2 - Basic Types of Individual Life Insurance Flashcards
All Life policies have the following characteristics:
- death benefit paid in a lump sum is NOT income taxable
- qualifying for life insurance is primarily based on the health of the proposed insured
- any cash accumulations are tax-differed
Mortality
-frequency of death at any given age
Term Life insurance is often referred to as…
- “pure” life coverage
- does not build a cash value
Term Life is an excellent option to…
-cover mortgage or child support payments if the insured dies
Special features of Term Life:
- right to renew for another period of time to term
- right to convert to another form of life
2 Methods of Converting Term Life
- Attained Age Method
- Original Age Method
Attained Age Method
-converted at current age
Original Age
-converted at age policy was issued
3 types of Term Life
- Level Term Life
- Decreasing Term Life
- Increasing Term Life
Types of Level Term Life
- 5 year
- 10 year
- 20 year
- Term to Age 65
- Annual Renewable Term
J purchases a new auto that he will make payments for 5 years . What type of life insurance policy would be best to pay off the debt if J were to die prematurely?
-5 year Decreasing Term
Renewable Level Term Life insurance can be renewed at the end of the term:
-w/out evidence of continued good health at time of renewal
Limited-pay Whole Life insurance policies:
-Require a limited number of premium payments in return for the death benefit until the policy maturity date.
K, a 35-year-old building contractor, wants financial protection for his family while $100,000 of his assets is tied up in a building project for the next five (5) years. K expects the financial risk to decrease throughout the five (5) year period. Which of the following types of life insurance policies would give him financial protection at the lowest premium cost?
-$100,00 5-year decreasing term
This increases in a whole life policy every time a premium is paid:
-the cash value
