Types of Life Insurance Policies

Universal Life

combines the features of Whole Life and Adjustable Life by allowing the policyholder to adjust the premiums and coverage. It will even allow the insured to skip a premium payment if the cash value is sufficient to pay the premium. The target premium is the recommended amount that the insured should pay in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime

Re-Entry Term

it's a form of Renewable Term, which allows an insured the option to prove insurability at the time of renewal, and receive a lower rate at renewal

Five Year Renewable Term

has the same features mentioned in the Annual Renewable Term, except the policy renews every five years

Limited Pay Whole Life

limits the period of time an insured is required to make premium payments. Policies mature or endow at the age of 100. The shorter the premium-payment period, the faster the cash value build up

Variable Life

policy where the cash value is used to purchase investments (usually mutual funds). Term rates are used for the mortality portion of the policy. A separate account is established by the insurance company for the investments and no guarantees beyond the death benefits are made.

Adjustable Whole Life

In order to address a change in the financial resources of a policyholder, this policy allows an insured to increase or decrease the amount of premium paid monthly (thereby altering the face value)

Variable Universal Life

It provides policyowners with flexible premiums and an adjustable death benefit. The policyowner will decide where the cash values will be invested, but neither cash values nor death benefits are guaranteed. It gives the insured the most investment options: stocks, mutual funds, and/or bonds. Contains the highest potential return on investment, but also carries the highest risk

Liquidity

Life Insurance death benefits can provide immediate cash for beneficiaries for burial and final expenses.

Estate Conservation

Life Insurance proceeds may be used to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell assets from the estate to pay these costs.

Estate Creation

a person might create an estate through earnings, savings, and investments over a period of time. The purchase of Life Insurance creates an immediate estate upon death.

Single Pay Whole Life

a policy which is "funded" with a single payment. There is a market for this kind of policy among people who come into large sums of money via Life Insurance settlements, lawsuit settlements, lottery winnings, and inheritances.

Term Insurance with Premium Refund

insurance that will refund all premiums paid at the end of the term (if the insured outlives the term). No interest is applied and since it contains no cash value, no loans can be made.

Modified Endowment Contracts

is a single premium or other high premium life insurance policy deemed to be sold purely for investment purposes, minimizing the need for the death benefit. When a policyholder takes a loan or redeems it, the policy prior to 59.5yrs old the proceeds are considered an interest withdrawal, taxable as ordinary income

Needs Approach

is based on the predicted needs of a family after the premature death of the insured. When using this approach, use current need of the the family for determination

Annual Renewable Term

is issued for a certain number of years with a premium increase each year it is renewed. The amount of insurance will be the same each year but the premium will increase each year based on the insured's age and on the date of renewal (attained age).

Equity Indexed Universal Life

policy carries flexible premiums, an adjustable death benefit, and policyowner control of investment, but the biggest difference is that cash value is based upon the performance of one or more investment funds.

Current Assumption Whole Life (CAWL)

policy may be supplemented by additional interest payments if the insurer meets or exceeds certain interest sensitive investment goals. The annual premium is adjusted by the application of a "Current Interest Rate" which is determined by investment results. These policies are almost always an MEC due to the accelerated premium structure.

Whole Life Insurance

provides a level amount of insurance, level premium, and cash value, which grows tax deferred at a guaranteed interest rate. The insured owns the cash value and may borrow against it after the 2nd year. Upon death, the beneficiary receives the face amount, unless any outstanding loans and interest are due on the loans.

Level Term

provides for a level amount of insurance throughout the term of the policy. The premium will also be level.

Juvenile Life Insurance

refers to any life insurance written on the life of a minor. This guarantees insurability for the insured upon reaching adulthood, covers any outstanding medical expenses in the event of the child's death, and provides for burial expenses

Technical and Financial Reform Act (TEFRA)

requires that the Face Value of Life Insurance policy must always be equal to or greater than two and one half times the cash value (as a general rule), or the policy is voided and severe tax ramifications occur. This is avoided by providing for a level death benefit and a corridor of additional insurance, or by providing a constant death benefit in addition to the cash value.

Human Value Approach

requires the calculation of the probable future earnings of the insured. This method will give the insured an estimate of what amount of money would be lost to the family in the event of premature death

Modified Whole Life

starts out with a lower premium and then increases to a higher premium payment in later years. A young couple with limited funds may wish to consider this in order to establish permanent insurance with cash value and reduced cost in the early years

Convertible Term

the IC commits to convert the policy from a Term to a Whole Life Policy (w/o evidence of insurability). Usually takes place within 31 days of the expiration of he policy and insurance.

Endowments

the date at which the face value equals the cash value is targeted. At that time, the cash value will equal the face value and the endowment will cease.

Survivor Protection

the death of a primary wage earner can be devastating to a family. Equally devastating is the loss of a non-working spouse who cares for minor children

Renewable Term

the insurance company agrees, in advance, to renew the policy at the end of the term with no evidence of insurability, meaning no medical exam. The IC will limit the number of renewals and charge a new premium at the end of each term based on the insured's attained age.

Decreasing Term

used to protect any kind of Amortized Loan. The amount of insurance decreases each year (coinciding with the reduction of the loan), but the premium remains level. It's the least expensive way to protect long-term loans

Graded Premium Whole Life

when any policy requires tow or more premium increases over a period of time, it is referred to as this. In other words, the premium will increase in a step like fashion; they start out low and gradually increase each year for a period of usually 5-10 years

Credit Life Insurance

written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. The amount can never exceed the limit of the debt, and it begins the day the money is borrowed, and ends the day the money is paid back.