3) Permanent life insurance Flashcards
What are the three types of Permanent Insurance
T-100, Whole life and Universal Life
What is Whole-life insurance (WL)
Premiums are due for the life insured’s entire life. The premiums are level and are guaranteed for life.
What is limited payment whole life insurance (WL)
- Premiums are payable only for a specified time period
- level and guaranteed premium
- The fewer the payments, the higher the annual premium and the cash surrender value is higher as well
What are the Three guaranteed elements of whole life (WL)
1) a death benefit
2) a fixed premium
3) a cash value**
What is a Cash value*** (WL)
The portion of the premiums that are accumulated within the policy into savings wich are payable when the policyholder terminates their contract
DIFFERENT THEN A DEATH BENEFIT
What are three facts about the cash value? (WL)
1) the amount is known in advance in a whole life insurance policy
2) Tax consequences, or policy gain, when withdrawing the cash value in one lump sum
3) May or may not be payable upon death
What are non-forfeiture options? (WL)
An option that allows the policyholder to miss payments and deduct them from the built up cash value while keeping some form of insurance in place.
Non-forfeiture Application: Reducing the value of the policy (REDUCED PAID UP) (WL)
Reducing the coverage amount of the original contract and eliminating premiums until the insured’s death.
This is called a reduced paid-up policy because the coverage has been reduced and the payments are no longer due (paid up)
Non-forfeiture Application: Extended Term insurance (WL)
In this case, the whole life contract is converted to a term insurance policy in the same amount as the original face amount, but over a lesser period of time, until the cash value runs out. the amount of cash value built up dictates the length of the new term insurance policy
Non-forfeiture Application: Automatically advancing the premium (WL)
The insurance will automatically be kept in effect using the cash value as premium payment, each month they will deduct the premium amount from the cash value accumulated. (THESE ADVANCES ARE LOANS MADE FROM THE POLICY AND MUST BE Repaid WITH INTEREST)
Non-forfeiture Application: Policy Advance (WL)
the insurer grants the insured a loan to prevent a policy lapse. The loan amount and interest must not exceed the cash value.
The difference between this and an Automatically advancing the premium option is that this amount is deposited into the client’s bank account, and can be used at their discretion.
What is T-100 insurance
Level and guarantees coverage and premium until the age 100.
What is Universal life insurance
includes two portions in a single contract: a life insurance portion and an investment portion. The investment portion replaces the savings portion that you would have in whole life. Investments fluctuate so the returns will depend on the preformance of the investment.
Universal life insurance: Advances or withdrawals
Policy advances or withdrawals may be made, these are not considered loans, unlike whole life.
Tax sheltering accumulation
As long as the money remains in the policy, the investment portions and the returns earned on the investments are not subject to tax. at the death all amounts received by the beneficiary are seen as a death benefit. Death benefits received from life insurance are never taxable.
