its underlying investment portfolio; investment account that grows through mutual funds, stocks, and bonds; hedge against inflation account; policyowner assumes all investment risk and rate of return is not guaranteed.

Adjustable Life policy

When owner is looking for Flexible premiums; as financial needs and objectives change, the policyowner can make changes to the premium and/or face amount insurance policy: this policy combines whole life and term life into a single plan, and policyowners can control the amount and frequency of payments with a death benefit that can be changed according to life needs changing.

Investor (or stranger) Originated Life Insurance (IOLI or SOLI)

When someone purchases a policy on the life of someone else to profit upon that person's death; these policies are illegal as they are designed to circumvent the insurable interest requirements of an insurance contract and position the policyowner to benefit upon the death of the insured.

Family Income Policies

Whole Life + Decreasing Term • This policy pays the beneficiary a monthly income for the balance of the family income coverage period. • The insurer must die prior to the time the selected family income coverage period ends. Starts when insured dies and continues for specified period from the date of the policy issue. Example: G purchased a Family Income policy at age 40, with a 20 year rider period. If G dies at age 50, G's family would receive income for 10 years.

Juvenile Insurance

Written on the lives of children who are within specified age limits and generally under parental control.

Industrial Life Insurance

a type of insurance in which the policies are issued in very small face amounts (such as $1,000 or $2,000) and a debit agent of the company collects the premiums weekly. Designed for burial coverage.

Straight Whole Life insurance (or With Whole Life Straight Life Ins)

also called ordinary life insurance and whole life insurance, requires the payment of premiums throughout the insured's life; requires the face amount to be paid out to insured at age 100 when the policy matures, provided the death benefit has not already been paid; limited pay policy (premiums are limited to certain period)

Convertible term

provision provides the policy owner with the right to convert the to a permanent insurance policy without PROOF OF INSURABILITY. The premium will be based on the insured's attained age at time of conversion