Term Life Insurance

Decreasing Term Policies

Benefit amounts decrease gradually over the term of protection. A 20 yr $50,000 decreasing term policy, will pay a death benefit of $50,000 at the beginning of the policy term; the amount gradually declines over the 20 yr term and reaches $0 at the end of the term.

What 2 options does the policy owner have on a term life policy that can extend the coverage period?

Option to renew and the option to convert

Harry purchases a 5 yr $50,000 level term policy on his life, naming his sister, Joan, the beneficiary. If Harry dies at any time within the policy's 5yr period, (1) how much will Joan receive? (2) How much will Joan receive if he lives beyond that period?

1) Joan will receive $50,000 2)Nothing is payable because the policy's term has expired.

Industrial Life Insurance

Characterized by comparatively small issue amounts, such as $1,000, with premiums collected on a weekly or monthly basis by the agent at the policy owner's home. Often marketed and purchased as burial insurance.

Option to Convert

Gives the insured the right to convert or exchange the term policy for a whole life (permanent) plan w/o evidence of insurabiliity.

Step-Rate

Insurance companies offer term insurance plans on a level-premium basis because few people could afford the premium rates that would be charged at higher ages. If the policy is renewed, the premium is adjusted upward, reflecting a higher rate for the increase age and will remain level at that amount for the duration of the renewal term.

What is the advantage of a Guaranteed Renewable Policy?

It allows the insured to continue insurance protection, even if the insured has become uninsurable.

Level Premium Basis

Premiums are calculated and charged so that they remain level throughout the policy's term period.

Increasing Term Insurance

Provides a death benefit that increase at periodic intervals over the policy's term. The amt of increase is usually state as specific amounts or as a percentage of the original amount. or it may be tied to a cost of living index. (may be sold as a separate policy; but usually purchased as a cost of living rider to a policy.

What is Annually Renewable Term insurance also called?

Yearly Renewable Term (YRT)

Ordinary Life Insurance

individual life insurance that includes many types of temporary (term) and permanent (whole life, endowment, universal life, variable universal life, and other interest-sensitive cash value plans) insurance protection plans written on individuals with premiums paid monthly, semiannually, or annually.

What are the renewal options with most term policies?

renewal options with most term policies typically provide for several renewal periods or fore renewals until a specified age.

Level Term Insurance

Provides a level amount of protection for a specified period, after which the policy expires. Ex: a $100,000 10 yr level term policy, provides $100,000 of coverage for a period of 10 yrs. If the insured dies at any time within those 10 yrs, the insured's beneficiaries will receive the policy's face amount benefits. If insured lives beyond 10 yr period, the policy expire and no benefits are payable.

Term Life Insurance

Provides insurance protection for a specified period (or term) and pays a benefit only if the insured dies during that period.

Guaranteed Renewable Policy

Allows the policy owner to renew the term policy before its termination date, without having to provide evidence of insurability (w/o having to prove health). EX: a 5 yr policy permits the policy owner to renew the same coverage for another 5 yrs at the end of the 1st 5 yr term. Premiums for the renewal period will be higher than initial period, reflecting the insurer's increase risk.

With an option to convert, what are the 2 possible methods an insurer might use in determining the premium when issuing a term policy to a whole life policy?

Attainage Age Method: issuance of a whole life policy at a premium rate reflecting the insured's age at the time of the exchange. Original Age Method: Premium rate reflecting the insured's age at the time when the original term policy was taken out.

Annually Renewable Term (ART)

Provides coverage for 1 yr and allows the policyowner to renew coverage each yr, w/o evidence of insurability. Most insurers limit the number of times such a policy can be renewed or specify an age limit.

When is decreasing term policies best used?

When the need for protection declines from yr to yr. Ex: a family breadwinner who has a $100,000 30 yr mortgage could purchase decreasing term mortgage insurance that would retire the mortgage balance should the breadwinner die during the 30 yr mortgage pay period.

Re-Entry Option

With Reentry term policies, the policy owner is guaranteed, at the end of the term, to be able to renew coverage w/o evidence of insurability, at a premium rate specified in the policy. However, this policy also provides that, at periodic intervals, the insured may submit evidence of insurability and, if found acceptable by the insurer, qualify for renewed protection at a rate lower than what the contract state.

Group Insurance

Written for employer-employee groups, associations, unions, and creditors to provide coverage for a number of individuals under one contract. Underwriting is based on the group, not the individuals insured.