Types of Policies
Pure Death Protection
- 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 other living benefits
permanent life insurance
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.
Certificate of insurance
A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided.
Survivorship life
A life insurance contract which pays policy proceeds only upon the death of the last of two or more insureds covered by a combination plan. Lower premium then joint life.
Joint Life
A single policy that is designed to insure two or more lives.
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.
interest sensitive whole life
AKA current assumption life whole life policy that provides a guaranteed rate of interest comparable to money market rates and can have fluctuating premiums based on changing assumptions about risk, interest, and expense
Policyowner has the option of converting from term to whole life vice versa
Adjustable life
Renewable provisions
Allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability.
The insurance component of a universal life policy is always what?
Annually renewable term insurance
Juvenile life insurance
Any life insurance written on the life of a minor.
Indexed Whole Life (Equity Index Whole Life)
In this whole life insurance, the cash value is dependent upon the performance of the equity index, such as S&P 500 although there is a gauranteed minimum interest rate
Option B
Increasing death benefit option, the death benefit includes the gradual increase in cash values so that the death benefit gradually increases each year by the amount that the cash value increases.
Cash value is credited to current interest rates, usually comparable to money market rates. Can be higher than the guaranteed levels. Policy also provides for a minimum guaranteed rate of interest.
Interest sensitive whole life
Premium based on joint average age and the death benefit is paid upon the first death only
Joint Life
Increasing Term Insurance
Level premiums and a death benefit increases each year over the duration of the policy term
Variable life insurance is a securities product, so producers must be daily licensed in both what?
Life insurance and securities
Universal life offers one of two benefits to the policy owners. What are the two options?
Option A and Option B
In what universal option does the death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Option B
Single Premium Whole Life
Paid up for life with one large premium payment and generates immediate cash
What does "level" refer to in level term insurance?
Refers to the death benefit, which does not change
Does the premium in term insurance lower, decrease, or stay level
Stays level
This type of policy is often used to offset the liability of the estate tax upon the death of the last insured
Survivorship life
Option A
The level death benefit option, death benefit remains level while the cash value gradually increases, lowing pure insurance with the insurer in later years.
How is the premium figured in term insurance
The premium is figured at attained age
Variable contract and securities are regulated by what?
The securities and exchange commision (SEC) and the Financial industry regulatory authority (FINRA)
Why is decreasing term insurance commonly purchased for?
To insure the payment of a mortgage or other debts if the insured dies prematurely.
Variable universal life
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
In this contract the policyowner bears the investment risk
Variable Contract
Policy where the cash value is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer
Variable life insurance
Policy owner has the option to increase or decrease premium, face amount, and change the period of protection
adjustable life
straight life insurance
aka ordinary life or continuous premium whole life. Is the basic whole life policy.
Term Life Insurance
aka pure life, temporary protection, Greatest amount of coverage for lowest premium. no cash value. premium goes up with age.
Variable Life Insurance
aka variable whole life insurance. A level, fixed premium, investment base product, guaranteed minimum death benefits.
Flexible premium policies
allow the policyowner to pay more or less than the planned premium
Converting
changing from term to whole and vice versa, new policy will usually require proof of insurability
limited-payment life insurance
designed so that the premiums for coverage will be completely paid-up well before age 100.
Adjustable life
developed in order to provide the policyowner with the best of both worlds (term and permanent coverage)
Convertible provision
give the policyownee the right to convert the policy to a permanent insurance policy, without evidence of insurability.
Participants under this plan do not receive a policy because they do not own or control the policy
group life insurance
Return of premium
increasing term insurance that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
2 Components of Universal Life
insurance component and cash account
Master policy contract
is issued to the sponsor of the group which is often an employer
A common juvenile policy is known as..
jumping juvenile because the face amount increases at a predetermined age, usually 21.
The face amount jumps at predetermined age but the premium remains level
jumping juvenile policy
3 types of term coverage
level, increasing, decreasing
Group Life Insurance
life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance
Has higher annual premium and cash value builds up faster
limited payment life insurance
Level Term Insurance
most common type of temporary protection purchased
Universal Life Insurance (flexible premium adjustable life)
policyowner has the option to increase the amount of the premium paid and to later decrease it again. Can skip a paying a premium and policy wont lapse as long as there is sufficient cash value at the time
are premiums for whole life usually higher or lower than term insurance?
premiums in whole life are usually higher than term life
whole life insurance
provides lifetime protection, and includes a savings element (or cash value)
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
Minimum premium
the amount needed to keep the policy in force for the current year
if insured remains healthy and still alive when a return of premium policy expires what happens to premium?
the insurance company guarantees a return of premium
Level Premium
the premium and death benefit that does not change throughout the life of a policy
Annually Renewable Term
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.
what policy is interest sensitive?
universal life insurance
Policy where assets must be held in separate accounts
variable life
these are dually regulated by the state and federal government
variable life insurance and variable annuities
Unlike universal life, most of the investment vehicles in this policy do not guarantee a return on investment
variable universal life insurance
what policy has fixed interest rate?
whole life
What provided lifetime (permanent) protection and accumulates cash value?
whole life insurance