Life Insurance Policies

If notice of conversion not supplied within 15 days of termination

60 days must be given to convert

Annual Renewable Term

Level term insurance which has a level face amount and increasing premiums. -term period is one year -premium goes up each year increasingly fast -eventually cost gets prohibitive

Decreasing Term

Term life insurance in which the face amount of the policy decreases over time in scheduled steps, but premium statys the same each year. Most often used to cover a debt obligation (mortgage). -death benefit stays the same -consequently it becomes more expensive over time

Converted policy equal to 10,000

or amount of group insurance, whichever is less

limited pay life

pay for 10 or 20 years or to age 65 and be covered for life

whole life

pay premiums until you die

When whole life beings to accumulate cash value

-after the third year the policy is in force

Juvenile life

-any insurance written on the life of a minor -face amount could increase later -purchaed by adiult or gardian Jumping Juvenile: automatically increaees in face amount at given age, usually 21, but premium remains level

Universal Life basic term

-considered to be permanent life insurance -protection element is always term -premiums are flexible within a range -death benefit can be icnreaed with proof of good health or reduced at any time -the cost of insurance is deducgted monthly from the cash value -premiums are optional as long as the cash value doesnt drop to zero

Convertible Term

-conversion option -convertible to whole life without evidence of health -during a specified time period -most policies allow conversion up to 80% of face amount -conversion premium based on attained age; standart rates Premium increases because: 1. whole life is more expensive than term 2.conversions are done at te clients attained age at time f conversion

Joint Life Policy

-covers 2 people and pays when first one dies -less expensive tan two separate policies -ussed to fund buy-sell agrements

Option A: level death benefit

-death benefit equals the face amount -cash value + amount of risk (term) -as the cash value increases, the amount the insurance company has at risk to pay the death benefit decreases -must alwqays include an amount of insurance risk until age 95, when accumulated cash value may equal death benefit

Option B: incrfeasing death benefit

-death benefit equals the face amount + the cash value -"b" more expensive than "a" becuase the net amount at risk reduces in option A and stays the smame in option B

Group Life Insurance

-groups cannot be formed to buy insurane -usually purchased by the employer -minimum of 10 persons insured -no phyiscal exams -master policy to employer, certificate of coverage to everyone else -benefits for employee and dependents, employee could pay for dependents -31 day grace period

Universal Life

-interest sentivie life insurance -changes in the interest rates credited to the policy's cash value affect the level of premiums required to be paid to sustain the protection -cash values earn a guaranteed minimum % (usually around 4%) -cash values may earn a higher non-guarenteed rate of interest

Unlike adjustable life, univeral life:

-is an unbundled "transparent" contract -mortality, inerest, expenses -the policy owner gets an annual report detailing all charges for benefits and credits of intereest and premium to the cash values

Credit Life Insurance

-life of debtor: individual or group -beneficiary is the creditor -policy limit cannot exceed amount of debt -usually decreasing term -suicide clause no longer than 6 months -65 or older, 66 or older beofre loan repaid: usually not eligible

The cash value corridor approach

-life policies cannot mature prior to age 95 or they lose some of their tax benefits -high interest rates credited to cash values of universal life insurance may cause the cash value to exceed the face amount before age 95: seven pay test -could be labeled modified endowment and taxed -by concesion, if that occurs, the insurance company will automatically increase the death benefit to maintain a "corridor of proection" to prevent the policy from maturing early -this preserves the tax free death benefit and permits tax free access to cash values

Who is term insurance suitable for

-person has large need but limited money for premiums -has a temporary need for coverage -expects to ve better able to afford higher premiums later -wants to preserve his insurablilty for the future

group life facts

-premiums paid by an employer are tax deductible as long as the employer is not the benficiary -premiums paid by and EMPLOYEE are NOT tqax deduciblte -employees who pay income tax on part of the premiyum when the death benefit exceeds $50,000 -death benefits are income tax free

Adjustable Whole Life Insurance

-well suited for someone who needs flexilibity in their insurance -can choose and 2 of these elements and the company chooses the 3rg once per uyear -premium amount -death benefit -period of protection ** page 64 book -premiums are flexible and the face amount can be adjusted annually

Instead of paying an increasing premium like term,,, choose whole life

-whole life costs more at first but less later -it is the higer than term cost in the beginning that alllows cash value to develop -interest earned by the company on cash value allows ompany to charge a level of premium and guarantee coverage for life

Non-contributory

100% must apply

Re-entry option

An option that gives the insured the opportunity to pass a physical exam at the end of the term and qualify to renew the policy at a lower premium rate

Maximum Premium

allowable the the IRS to allow cash values to grow

Employee group plan sponsor

amount of insurance must be based on some plan, such as a job description or salarry that precludes individual selection by either employee, employer, or by a trust established by employer

Contributory

at least 75% of eligible must apply

single premium

one premium

Surrender charges

back end loaded -penalty for early withdrawals or surrenders

Level Term

both the premium and face abount stay level for a period of time -however at the end of this time period they will have to renew and pay substantially higher premium -death benefit stays the same -re entry options

If group policy is terminated

employees are insured for at least 5 years are entitled to cnvert within 31 days

multiple employer trusts

groups covering employees in the same industry

Debtors group plan sponsor

groups may be established if the amount of insurance on the life of the debtor does not exceed the amount owed to the creditor. policy proceeds are payable to the master policy owner to extinguish debt

Modified Whole Life

has a lower premium the first 3- years, then increaes and remains level for the rest of the policy

Step Rate / Graded Premium

increase each year for 5-10 years and then levels out for the rest of the policy

Last Survivor or Second to Die

pays the named beneficiaries when the second person dies -proceeds often used to pay estate taxes

Target premium

premium needed to keep in force until at least age 95

Minimum Premium

pure "term" cost to keep inforce for one year

Term Life

temporary insurance, written for a specified period of time

Back end load policies

usually have a contingent deffered sales chage, that declines over time, usually 8 year period

Group life is convertible

witihn 31 days to whole life, regardless of health, at standard rates if employment is terminated