102-3 Life Insurance (Individuals) - Part 1 Flashcards
Temporary life insurance
Provides coverage for a specified period
Term life insurance is the most common
Term life is aka pure insurance because it does not accumulate cash value
Permanent life insurance
Does not terminate at any given tune as long as adequate premiums are paid
Annual renewable term (ART) Insurance
Issued for (and provides protection for) only one year, but the policyowner is permitted to renew the policy for subsequent periods to a stated age without evidence of insurability
Premiums increase each year as the insured ages
Level term insurance
Has a level death benefit and a fixed annual premium for a stated period
Decreasing term insurance
Features a level premium with a decreasing death benefit
This type of policy has been historically used as mortgage protection insurance
Recently term insurance
A policy under which the insurance company may renew coverage at a lower premium rate than the guaranteed renewal rate, provided that, at the time of renewal, the insured furnishes satisfactory evidence of continued insurability
Convertible term insurance
May be converted to a cash value policy (ie permanent policy) without evidence of insurability
Whole Life Insurance
Pays a benefit at the death of the insured as long as the premiums are paid according to the terms of the insurance contract
Provides protection for the entire (whole) life of the insured while also generating a cash reserve that can be made available to the policyowner during the insured’s lifetime
Ordinary (or straight) life insurance
Based on the assumption that the policyowner will pay the premiums on the policy until either death or the endowment age (which has historically been 100 but recently has often been 120)
This policy provides maximum permanent death benefits for the lowest premiums
Limited-pay whole life
The insurance is permanent and the insured has lifetime protection
Premiums are payable only for a limited # of years, after which the policy becomes paid up
Modified premium whole life
Premiums are lower for the initial years after policy issue (usually no more than the first 5 years) and then increase once thereafter
Single premium whole life
The ultimate example of a limited-pay whole life policy — that is, a policy for which all premiums are paid in one up-front lump sum
Usually classified as a MEC for tax purposes
Nonforfeiture options
Benefits available in a whole life insurance policy if the policy is discontinued during the insured’s lifetime
- cash surrender value option
- reduced paid-up insurance option
- extended term insurance option
Whole life insurance policy that pays dividends that are not guaranteed
Considered to be a participating policy
Whole life insurance dividend options
- Cash option
- Dividends to reduce premium
- Dividends to accumulate at interest
- Paid-up additions
- One-year term insurance option (fifth dividend option)
