Types of LIfe Policies
Variable whole Life
A level, fixed premium, investment- based product with a guranteed minimum death benefit. The cash value fluctates with performance of the portfolio and is not gurranteed. The underlying assets are held in a sepatrate account which invests in bonds, stocks and other securties. The policy is regulated by the state & Federal Govt (SEC, FINRA & NASD as well as insurance Dept as a Life Ins Poliy) and are considered securties and
Universal Life
AKA flexible premium adjustable life. Implies that the PO can increase and decrease the amount of premium paid. Can alos skip paying w/out laspe as long as there is suffient cash value to cover the monthly deductions, if not policy will expire.
Linited Pay Whole Life
Designed so that the premium for covrage will be completely paid up well before age 100. common version are 20 pay life.
Optionally Renewable
Gives the insurer the option to terminate the policy for any reason on the date specified in the contract (usually a renewable date). Also allows the insurer to increase the premium for any class of optionally renewable insureds.
Group Disability Income
Group plans usually specify the benefits based on a percentage of the workers income. Group long term plans provide monthlybenefits usually limited to 60% of the individuals income.
Refund Life Annuity
Guranted Lifetime income. If annuitant dies balance is refunded to benefiary. Installment option . gives beneficary payments until purchase amount is paid out. Cash refund gives refund of balance of orignal annutiy purchase amount less payaments made to annuitant.
Extended Term Option
In an extnded term option the face of the term policy would be the same as the face amount provided under the whole life policy.
20 pay life
Type of limited pay whole life policy where the coverage is completely paid for in 20 years and life paid up at 65. This policy has a shorter premium paying period than straight life so annual premiums are higher. Cash value builds up faster.
Universal Life Characteristics (additional)
ULP allows partial withdrawl of cash value. However there may be a charge for withdrawl and limits as to how many. Intrest earned on withdrawl cash value is table. Not the same as a policy loan.
Nonforfeiture value
Cash value of a whole life policy that usually accumulates the 3rd year of the policy and grows tax deferred.
Intrest rate
Guranteed company must typically pay around 3%.
Whole Life Types
Straight, Limited Pay & Single Premium
Health Ins Policy signatures
Whenever the proposed insured is different from the applicant both parties need to sign the application as well as the agent.
Current
exceeds guranteed rate. Paid to annuitant when a company own investment is better than expected
Fixed Annuity
- Guranteed minium rate of intrest to be credited to the purcharers payments - Income (annuity) pymtd that do not vary from one pymt to the next - The Ins CO. gurantees the specified dollar amount for each pymt. and the length of the period of paymts as determined by teh settlement option chosen by the annuitant
Term Insurance additional charecteristics
- If the insured dies during term, DB are paid to the benefciary. - If policy canceled or expired prior to insureds death nothing is payable at the end of the term. - There is no cash value or living bebefits.
Term Insurance Charcteristics
- Know as Pure Life Insurance. - provides the greatest amount of coverage for the lowest premium. - Usually maximum age above which coverage will not be offered or which coverage cannot be renewed. - Provides what is know as pure death benefit
Variable Life Insurance agent Requirements
- Resgitered with FINRA - Securties License - State Life Insurnace license
Joint life Annuty
2 or more annuitnats receive payments until 1st deat, then payments cease.
Annuity
A contract that provides income for a specified period of years, or for life. - Protects a person against out living there money - not life insurance rather vehicle for accumulation of money and the liquidation of estates. - basic function is liquidating a principal sum, regardless of how it wa accumulated.
Surviorship Life
AKA 2nd to die same as joint life in that inures 2 or more lives for premium based on joint age. - Pays on the last death (since DB is paid onlast last death the joint life expectncy is extnded resulting in lower preiums. Often used off set estate tax liability.
Intrest Sensitive Whole Life
AKA as current assumption whole life policy that produces a guranteed death benefit at age 100. The insurer sets intial premeium & will adjust premiums at designated intervals if assumptions change. Provides min guranteed rate of intrest. * has the same benefits as other whole life polices w/added benenfits of current intrest rate, which may allow for greater cash value accumulation or a shorter premium paying period.
Guranteed Renewable health Insurance
Allows the Policy holder to renew the policy to a stated age, with the company having the right to increase the premiums on the entire class. Coverage is guaranteed but rates can be adjusted for the entire class.
Renewable
Allows the policy owner to renew w/out evidence of insuability. The premium for the new term will be based on the insureds current age at time of renewal.
Types of Term Insurance (3 kinds)
Based on how the face amount ( death Bebefit) changes during the term. Regardless of type premium is level throughout the term. Only the amount of DB may fluctate, depending on the type of term Ins. Upon selling renewing or converting the term policy the premium is figured at insureds attiained age at time of transaction.
Variable Universal Life Policy
Combines whole life features with flexible premiums of universal life & investment componet of univrsal life Ins. - Flexible premium (increase decerase or skip as long enough value is in policy to fund DB. - Increase decrease the amount of insurance & - Cash with drawls or policy loans. - * unlike UL no gurnateed return
Universal Life Option A DB
DB remains level while cash value gradulally increases thereby lowering the pure insurance with the insurer in later years
Decreasing Term
Feature a level premium and a DB that decreases each year over the duration of the policy term. Comonly used for mortgage or other debts. it is convertible but usually not renewable since DB is 0 at the end of the policy.
Life Income,Joint & Survior Option
The life income Joint and Survivor option guarantees an income for 2 or more recipients for the duration of their lives. Most contracts stipulate that the surviving partner will receive a reduced payment after the other dies, although some will continue to pay the same amount. There is no guarantee that all of the life insurance proceeds will be paid out.
