Types of life insurance policies

disadvantages of variable policies

- No guaranteed rate of return -complicated -highly regulated

Variable Universal Life

No guaranteed death benefit

Single Premium Whole Life

Paid up for life with one large premium payment

level term policy

The premium and the amount of coverage are level throughout the term, equals the face amount throughout term

Policy Surrender

When a policy is surrendered for the cash value, some of the cash value received may be taxable, if the value was more than the amount of the premiums paid for the policy.

Separate Account

a fund held by the life insurance company and maintained separately from the insurers general assets, account is established to hold premiums used to purchase funds/investments that the company offers

intrest sensitive whole life

aka current assumption where cash value can increase beyond the stated guarantee if economics warrant it has fixed level death benefit and a premium schedule fixed in timing of payments... the insurer will make investments with a percentage of each prenium payment, excess may be credited to the policy to make cash value rise

policy loans

allow the policyholder to borrow from the cash-value built up in the policy; interest must be paid

limited payment whole life

allow the policyholder to pay for the entire policy in a shorter period of time; can be broken down into any desired number of installments 10 yearpay or 20year pay, life paid up till 65

guaranteed interest crediting

cash value in a whole life policy increases over time, regularly credited with a level rate of interest

advantages of flexible policies

combines whole life with affordable preminums of term insurance in one policy. flexible premiums with use of cash value to cover payments, even if they are unable able to make it

Juvenile Life Insurance

coverage is written on a child or a minor

increasing term policy

death benefit begins near zero and grows over the term of the coverage premium increases

decreasing term policy

death benefit declines over the coverage period until it reaches zero at the end of the term premium remains level

Fixed, level death benefit

death benefit with whole life is fixed and level

university life

designed for those who want flexible premiums and flexible coverage over the course of their lifetime

Convertibility

feature that allows a policyowner to convert a term insurance policy to a pernmant type of policy without evidence of insurability and without an application. prenium is based on attained age at conversion and original age

adjustable life insurance

gives the policyowner the options to adjust the face value/death benefit, the preminum, and the length of coverage without having to change policies if purchased a large death benefit with low premium, all the premium would be used to pay the death benefit and nothing generating cash flow

Variable Life Insurance

has a separate account t instead of guaranteed cash value, the original face amount is the policys guaranteed minimum death benefit

Modified Premium Whole Life policy

have lower premiums for the first 3 to 5 years after are increased to a level consistent amount

continuous premium whole life

if the policy owner discontinues making prenium payments, they will receive the cash value of the policy

survivorship policies

insures two individuals and will pay the death benefit when the last one dies

whole life insurance

is a permanent policy which is guaranteed to remain in force for the insureds entire lifetime, designed to remain in force for the whole life and the premiums will never increase

advantages of whole life

is permanent coverage with guaranteed level premiums and it does not expire after a term. cash values are tax deferred(tax free) include cash surrender value, paid up insurance

disadvantages of flexible policies

more complex, important to know preminum amounts. intrest, withdrawals, and death benefit can significantly impact the long term benefits

advantages of variable policies

offer the potential higher returns investment based returns have the potential to keep pace with inflation and with tax deferred feature, they may offer an attractive tax advantage for those in higher income brackets

universal life death benefit policy options

option 1, provides for a level death benefit equal to the policys face value, more of the premium is placed in the cash account making the value rise more quickly option 2, increasing death benefit to the face value plus the cash account. cash value does not increase as quickly

Step-Rate Premium

payment of the higher premium at each renewal

variable policies

permanent insurance policies designed to provide lifetime coverage for the insured and have cash value and a death benefit, major advantage is various options are not taxed on the earnings until the policy is surrendered

equity indexed universal life

permanent life police that allows policyholders to tie accumulation values to stock market index such as standard and poor's 500 index. typically contains a minimum guaranteed intrest rate along with the indexed account option stocks have no stated rate of return and may lose value

fixed premium schedule

policy owner selects the mode of payment

Return of Prenium term

prenium higher than regular term policy, preminum paid back if insured is alive at the end of the term

Level Premium

purpose is to make lifetime coverage affordable at older ages, system results in overpaying in younger years and underpaying in later years

indeterminate premium whole life

similar to a nonparticipating whole life in providing for adjustable premiums, company will charge a current premium based on it's current estimate of earnings, mortality, and expense costs.. company could change rate if costs change

advantages of term insurance

since only provides a death benefit, its premiums are lower than other types of life insurance policies. initially the least expensive form of insurance

Graded Premium Whole Life

starts even lower than modified and increases every five to ten years until leveling out

disadvantages of term insurance

term coverage lasts only for the term of the policy, like renting not owning the policy term premiums increase as the insured gets older renewability features expire before the age of average life expectancy, may lead to individuals may not be able to afford coverage at older ages with their risk greater

death benefit components

the cash value or the savings element an insurance protection element that must be paid in addition to cash value so that the death penalty benefit equals the policy face amount, know as the net amount of risk

disadvantages to whole life

the initial premium for whole life is higher than term insurance, cannot be decreased and are not flexible.. the death benefit cannot be increased, lastly policy owner has no control over how the cash value is invested

Joint Life Policy

usually covers two or more lives with the death benefit being paid when the first insured dies

renewablity

with term, guarantees that the policy will renew at the end of its term premium might increase depending on age

Universal Life Insurance withdrawls

withdrawals and loans can be made against the cash value account. the policy owner can also surrender or cash in the universal life contract for it's current cash value whenever they want