Life Insurance Policies: Chapter 3

Whole Life Insurance

Provides lifetime protection and includes a savings element (Cash Value). Endow at insured's age 100, cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100.

Target Premium

Recommend amount that should be paid on the policy in order to cover the cost.

Joint Life (First-to-die)

Single Policy designed to insure 2 or more lives. Premium based on joint average age, death benefits paid upon the first death only.

Annually Renewable

ART, The purest form a term insurance. Death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability. The premium increase annually according to the attained.

Variable Universal Life Insurance

Combines features of whole life with flexible premium of universal and the investment component of variable life.

Fixed Life

Contracts that offer guaranteed minimum or fixed benefits that are states in the contract.

Group Life Insurance

Issued to a sponsoring organization, covers lives of more than one individual. Written employee-employer group. Evidence of insurability not required.

Return of Premium

ROP, Life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount the premiums paid.

Decreasing Term

A Level premium and a death benefit that decreases each year over the duration of the policy term.

Level Term Insurance

Most common type of temporary protection purchased. Level refers to the death benefit that is does not change throughout the life of the policy.

Term Insurance

Temporary protection because it provides coverage for a specific period of time. Also Pure Life insurance. Lowest premium

Minimum Premium

The amount needed to keep the policy in force for the current year.

Characteristics of Group Plans

1. Purpose of Group: Created for a purpose other than to get group insurance. 2. Size of Group: Law of Large Numbers, The larger the group, the more accurate projection of future loss. 3. Turnover of the Group: Steady turnover: Younger low risk, Older higher risk. 4. Financial Strength of the Group: Must have financial resources to pay premium.

Option B (Increasing Death Benefit Option)

Death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount the cash value increases.

Option A (Level Death Benefit Option)

Death benefit remains the level while cash value gradually increase, lowering the pure insurance with the insurer years later.

Universal Life

Flexible premium adjustable life. The policyowner has the flexability to increase the amount of the premium paid into the policy and later decrease it again. May even skip paying a premium and the policy will not lapse if there is sufficient chase value to cover.

Index Whole life

Insurance that the cash value is dependent upon the performance of the equity index (S&P 500). Although guaranteed minimum interest rate. Policy face amount increases annually to keep pace with inflation.

Credit Life

Insure the life of a debtor and pay off the balance of a loan in the event of the death of the debtor. DECREASING term coverage. Creditor is the owner of the policy and beneficiary.

Survivorship Life (Second-to-die)

Insures 2 or more lives, premium based on joint age. This pays the death benefit on the last death.

Continuous Premium (Straight Life)

Basic whole life policy, policy owner pays the premium from the time the policy is issued until the insured's death or age 100. Lowest annual premium of whole life.

Eligible Groups

Group life insurance may be sponsored by employers, debtor groups, labor union, credit unions, associations.

Conversion to Individual Policy

If an employee terminates membership in an insured group, the employee can convert to an individual policy without proving insurability. They have 31 days to make the convert.

Level Premium Term

Provides a level death benefit and a level premium during the policy term.

Adjustable Life

Provides policyowners with the term and permanent coverage. Insured determines how much coverage is needed and the affordable amount.

Permanent Life Insurance

Refers to various forms of life insurance that build cash value and remain in effective for the entire life of the insured (or until age 100) as long as premium is paid.

Regulation of Variable Products

Regulated by State and Federal Government. Also by Securities & Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA).

Variable Life

The cash value accumulate based upon a portfolio of stocks without guarantees of performance. A level, fixed premium, investment-based product.

Limited Payment

The premiums for coverage will be completely paid-up will before and 100 (Can choose age). Shorter premium-paying period than straight life insurance, so annual premium will be higher. Cash value builds up faster.

Single Premium Whole Life

SPWL, Provide a level death benefit to the insured's age 100 for a one-time payment, lump-sum payment. Policy is completely paid-up after one premium and generates immediate cash.

Key Characteristics of Whole Life

Level Premium: Based on issue age, remains the same. Death Benefit: Guaranteed and remains level for life. Cash Value: Will equal face amount when insured it 100. Living Benefits: Can barrow cash value while in effect.

Increasing Term

Level premiums and a death benefit that increases each year over the duration of the policy term.

Juvenile Life

Life insurance written on the life of a minor. "Jumping Juvenile" Face amount increases at the predetermined age, often 21. Premium remain level.