Annuitant
The person who receies beneits from the annuity whose life exceptancy is taken into consideration. - must be an natural person
Universal Life Option B DB
Under option B (increasing DB option) the DB includes the annual increase in cash value so that the DB gradually increases each year by the amount that the cash value increases. At any point in time the total death benefit will always be equal to the face amount of the policy plus the current cash value. Since the pure insurance w/ the insureer remains level for life expenses of this option are much greater thatn option A causing the cash value to be lower in the older years.
Third Party Owner
a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforcable right under it.
Annuity accumulation period
aka pay in period of time which owner makes payment into an annuity. also period in which payments earn intrest on a tax deffered basis.k
Deferred Annuity
income pymts sometime after 1 year from date of purchase. Can be funded w single lump sum or through periodic payments. Periodic payments can be varied from year to year. - the longer the annuity is deferred the more flexibilty for pymt of premiums.
Annually Renewalbe Term
is a type of level term policy it is the Purest form of Term Insurance, - DB remains level, - and policy may be gruranteed to be renewable each year w/out proof of insurability, - but premium increases annually according to the atttained age as the probaility of death increases.
Lump Sum Annuity
paid at annuiztion, all intrest accumulated is taxable. Additional 10% penalty imposed prior to annutuization reaching 59 1/2.
Single Premium Whole Life (SPWL)
provides a level DB to insureds age 100 for a one time luump sum payment. Policy is competly . paid up after one payment and generates immediate cash.
Immediate annuity
purchased with a single lump sum payment and provides income pymts. that start w/in one year from the date of purchase. This is known as (SPIA) Single Premium Immediate Annuty)
Endowment Polices
type of whole life insurance with straight variation in the maturity date. endowment policy matures (endows at an early age (before age 100). becasue cash value are needed earlier and intenede to be used while the insured is alive premiums are condierable higher than straight life policy.
Straight Whole Life
The PO pays premium from the date the policy is issued untill the insureds death or age 100. Has lowest premium
Medicare Supplements
Include the following - - Out patient prescription drup plans - Any Health Care Prepayment Plan providing benefits realted to Social Security Medicare supplement policies ae desinged primarly as supplements to reimbursements under Medicare fo the hospital, medical or surgical expenses of persons eligible for Medicare. These policies do not included Medicare Advantageplans, outpatient prescription drug plans or any health care prepayment plan that provids benefits realted to Social Security.
Joint & suvervior
Income for 2 or more that cannot be outlived. Often used w/period certain. When one annutiant dies the other reeives 1/2 or 2/3 of the original payment amount.
Investigative Consumer Reports
Information for investigate consumer reports is obtained through investigative and interviews with associates friends and neighbors of the consumer.
Settlement Life Only
Insured cannot oulive income. Any monies not paid out are retained by company at insureds death. Pays highest monthly amount.
Increasing Term
Level premium and a DB that increases each year over the duration of the policy term. Increase is expressed as percentage ove the original amount. Ideal to handle inflation & the increasing cost of living. Often added to other policies as a rider such as with return of premium policies.
Annuity period/ Annutization period
Liquidation period or pay out period timeduring which the accumulated sum is converted into a stream of income payments to the annitant.
Level Term
Most common type of term insurance, DB does not change trough out the life of the policy.
Universal Life Characteristics
PO may pay - - Minimum Premium - amount needed to keep the policy inforce for current year. Paying this will make the policy perform as an annually renewalbe policy. - Target Premium - a recomend amount that should be paid in order to cover the cost of insurance to keep policy inforced through its lifetme. ULP has an Insurance componet and a cash account. The insurance componet is always anually renewable.
Annuities Certain
Payment guranteed for fixed period or untill certain fixd amount paid. No life option
Convertible
Provides PO the right to convert the policy to permanent insurance polciy w/out Evidense of insurability. premium based on insureds attained age
Adjutable Life
Provides best of both worlds (term & permanet coverage) The Policyowner can: - increase or decrese the premium or premium paying period - increase or decrease the face amount - change the period protection
Term Insurance
Provides coverage for a specific period of time, it is temporary protection and is also know as Pure Life Insurance. It provides the greatest amount of coverage for the lowest premium.
Whole life Insurance
Provides life time protection includes a saving element or cash value. Endow at age 100. The cash value created by the accumulation of premium is scheduled to equal the face amount. - Level premium - guranteed DB, remais level for life - cash value paid to PO at age 100, - cash value credted to policy on regular basis & has a guranteed interst rate - Living Benefits - PO can borrow against cash value while policy is in effect or can receive cash value when policy is surrendered.
Variable Annnuity
Serves as hede against inflation and is variable from standpoint that annuitnat can receive diff rate of returns on the funds that are paid into the annuity. Underlying Investment - pymts are invested in the insureers separate account not general account. Intrest Rate - does not gurantee a Min intrest rate License Requirments- consdiered security & reg by SEC & state Ins regs. Agent must hold a securtites & life Ins license and be registered with FINRA
Joint Life
Single policy to insure 2 or more lives. Can be in the form of term or permanet Ins. most commonly found as joint whole life which functions similiary to an individual whole life w/2 major execptions. - Premium based on joint average - death benefit base on first death only. * alo used to insure lives of business partners in funding of a buy sell agreement
Life with period certain
Specific monthly payments for life and a specific period of time if annutiant dies before payment period is up, payment goes to benefiary.
Adjustable Life Charcteristics
The PO can cconvert from term to whole Life and back again. Increases in the Db or changing to a lower premiuim type of policy will require proof of insurability. ** cash value only develops when premiums paid are more than the cost of the policy.
Annuitization date
The time when the annuity benefit payouts begin. Income amont is based on : - amount of premium - frequency of payment - interest rate - annuitants age and gender
