Insurance CH4 Types of Policies

Family Maintenance Policy

A combination of whole life insurance and level term insurance to provide permanent coverage (lump sum payment to beneficiary when the insured dies) and a monthly family maintenance portion for a set period of time following the insured's death.

Modified Endowment Contract (MEC)

A life insurance policy under which the amount a policy owner pays in during the first years exceeds the sum of net level premiums that would have been payable to provide paid-up future benefits in seven years.

Limited Pay Whole Life

A variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid-up well before age 100.

Variable Universal whole Life

Allows the client to self direct the cash value investment

Level Term

Also called level premium level term, hazard level face amount and level premiums. Premiums tend to be higher than annual renewable term. Because they are level throughout the policy Period. however, the premiums will increase at each renewal. Life insurance written to cover a need for a specified period of time at the lowest premium is called level term insurance. Term insurance always expires at the end of the policy period. For example if D needs life insurance that provides coverage for the remainder of her working years and wants to pay as little as possible, he would need level term. Level term provides a fixed, low premium in exchange for coverage which lasts a specified time period.

Endowment policy

An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Endowment policies are often used as a way of saving over the long term.

Joint Life Policy

Covers two or more lives and provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.

Non-Medical Life Insurance

Non-Medical Life Insurance typically does not require a medical exam and tends to be more expensive than medically underwritten policies.

Equity Index Universal Life Insurance

Policyholders to link accumulation values to an outside equity index, like the S&P 500 Minimum guaranteed fixed interest rate If the return on the index exceeds the policy's guaranteed rate of return, the cash value will reflect that of the index

Variable Life Insurance

Requires all premium payments be made for the life of the contract and are FIXED

Annual Renewable Term

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

Renewable term

Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.

Decreasing Term

Term life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection. A decreasing term policy is a type of life policy which has a death benefit that adjust periodically (according to a schedule) and is written for a specific period of time. Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off. For example, a 15 yr decreasing term policy could protect a 15 yr mortgage. As the mortgage balance reduces each year, the face value of the insurance policy will adjust accordingly to match. After the mortgage is paid off, the insurance policy will expire.

Increasing term

Term life insurance that provides an increasing face amount over time on specific amounts or a percentage of the original face amount.

Target Premium

The premium in a universal life policy that builds policy cash value.

Credit Policies

Typically purchased using a decreasing term life insurance policy, with the term matched the length of the loan. And the decreasing insurance amount matched the declining loan balance. Since credit life insurance is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid, credit policies can only be purchased for up to the amount of the debt or loan outstanding. for example, if you wanted an insurance policy to protect a $20,000, five year auto loan, you would use a five-year decreasing term life insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the five-year term of the policy. The face value will start out at $20,000 and change according to a schedule (the decreasing balance of the auto loan). After five years, the car will be paid for and the insurance policy will no longer be needed.

Family Income Policy

Which special policy combines decreasing term insurance with whole life insurance to provide the insured's family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments?

Adjustable Life Policy

Whole life insurance policy, but you can change your policy as your needs change. You can change your premium payments to increase or decrease coverage

Juvenile Insurance

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

Convertible Term

a provision that allows policy owners to convert their term insurance into permanent policies without showing proof of insurability. Convertible term provides temporary change that may be changed to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and the policy's lower premium, but want the option to convert the policy to a permanent one for final expense benefits once your finances improve, you would want a convertible term life policy. The conversion privilege of a group term life policy allows an individual to leave the group term (temporary) plan and convert his or her insurance to an individual (permanent) policy without providing evidence of insurability. The most important factor to consider when determining whether to convert term insurance at the insured's original age is the premium cost. The number one factor which impacts life insurance premium cost is the insureds current or attained age.

Joint survivor or last survivor life policies

cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds. Joint life survivor or last survivor policies only pay the death benefit upon the death of the last insured person. For example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no benefits would be paid out from the policy until M died. A Joint Life and Survivor policy covers two lives but only pays benefits after the death of the last insured.

Modified Whole Life

distinguished by premiums that are lower than typical whole life premiums during the first few years(usually 5) and then higher than typical thereafter. Designed to make initial purchase of insurance easier and more attractive with a promise of an improved financial position in the future.

Term Life Insurance

gives you the greatest amount of coverage for a limited period of time. Term insurance is only good for a limited period of time because it has a TERMination date. Term insurance is an inexpensive type of insurance, making it an attractive option for large policies. Term life is the CHEAPEST type of pure life insurance, and due to having a termination date and not having any cash value, it will ALWAYS be cheaper than whole life policy with the same face value. It provides a pure death protection since it only pays a death benefit if the insured dies during the policy term.

Group Life Insurance

insurance written for members of a group, such as an employer-employee group, association, union or creditor-debtor group. Coverage is provided to the members of the group under one master contract. The group is underwritten as a whole, not on each individual member. One of the benefits of a group life coverage is usually there is no evidence of insurability required.

Industrial Life Insurance

issues very small face amounts, such as $1000 or $2000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.

Ordinary Life Insurance

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

Term Rider

life insurance product 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. This is cheaper than every family member getting their own policy.

Universal Life Insurance

permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates

whole life insurance

provides death benefits for the entire life of the insured. It also provides living benefits in he form of cash values. It matures at age 100 and normally has a level premium. All whole life has the same type of benefits. The only difference in "types" of whole life is how the policy is paid. Some will be paid straight until death or age 100, some will be paid for after a few years or by a specific age, some may give you a little discount in the early years to help you get started, etc. All whole life lasts until death or age 100, has a fixed premium, and level benefit with cash value accumulation, regardless of how it is paid. Whole life is often compared to BUYING; like BUYING a house.

straight life insurance

with whole life- premiums are payable throughout the insured's lifetime. Said differently, premiums are payable as long as coverage is in force. Like all other whole life policies, straight whole life provides fixed premiums, a level death benefit, and cash value. Whole life also requires the face amount to be paid out to the insured at age 100 (when the policy matures) provided a death benefit has not already been paid.