Premiums
during the first 7 years of a minimum deposit policy, how many of the 7 annual premiums must be paid form the funds other than policy loans?
4
Single Premium
Lifetime coverage purchased with a single premium
Graded Premium Whole Life
Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off
Net Premium
Mortality - Interest
net single premium
Mortality - Interest = Net Premium includes mortality and interest components to keep policy in force until maturity
Factors in computing premiums
Mortality, interest, expense
Modified Life Policy
Whole Life Insurance with reduced premiums during the initial years and higher premiums during later years. Can be structured as Term insurance during the initial years and changing to Whole Life in the later years.
limited Pay
a level annual premium. policy designed so premiums for the coverage will be completely paid up before age 100
modified pay
a lower premium is charged in the first few years of the policy and then a higher level premium for the remainder of the insured's life
what do modified life and straight life policies have in common
accumulation of cash value
premium deposit or financial insurance plan
cash value of a permanent policy is used to pay the premiums on the policy thought the use of policy loans
Premiums
consideration paid to the insurance company for life insurance protection.
Gross annual premium
cost of 1 year of mortality + (commissions +taxes +advertising + profit margin)
premium tables
determines the cost of insurance based on the insured's age and other underwriting factors
higher frequency (mode)
equals higher premium
Fixed vs. Variable
fixed premium- same amount paid periodically. Varied- policy owner is allowed to pay more or less than the planned premium
interest
interest is the primary factor in lowering the premium rate
Non-Payment of Premium
lapsed policy can be terminated
mortality tables are statistical tables used by life insurance to help predict
life expectancy and the death rates for specific groups of individuals
which of the following premiums would result in the highest annual cost for an insurance policy?
monthly
gross premium
mortality - interest + expenses (loading)
Gross Premium
net premium + expenses (loading)
which type of insurance policy pays dividends if there are excess premiums over the cost of providing insurance?
participating
guaranteed at initial level
premiums can remain the same for entire policy period
initial and maximum premiums
premiums increase or decrease at different times
level
premiums remain the same throughout the duration of the contract
comparative interest rate
rate of return that must be earned on a "side fund" in a buy term invest the difference plan so that the fund will be equal to the surrender value of the higher premium policy at a designed point in time
reserves
set aside funds to insure that it can cover liabilities
Mortality tables
show statistical averages or possibility of death at a certain age - helps determine premium
an insured's life insurance policy include an automatic premium loan provision, which e uses 3 years after he buys his policy. what will happen if he never repays it?
the face value of the policy will be reduced at the maturity date.
