Chapter 4 Flashcards
Kind of life insurance
What is industrial life insurance?
Industrial life insurance premiums are paid on either a weekly or a monthly basis. Generally, the face values of industrial life insurance policies are no more than $10,000. This is considerably lower than other types of life insurance policies, which typically have face values of hundreds of thousands. Industrial life insurance is a good option for people who want some life insurance but cannot afford to pay high premiums.
What is term life insurance?
Term life insurance provides pure or temporary protection and is the simplest form of life insurance coverage. Term life provides low-cost insurance protection for a specified, limited, period of time and pays a benefit only if the insured dies during that period.
What is level term insurance?
It is similar to term life insurance?
What is Increasing Term Insurance?
Increasing term insurance is term insurance that provides a death benefit that increases at periodic intervals over the policy’s term. The increase is usually stated as specific amounts or as a percentage of the original amount. It may also be tied to a cost of living index, such as the Consumer Price Index. Increasing term insurance may be sold as a separate policy but is usually purchased as part of a package or as a cost-of-living rider to a policy.
What is Decreasing Term Insurance?
Decreasing term policies are characterized by benefit amounts that decrease gradually over the term of protection and have level premiums. A 20-year $50,000 decreasing term policy, for instance, will pay a death benefit of $50,000 at the beginning of the policy term. That amount gradually declines over the 20-year term and reaches $0 at the end of the term. Decreasing term insurance is commonly used to protect pay off debt in the event of the insured’s death.
What is Mortgage Redemption Insurance?
Mortgage Redemption Insurance is a type of decreasing-term life insurance policy. Its purpose is to provide policyholders a way to have their mortgages paid off if they die before it is fully paid. This prevents the full burden of paying the mortgage from falling on the surviving family members’ shoulders. With this design, the face value decreases as the balance remaining on the mortgage decreases.
What is Credit Life Insurance?
Credit Life Insurance is limited benefit (term) policy designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. The beneficiary of such a policy is usually the lender. The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the outstanding loan balance.
What is convertible term insurance?
The option to convert gives the insured the right to convert or exchange the term policy for a whole life (or permanent) policy without evidence of insurability. In other words, the insured is not required to pass a medical exam or demonstrate good health since that requirement was already satisfied before the policy was originally issued.
What is a temporary life insurance policy
When the original age is used, the insurer will determine what the appropriate premium would have been had the owner purchased a whole life policy at the “original age” when life insurance was initially purchased. Premiums will be lower using the original age compared to the attained age. However, if this method is selected, the owner must fund or deposit an amount equal to the difference between what they would have spent on the policy had they started with whole life and what they actually spent on term life the policy so far, plus interest. This deposit guarantees lower premiums and also results in higher cash values. The premium and cash value deposit characterize the retroactive conversion that exists if this method is selected.
What is Interim Term Insurance?
Interim term insurance is type of convertible term insurance written on a person wanting protection immediately, but who is not able to afford permanent protection immediately. It provides interim coverage between now, and the eventual conversion to permanent protection. Interim-term insurance is typically written to automatically convert to permanent protection at some point within the first year. While insurability is guaranteed, the premium for temporary protection is based on the original application age, and the premium for permanent protection is based on the age at the time permanent protection begins (the attained age).
Renewable Term Insurance
Some term policies may contain an option allowing the policy owner to renew the term policy before its expiration date without having to provide evidence of insurability. Like the option to convert, the option to renew must be included in the contract when the policy is purchased. The premiums for the renewal period will be higher than the initial period, reflecting the insured’s increased age and the insurer’s increased risk.
What is an annual renewable term?
An annually renewable term (ART) or yearly renewable term (YRT) provides coverage for one year and allows the policy owner to renew coverage each year without evidence of insurability. This represents the most basic form of life insurance. This renewal is typically automatic and renews at an increased premium.
What is Re-entry Term Insurance?
Some term policies include a re-entry feature, which states that the premium can change at renewal based on insurability. This means that to maintain the lowest premium rate (or a discount from the standard), the insured may have to prove insurability again upon renewal. If there is an insurability problem, the insured fails the medical exam, and coverage may be maintained at a higher premium rate. Sometimes, the re-entry term is also referred to as the revertible term.
What is Whole Life Insurance?
Whole life insurance provides for the payment of a death benefit or face amount of coverage upon the death of the insured whenever death occurs. This policy will provide permanent protection for the insured’s entire (whole) lifetime from the date of issue to the date of the insured’s death. Whole life policies may also be referred to as straight life, continuous premium life, permanent life insurance or ordinary life.
Generally speaking, certain features are shared by all types of whole life insurance. A traditional whole life policy combines pure death protection with a cash value savings feature. Additionally, the death benefit (face amount) of the policy remains constant or level throughout the policy’s life. Premiums are set at the time of policy issue, and they, too, remain fixed for the policy’s life.
What is a Juvenile life insurance policy?
A juvenile life insurance policy is any type of ordinary life insurance policy that insures the life of a minor. Applications for insurance and ownership of the policy rests with an adult, such as a parent or guardian, and do not require the minor’s consent.
