Primerica Chapter 3: Life insurance policies
Interest-Sensitive Whole Life
(AKA current assumption life) a whole life policy with guaranteed death benefit at age 100. Insurer sets premium based on current assumption about risk, interest, and expenses. If the value changes the company lowers or raises the premium.
When does cash value begin accumulation?
3rd policy year.
Straight Whole Life
Basic whole life policy. Level premiums and increasing cash value. Straight life has the lowest annual premium of whole life policies.
Nonforfeiture values
Benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses.
Cash value with interest-sensitive whole life policies
Cash value is credited at the current interest rate and has a minimum guaranteed rate of interest.
Indexed whole life
Cash value is dependent upon the performance of the equity index, like S&P 500. There is a guaranteed interest rate, and this policies face amount increases annually to keep pace with inflation.
Variable Life insurance products
Contracts in which cash values accumulate base upon a specific portfolio of stocks no guarantee of performance.
Cash value grows tax _____
Deferred.
Limited Payment whole life
Designed so the premium is paid up well before 100 years old. Has a shorter paying period than straight life, so annual premiums will be higher.
Single Premium Whole Life
Designed to provide a level death benefit to the insured's age 100 for a one time lump sum payment. Policy is paid up after one premium and generates immediate cash.
Decreasing Term Insurance
Feature a level premium and a death benefit which decreases every year over the duration of the policy term.
Attained Age
Insured's age at the time the policy is issued or renewed.
What happens to cash value if a whole life policy is surrendered?
Its going to the policyowner.
Whole life and death benefits premiums, liquidity, and cash value info.
Level Premium, Level death benefit for life, Cash value paid out to policyowner. Whole live has a liquidity feature, but all unpaid loans against cv are subtracted from the death benefit if the insured dies.
There are three different types of term insurance, based on how the death benefit changes during the policy term, what are they?
Level term, increasing term, and decreasing term
Does the premium change in a term policy?
No, the premium is figured at the attained age upon selling, renewing, or converting the term policy.
Level Term Insurance
Provides a level death benefit and a level premium during the policy term. (renews based on attained age)
Whole Life Insurance
Provides lifetime protection and includes a savings element (or cash value). Whole life policies endow at the insured's age 100.
Annually Renewable Term
Purest form of term. Death benefit remains level and the policy renews annually without proof of insurability. The premium also increases annually according to attained age.
Graded Premium
Similar to modified whole life in that the premiums start relatively low ant then level off at a point in the future. Starts cheaper than straight life, and increases for 5 to 10 years and remains level thereafter.
Basic Whole Life insurance Types
Straight whole life, Limited Pay whole Life, Single Premium Whole life
Term Life Insurance (aka pure life insurance)
Temporary protection, offered in groups of years. Greatest protection for the lowest cost.
Face Amount
The amount of benefit stated in the LIP.
Modified Life
Type of whole life that charges a lower premium (similar to term rates) for the first 3 to 5 policy years, then higher level premiums for the rest of the insured's life.
When is increasing term used?
Usually by insurance companies to fund riders that provide a refund of premium, or gradual increase in total coverage.
When is decreasing term used?
Usually to insure the payment of a mortgage, or other debts.
Deferred
Witheld or postponed until a specific time or event in the future.
Fixed Life Insurance Products
contracts that offer guaranteed minimum or fixed benefits
Increasing term
features level premiums and a death benefit that increases each year over the duration of the policy term. They adjust for inflation and provide greater survivor protection.
Lapse
policy termination due to nonpayment of premium
Endow
to have cash value of a whole life policy reach the contractural face amount.
