EXAMFX- Life Insurance Policies

pure death protection (provided by term insurance)

-if the insured dies during this term, the policy pays the death benefit to the beneficiary -if the policy is canceled or expires prior to the insured's death, nothing is payable at the end of the term -there is no cash value or living benefits

permanent life insurance (most common)

A general term used to refer to various forms of whole life insurance policies that remain in effect to age 100 so long as the premium is paid.

joint life (first to die)

A single policy that is designed to insure two or more lives. can be either term or permanent insurance

decreasing term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

financial strength of the group

Because group insurance is costly to administer, the underwriter should consider whether or not the group has the financial resources to pay the policy premiums, and whether or not it will be able to renew the coverage.

Single Premium Whole Life

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

turnover of the group

From the underwriting perspective, a group should have a steady turnover: younger, lower-risk employees enter the group, and older, higher-risk employees leave.

Level Term Insurance

Most common type of temporary protection purchased. death benefit does not change throughout the life of the policy

term insurance

Temporary protection because it only provides coverage for a specific period of time. (known as pure life insurance)

living benefits

The policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.

cash value

a policy's savings element or living benefit

Flexible Premium policies

allow the policyowner to pay more or less than the planned premium

universal life insurance

also known as flexible premium adjustable life insurance. implies that the policyowner has the flexibility to increase the amount of premium paid into the policy and later decrease again

Juvenile Life Insurance

any form of coverage written on the lives of minors. the face amount jumps, but the premium remains level

separate account

because the insurance company is not sustaining the investment risk of the contract, the underlying assets of the contract cannot be kept in the insurance company's general account. these assets must be held in a____ which invests in stocks, bonds, and other securities

Nonforfeiture Values

benefits in a life insurance policy that the policy owner cannot lose even if the policy is surrendered or lapses

accumulate

build up

variable life insurance or annuities

contracts in which the cash values accumulate based upon a specific portfolio of stocks with our guarantees of performance. keep pace with inflation and are determined by the value of securities backing it up. ave fixed premiums and a guaranteed minimum death benefit. cash value is not guaranteed and it also fluctuates by the performance of the portfolio

variable life insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

fixed life insurance or annuities

contracts that offer guaranteed minimum or fixed benefits that are stated in the contract

cash value

created by the accumulation of the premium, is scheduled to equal face amount of the policy when the insured reaches age 100, and is paid out to the policyowner. have guaranteed interest rate

debt

credit insurance cannot pay out more than the balance of the ___

first death only

death benefit of joint life insurance is paid upon:

limited payment

designed so that ptemiums for coverage will be completely paid up well before age 100

adjustable life

developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage). can assume the from of either term or permanent. insured usually determines how much coverage is needed and the affordable amount of premium

securities

due to the element of investment risk, the federal government has declared that variable contracts are___

certificate of insurance

each insured participant under the group plan is issued a ___

increasing term

features level premiums and a death benefit that increases each year over the duration of the policy term. ideal to handle inflation and increasing cost of living

securities

financial instruments that trade for value (stock, bonds, options)

annually renewable term insurance

group insurance is written as ____

employers, debtor groups, labor unions, credit unions, associations, and other organizations formed for a reason other than purchasing insurance

group insurance plans may be sponsored by___

purpose or nature of the group

group must be created for a purpose other than to obtain group insurance

no medical questions since the plan will be issued based upon the nature of the group and the group's past claims experience

if a group is large enough there are____

without proving insurability

if an employee terminates membership in the insured group, the employee has the right to convert to an individual policy without ___at a standard rate, because of the individuals attained age

policy's cash value

if an insured skips a premium payment on a universal life policy, the missing premium may be deducted from the police's cash value

policy maturity

in life policies, the time when the face value is paid out

index whole life

insurance that's cash value is dependent upon the performance if the equity index, such as S&P 500 although their is a guaranteed minimum interest rate

credit insurance (decreasing term insurance)

is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of a debtor

Variable Universal Life Insurance

is a type of insurance that combines many features of the whole life with the flexible premium of universal life and the investment component of variable life, making it a securities version of the universal life insurance.

Return of Premium

is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of premiums paid

death benefit

is guaranteed and also remains level for life

group life insurance

issued to the sponsoring organization, and covers the lives of more than 1 individual member of that group

lives of business partners married couples

joint life policies can be used by:

creditor

owner and beneficiary of the group in credit insurance

lapse

policy termination due to nonpayment of premium

converting

policyowner has the option of ___ from term to whole or vice versa

straight life

policyowner pays the premium from the time the policy is issued until death or age 100 (whichever occurs first). will have lowest annual premium

less than

premium for joint life would be ____ for the same type and amount of coverage on the same individuals

joint average age that is between the age of the insureds

premium of joint life insurance is based on___

survivorship life (second to die)

pretty much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. the major difference is that survivorship life pays on the last death, rather than the first. this is often used to offset the liability of the estate tax upon the death of the last insured

term policies

provide for the greatest amount of coverage for the lowest premium as compared to any other form of protection. usually a maximum age above which coverage will not be offered or at which coverage cannot be renewed

whole life insurance

provides lifetime protection, and includes a savings element (or cash value). endow at age 100, which means the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100

target premium

recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime

no cash value

term insurance has no___

minimum premium

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

face amount

the amount of benefit stated in the life insurance policy

attained age

the insured's age at the time the policy is renewed or replaced

size of the group

the larger the number of people in the group, the more accurate the projections of future loss experience will be. this is based on the law of large numbers of similar risks

level premium

the premium for whole life policies is based on the issue age. it remains the same throughout the life of the policy

level premium

the premium that does not change throughout the life of a policy

Annually Renewable Term (ART)

the purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.

endow

to have the cash value of a whole life policy reach the contractual face amount

insurance component and a cash account

universal life policy has 2 components:

dually regulated

variable life insurance products are____ by the state and federal government

provide temporary coverage for a small price at a large amount

why is term insurance purchased?

deferred

witheld or postponed until a specified time or event in the future