Chapter 10 - Whole Life Insurance Flashcards
Whole life/Permanent Insurance
Policy that pays either a death benefit or cash value. Death would pay the matured value of the policy. Or the insured receives cash, the policy builds a cash value that can be surrender due to lapse or borrowed against.
Provides protection until you reach age 100
Has a cash value, that starts building in year 2. Follows a cash value table, that builds until it reaches face value at age 100.
Level premium payments to age 100.
You can access the cash value of the policy by letting is lapse, surrendering the policy, by borrowing against the cash value from the insurance company.
Ways to pay for Whole Life Insurance
Continuous Premium: paid monthly of annually. Most common. Also called Straight Life or Ordinary Life premium modes.
Limited Pay: paid premium for a predetermined number of years. Payment begins at the inception of the policy and ends of the specified date (like 65). The policy doesn’t mature until age 100. It’s just PAID UP at the chosen year. Also called Installment Life.
Single Premium: least common method. Funded with cash up front. Typically purchased by older people to take care of estate/death taxes.
Graded Premium: makes the premium more affordable in the early years. Violates the rules of life policies always having a level premium. Also called Graduated or Modified
Converting Term to Life
Proof on insurability is only required if going from Whole life to Term. Companies want you to convert to whole life because of the “higher policy form” that has a higher premium.
Substandard Graded Life Insurance
The company could deny if you have a preexisting condition, issue a policy with a rated (higher) premium, issue a “SUBSTANDARD GRADED LIFE POLICY” which will pay a lower death benefit in the early years but will pay the full face value if the insured dies after a specified number of years.
